It is still the beginning of the 21st century, and according to predictions, the world is moving at high speed. People who catch up with the world right now will be able to survive, others will not be able to follow. The same is true for companies in the 21st century. Today’s businesses must grow rapidly, be efficient, profitable, flexible, adaptable, future-proof, and have a dominant market position. Without these qualities, companies believe that it is virtually impossible to be competitive in today’s global economy. In some industries, such as insurance or banking, companies can enter new markets. In others, such as pharmaceuticals or software technology, companies may work with smaller companies that have developed or are developing new products that they can manufacture and / or distribute more efficiently, while other companies focus on their own growth. , leadership and internal development. Regardless of the industry, however, it seems that it has become nearly impossible in our global environment for companies to compete with others without growing and expanding through deals that result in mergers or acquisitions.
Companies are increasingly using mergers and acquisitions to strengthen and maintain their position in the market. They are seen by many as a relatively fast and efficient way to expand into new markets and incorporate new technologies. However, its success is by no means assured. On the contrary, most do not achieve their stated goals and objectives.
There are many reasons for a company to merge with others or acquire other companies. Some of the reasons are as follows.
§ For the sake of survival
§ Horizontal mergers for market dominance
§ Vertical fusions for channel control
§ Hybrid merger for risk sharing, cost reduction
§ Growth for world-class leadership and global reach
§ Acquisition of cash
§ Quickly enter the market
§ Flexibility
§ Adopt good technology
§ Acquire basic skills
§ Financial gain and staff power
§ Talent, knowledge and skills
Regardless of the reasons, basic assumptions are being made including.
§ Planning ahead can help increase your chances of success
§ Mergers and acquisitions (M&A) are the fastest and easiest way to grow
§ Mergers and acquisitions are difficult to carry out
§ Creating synergy is a challenge
§ The culture of molding is a challenge
Mergers and acquisitions can be successful, but they can also lead to major failures. Mergers and acquisitions are made to grow faster but it is not certain that the result will turn out the way it was thought. Some failures can be explained by financial and market factors, a considerable number can be attributed to neglected HR activities and issues. Numerous studies confirm the need for companies to consistently address a variety of HR issues and activities in their M&A activities. In fact, industry research over the past 15 years indicates that 50-70% of all mergers, acquisitions, and other corporate transformations fall short of the desired level of success, primarily due to people issues.
There are many reasons for the neglect of HR issues and activities. Some of the reasons are as follows.
§ Lack of awareness that human problems are the most critical
§ No spokesperson to articulate these issues
§ The belief that they are too soft and therefore difficult to handle.
§ There is no model or tool to understand and manage human problems
§ Focus, while mergers and acquisitions focus on other activities rather than human issues
§ The Human Resources department in many countries like Pakistan, India, etc. it is not fully taken into account.
Experts point out that during a merger or acquisition, HR professionals must be involved before, during, and after the transaction. Human resource systems must be aligned, integrated and differentiated. Research has shown that mergers of companies with fully integrated HR practices perform better and employees are happier during any change.
The practices of selection, management and measurement of performance, training and development, and compensation and benefits must fit together to create a whole that is aligned with the objectives of the new organization. Audits of HR systems prior to the merger can help identify any issues or unrecognized liabilities. The goal, of course, is to align HR practices with the new business strategy.
The experiences of companies that are involved in mergers and acquisitions suggest a 3-phase model of M&A activities. The three phases are: (1) Pre-Merger (2) Merger – integration of partners (3) Post-Merger – Advancement of the new entity. While these three stages are applicable and span the broadest set of business functions, such as business strategy, finance, marketing, distribution, IT, and manufacturing, the issues highlighted here are those that reflect the issues most closely associated with managing business. human Resources.
The first phase is the Pre-Merger that includes the planning of the merger and acquisition. There are many HR problems along with other problems in the first phase. One of the problems that can arise in the pre-merger is to identify the reasons behind the Merger and Acquisitions. As described above, there can be many reasons behind any merger and acquisition and one of those reasons is to bring talented employees into the organization through the merger. Standard Chartered acquires union bank (merger in Pakistan) is one of the most crucial in Pakistan. One of the reasons behind the acquisition was to get the key talent from the union bank that will help them a lot. Some other HR issues that companies involved in these M&A are experiencing are:
§ Formation of the team or leader of Mergers and Acquisitions
§ Search for potential partners
§ Select a partner
§ Planning and management of the M&A process
§ Planning to learn from any process
The HR team is supposed to have some activities in mind while conducting these mergers and acquisitions. An action or implication that follows from the above problems can be many. One of the actions would be to inform the employee about mergers and acquisitions and their effects on the company, which will definitely help the employees to be proactive in the actions. A survey report suggests that HR issues are best addressed through comprehensive planning and follow-up. Experience and learning from past M&A activities can help inform planning and monitoring, but this learning process must also be well managed. Learning, knowledge sharing and transfer are recognized as important not only in
Mergers and acquisitions activities, but also in joint venture activities. Some of the other actions that an HR professional can take are:
§ Team composition effectively
§ Cultural evaluation
§ Creation of practices for learning and knowledge transfer
§ Planning for the merger will help lessen problems later.
The second most crucial phase is known as Partner Integration. This phase includes a variety of activities. In general, integration is the process by which two companies combine after a merger or acquisition is announced and pre-merger activities are completed. The most critical issue in this phase is selecting the integration manager. That person should not be one of those already running the business, it could be a loan, but should only focus on the particular M&A. In a country like Pakistan, the integration manager is not given a particular importance and they choose any person in the company for the task that an integration manager must perform. Some issues other than the integration administrator selection that was included in this phase are as follows.
§ Equipment design
§ Creating new structure
§ Retain key employees
§ Motivate employees
§ Manage the change process
Decide on human resources policies
The implications for the HR manager at this stage are many, but one of the most important is deciding who will stay and who will leave. The HR department must be very selective in its task, because the selection of employees is one of the critical issues at the time of any merger. The human resources department must also take many other actions.
§ Selection of the right candidate
§ Creation of new teams
Communication is essential
§ Establishment of the new culture and structure
In general, this second stage of integration in an M&A activity is extensive and complex. While Phase 1 activities set the stage for M&A activity, Phase 2 activities are what bring the activity to life.
Then comes the last phase which is the solidification of the new entity. As the new combination takes shape, it faces readjustment, solidification and fine-tuning problems. The human resources topics that will be in this phase are
§ Solidify leadership and staffing
§ Evaluation of the new culture
§ Evaluation of new strategies and structures
§ Assessment of the culture of new employees
Some of the actions and implications of the HR department at this stage are as follows.
§ The creation and evaluation of a new structure is important
§ Shape the 2 new cultures to each other
§ The concern of the interested parties must be taken into account.
There are numerous conclusions that can be drawn when discussing human resource issues and activities in mergers and acquisitions. Some conclusions are as follows.
Human resource issues should not be neglected when conducting a merger or acquisition because human resources are the real assets of any organization.
§ Many organizations failed due to neglect of human resource problems during their mergers.
§ Keep track of human problems in the 3 phases of M&A, so no problem is out of focus.
§ Employee communications, retention of key employees and cultural integration are the most important activities in HR for a successful integration of mergers and acquisitions.
Here are some recommendations for those companies looking to have some kind of M&A with human issues in mind.
§ Companies should put their best people in charge when implementing mergers and acquisitions
§ The human resources department must be included in all decision-making from the beginning to the end
§ The integration manager must be selected very carefully
§ Keep your personal password
