678 Change Management Post Mergers and Acquisitions

LITERATURE REVIEW
MERGERS & ACQUISITIONS

1.1.1 OVERALL PICTURE OF M & A’S
Mergers, acquisitions and joint ventures are common ways for companies to meet their growth,
globalization and development needs today. The words describing these different types of
contracts between companies have definitions. In particular the concepts of merger and
acquisition are used purposefully to give an impression about a situation in a certain perspective.
In many situations executives prefer to use concept merger instead of acquisition to offer a view
of co-operation instead of a hostile take-over.
Merger is defined as 'in general a situation in which two or more enterprises cease to be
distinct enterprises'.
Acquisition is defined as 'by one company of sufficient shares in another company to give the
purchaser control of that company'. (Both definitions are from Macmillan Dictionary of
Accounting).
Hubbard (1999) adds that acquisitions can be either friendly or hostile. Acquisitions are take-
overs in which the bidder negotiates directly with the target company’s board of directors.
Proxy contest is in question when there is an attempt to gain control of the target company's
board of directors via a shareholder vote (Hubbard 2001).
Leveraged buyout is the purchase of shareholder equity by a group usually including incumbent
management and it is financed by debt, capital or both (Hubbard 2001).
Joint venture is defined as 'establishing a complete and separate formal organization with its
own structure, governance, workforce, procedures, policies and culture - while the
predecessor companies still exist' (Marks & Mirvis 1998).
I intend use the terms 'mergers and acquisitions' or 'acquisition' as synonyms or simultaneously
not differing them from case to case. Sometimes the word merger is a nicer word for the situation
for the executives. Hostile take-over have not been included. I don't have a separate focus on
hostile situations. According to the cases I have studied, there are enough problems to be solved
in friendly mergers and acquisitions to be more successful or less painful to the people involved.
I shorten ‘merger and acquisition’ as MA.
According to company experts and economists there is no alternative to globalization.

Competition forces companies to go where labor and raw material are the cheapest, capital
favorable and the markets the biggest. The globalization started in the end of the 1980s when the
CHANGE MANAGEMENT POST MERGERS AND ACQUISITIONS 2007
GNP (gross national product) and world trade grew faster than ever. Firms and countries have
been able to specialize and develop their core competencies (Helsingin Sanomat HS 18.9.2000).
The American thinking about the importance of shareholder value has become common also in
countries earlier with in-effective capital.
According to Helsingin Sanomat arguments for globalisation are
• World GNP grows faster than ever

• Trade over borders is increasing
• Firms and people are able to focus on what they best can
• Firms are able to grow and become more profitable
• Firms are able to get labour, raw material and financing cheaper than before
• Competition and owners force the firms to be more profitable
• Fighting is more expensive
• Corruption decreases
• Oppressed minorities get their voice heard better than inside a country
• By international enactment it is possible to improve the position of labour, women and
environment
• Availability of culture is improving, for example TV-series
Arguments against globalisation are

Income differences among countries will increase
The protected, weak, subnormal and slow areas will remain retarded in terms of development
National states are toolless in world competition (market forces)
Democracy (democracy losing its power when the market power takes over)
Free capital, new technology and speculative investors bring instability in world economy with
them
Growing differences between poor and rich countries increase tension in world politics
Immigrant problems increase
Cultural clashes take place in multinational corporations
Supranational monopolies decrease competition
Tax competition will wreck social security systems
Cultural convergence because of exposure to shared media experiences
Globalization has become the most common thing to describe the business activities in the world
today. Three reasons (Cartwright and Cooper 1992):
• To be present for the customers all over the world (customers).

• To use the favors of infrastructures of different countries remembering that countries, not
only companies want to be and must be competitive. Companies work hard to locate their
production and services in the best possible locations using all the competence and
financial benefits, which are available in different countries (country competitiveness).
2 DISSERTATION REPORT BY PRIYANKA RAJPUT

• Talent search (talent search and recruiting). Nations compete for companies; nations want
to be competitive to get the best companies and favors coming with that (Porter 1992).
Governments work hard to attract business by offering special benefits, part of which are offered
by the society: education systems, safe environment, well organized contacts between different
stakeholders, taxation benefits, technology power. Many of the major corporations with Indian
origin have kept their headquarters in India, both because of taxation and human capital
availability reasons. Even if, it has meant a few expatriates to India, a lot of traveling in top
management.

1.1.3 TYPES OF ACQUISITIONS

• Share purchases - in a share purchase the buyer buys the shares of the target
company from the shareholders of the target company. The buyer will take on the
company with all its assets and liabilities.
• Asset purchases - in an asset purchase the buyer buys the assets of the target
company from the target company. In simplest form this leaves the target company as an
empty shell, and the cash it receives from the acquisition is then paid back to its
shareholders by dividend or through liquidation. However, one of the advantages of an
asset purchase for the buyer is that it can "cherry-pick" the assets that it wants and leave
the assets - and liabilities - that it does not. This leaves the target in a different position
after the purchase, but liquidation is nevertheless usually the end result.
An acquisition is only slightly different from a merger. In fact, it may be different in name only.
Like mergers, acquisitions are actions through which companies seek economies of scale,
efficiencies, and enhanced market visibility. Unlike all mergers, all acquisitions involve one firm
purchasing another--there is no exchanging of stock or consolidating as a new company.
Acquisitions are often congenial, with all parties feeling satisfied with the deal. Other times,
acquisitions are more hostile.
In an acquisition, a company can buy another company with cash, with stock, or a combination
of the two. Another possibility, which is common in smaller deals, is for one company to acquire
all the assets of another company. Company X buys all of Company Y's assets for cash, which
means that Company Y will have only cash (and debt, if they had debt before). Of course,
Company Y becomes merely a shell and will eventually liquidate or enter another area of
business.
Another type of acquisition is a reverse merger, a deal that enables a private company to get
publicly listed in a relatively short time period. A reverse merger occurs when a private company
that has strong prospects and is eager to raise financing buys a publicly-listed shell company,
usually one with no business and limited assets. The private company reverse merges into the
public company, and together they become an entirely new public corporation with tradable
shares.
Regardless of their category or structure, all mergers and acquisitions have one common goal:
they are all meant to create synergy that makes the value of the combined companies greater than
the sum of the two parts. The success of a merger or acquisition depends on how well this
synergy is achieved.
So, the term acquisition means an attempt by one firm, called the acquiring firm, to gain a
majority interest in another firm, called target firm.

The effort in control may be a prelude
• To a subsequent merger or
• To establish a parent-subsidiary relationship or
• To break-up the target firm, and dispose off its assets or
• To take the target firm private by a small group of investors.
There are broadly two kinds of strategies that can be employed in corporate acquisitions.
These include:
Friendly Takeover
The acquiring firm makes a financial proposal to the target firm's management and board.
This proposal might involve- the merger of the two firms, the consolidation of two firms- or the
creation of parent/subsidiary relationship.
Hostile Takeover
A hostile takeover may not follow a preliminary attempt at a friendly takeover. For
example, it is not uncommon for an acquiring firm to embrace the target firm's
management.

1.1.4 THE AMOUNT OF MERGERS AND

ACQUISITIONS HAVE INCREASED
Reasons and motivation
The merger climate and its influence on the merger and acquisition activity have changed.
Cartwright and Cooper (1992) have listed the changes, which influence the increase of mergers
and acquisitions:
• Changing market conditions

• Increasing availability of capital, e.g. World Wide wide collaborations
• Many companies available for mergers and acquisitions, e.g. many entrepreneurs who
started after the Second World War, are in retiring age and therefore willing to sell their
companies.
• Easing regulations; countries, when developing their infrastructure, have changed the
regulation about ownership and foreign investment policies.
• A need to share risk, for the cost of research has increased as an extreme investment for
the company to bare, especially when the development time is shorter than ever.
• The existence of complex invisible problems, which most often means difficulties to
interpret the implications and opportunities technology can offer or demand.
The motivation for the conduction of merger and acquisition was (UN 2000, UNCTAD 2000):
• Speed:
New concept was used in this connection: Plaction = plan and act at once versus green
field investments.
Quest for strategic assets
R&D, brand names, possession of local permits, licenses, supplier or distribution networks,
readymade access, using both static and dynamic advantages With both of these motivations
firms want to succeed by market power and market dominance, efficiency gains through
synergies, greater size, diversification and that way spreading risks, financial motivations,
and personal motivations (behavioral).
Hubbard (1999) summarizes as reasons to use merger and acquisition for company
development:
• Market penetration to get market power

• Vertical expansion to control the value creating process
• Financial synergies to use tax breaks, accounting modifications, etc.
• Market entry to get in a new market area or country with its legislation (India)
• Asset potential or synergy to transfer technology, knowledge or other types of assets
(innovations, patents) to be used in the whole corporation.
• Economy of scale to streamlining, rationalizing sites and administration
Firms undertake M & A in order
to
6 Gain Market
DISSERTATION REPORT BY PRIYANKA RAJPUTPower & Dominance
Achieve Synergy Gains
Changes in Global Environment
Technology Become Larger
Cross border Diversify & Spread Risks
merger Regulatory
Strategic advancesFrameworks
made by firms leads New
ExploitBusiness
Market Opportunities
to defend & enhance their competitive
activity Capital Market Changes
positions in a changing environment.
Reap Personal
Opportunities BenefitsTime
Table 2-UNCTAD has summarized the factors influencing in cross-border mergers and
acquisitions. (UNCTAD 2000).
Increased in figures

The United Nations had in their special World Investment Report 2000 (UNCTAD 2000)
focused on cross border mergers and acquisitions and development. In the overview the size of
the issue is indicated: 63.000 parent companies of transnational corporations (TNC) have
690.000 foreign affiliates and employ 6 million persons. Total growth of all mergers and
acquisitions worldwide (cross-border and domestic) has been 42 % annually 1980-1999.
The main reason has been the change in regulatory environment; changes to the law have created
a more favorable legal framework. This increase of mergers and acquisitions is paradoxical, for
mergers and acquisitions do not deliver results in share price or economic effect terms. But the
advantages are in speed and access to proprietary assets.
The reasons are summarized in ‘speed is our friend – time is our enemy’. Advantages are in
technology, liberalization, changes in capital markets. And mergers and acquisitions allow firms
to acquire a portfolio of local assets, which is the key source to competitive strengths.
In 1996-1998, national transactions accounted for 53 % of all operations involving EU

companies, Community operations for 17 % and international transactions for 30 %. The amount
of international transactions has increased steadily since 1993. Non-European investors have
wanted to become present in EU probably for by globalization and by some anticipation of the
Economic and Monetary Union. The number of international operations in 1997 was 2.140 and is
estimated to increase to more than 2.600 in 1998. The value of these operations is nearly EURO
120 billion in 1997.
1.1.5 MAJORITY OF ACQUISITIONS FAIL

Even though the mergers and acquisitions are more and more common, they are not necessarily
big successes to shareholders.
McKinsey consultants (Morosini 1998) have in their studies come to the conclusion that in 66
% of the merger cases you had got a greater return in bank savings than in acquisitions. Study
after study shows during the last thirty years or so, that from the financial point of view, mergers
have not been success stories. McKinsey (Morosini 1998) found that, based on the cost of capital
criteria, 61 % of the acquisition programs from a sample of 116 US-, Canada- and UK-based
companies failed, 23 % were successful and 16 % unknown. 86 % of larger acquisitions in
unrelated fields and 55 % of the acquisitions of small companies in related fields later failed.
Another study by the same consultancy showed that an unusually high 80 percentage of take-
overs had at least earned back the cost of capital invested.
The William M. Mercer Group (Hubbard 2001) pointed out that most acquisition programs
fail: acquiring firm’s shareholders usually lose as a result of the deal. The acquired firm’s
shareholders usually benefit, often as a result of the auction process.
A.T. Kearney notes that acquisitions have largely failed to increase profitability improve
efficiency and expand sales technology, ‘hard stuff’; you should invest in market opportunities,
too. Investors and financial journalists asked what would you do with your money, you must
invest it wisely, tell us what your plans are, and with this type of communications increased the
pressure.
Irrespective of the criteria selected, research evidence has repeatedly demonstrated that mergers
have had an unfavourable impact on profitability (Cartwright & Cooper 1992). Instead of
achieving the projected economies of scale, mergers have become associated with lowered
productivity; worse strike records, higher absenteeism and poorer accident rates rather than
greater profitability (Meeks, 1997; Sinetar, 1981). It has been suggested, that in the long term,
between 50-80 % of all mergers and take-overs are considered to be financial return represent ‘at
best an each way bet’ (Lorenz, 1986).
A discussion paper published by the Department of Trade and Industry in 1986 (British Institute
of Management 1986) found that there had been no improvement in the intervening years, and
the merger failure rate was still running at around 50 %. In a report from Hunt (1988), success
rates post-acquisitions to be in the region of 50 %. Failure figures in US have been on the same
level.
The William M. Merger Group (Morosini 1998) pointed out that, based on share values,
divestment rates or return on investment criteria, most acquisition programs fail. In particular,
they noted that ‘acquiring firm’s shareholders usually lose as the result of the deal’. Acquired
firm’s shareholders usually benefit, often as a result of the auction process.
A.T. Kearney (Hubbard 2001) notes that acquisitions have largely failed to increase
profitability, improve efficiency and expand sales, and do not seem to yield sufficient benefit to
any of the parties involved in these transactions.
Booz Allen & Hamilton (Hubbard 2001) reported a failure rate of about 55 %, based on the
management assessment at 200 diversification programs which took place in Europe between
1970 and 1984.
Business Week’s cover story of 21 March, 1988, (BW 1988) was, on the other hand,
sufficiently explicit in its message: ‘Most Mergers don’t Work’. A special report of the same
publication, on the 30th October 1995 (BW 1995), appeared to be as adequate as it was entitled:
The Case against Mergers. Even in the 1990s, most still fail to deliver.’ This special report
described the results of a study examining the stock returns of 150 deals worth more then USD
500 million during January 1990 through July 1995. The period under observation covered three
months before the announcement of the acquisition deal up to three years after. The study
pointed out that 30 % of the deals examined ‘substantially eroded shareholder returns, 20
%eroded some returns, 33 % created only marginal returns and only 17 % created substantial
returns for the shareholders’.
The Economist (1997) reported in 1997 that most mergers had failed to create shareholder
value, mostly due to company managers systematically overlooking the major cultural and
organisational complexities involved in integrating the operations and informal networks of the
merging firms. What is important is that experience seems not to help in mergers: the ‘novices’
or first-time acquisitions performed as well or rather as badly, as ‘the old hands’. There are two
possible reasons to this.
• Firstly, acquisitions reflect individual rather than corporations. Although some firms
engage in many acquisitions, the average individual manager makes only a few
acquisitions during his career. The situation may change if the amount of mergers and
acquisitions continues, there starts to be material in almost every company to learn from
their own experiences: reflect and conceptualise their way to merge successfully, or a
little more successfully – and to learn to avoid some of the failure traps concerning
mergers and acquisitions.
1.1.6 REASONS FOR FALUIRES

Firms and owners have had multiple motives to merge. Some are looking for economic benefits,
some strategic solution and for some the question is a personal one. Motives have an influence
on the merger and especially on its post-merger integration. Economic benefits can include
downsizing, outplacements, which is difficult to accept both from the buyers’ and the sellers’
side. Personal motives can be very varying from power reasons to ‘doing what everybody else is
doing: merge’. In those situations for the organizations it can take its time to understand the
reasons behind the decisions. In strategic motives the question is, if the strategy is fit to be
implemented and getting results with the help of it.
ABB, one of the most experienced acquirers and integrators in Europe, has listed some risks for
merger failures calling them ‘skeletons’ (ABB presentation 1998, Valpola’s notes). In some
cases there are skeletons hiding: warranties, order backlog, accounting procedures, accounts
receivables, obsolete stock, pension reserves, which make the way to good financial results very
complicated and time consuming.
Hubbard (1999) has listed both fit-issues and strategy implementation issues for the reasons to
failures. The fit issues have been:
1 Size issue, especially big differences in sizes have a strong influence.

2 Diversifications, unrelated seem to fail more often than related ones.
3 Previous acquisitions experience weak.
4Organizational fit, the match between administrative practices, cultural practices and
personnel characteristics of the target and acquirer.
5 Strategic fits, it can include the business philosophies of the two entities, the timeframe from
achieving the goals and the way in which assets are utilized.
6 Cultural fit, meaning possibilities to integrate. The relationship between cultural fit and
acquisition implementation is highly linked. (Study by Cartwright and Cooper 1992 in Hubbard
1999: 200 European Chief Executive Officers, CEOs, said that in their experience, the ability to
integrate the target company and its culture is a primary factor of overall acquisition success).
7 Other demographic factors, like the healthy conditions of the seller, timing versus market
cycle, ages of the organizations.
Strategy implementation process issues leading to acquisition failure are listed as following:
1 Negotiation issues like speed what has been typical to negotiations. Firms are using, especially
in cross-national mergers and acquisitions, external advisors, investment banks, which get paid
on the transaction’s completion and not its success. Especially in 2001, when there have been
fewer prospects for investment banks, they have been more aggressive to market their services
and keen to get the deal.
2 Inadequate pre-acquisition planning, which covers also ‘Day-One’ plans. Research has
found that only half of the acquirers had a pre-acquisition implementation plan (AMR 1998) in
Hubbard 1999. Target companies may have expectations for the acquirer to have a detailed plan
from which to start to work with the implementation. Without a plan the ‘Day One’
communication is difficult to succeed with.

3 Insufficient information gathering (are there any skeletons), KPMG (Hubbard 1999) says
that only 10 % conduct a human resource-related due diligence during pre-merger period. This
may become one source of ‘people problems’ during the implementation problems. One
explanation I get about this topic is that the information norms in the stock valued companies are
that tight, you keep the amount of people involved in the negotiations and planning as small as
possible: top management, owners, lawyers and financial advisors. Human resource people are
taken on board after the deal, they don’t have a track record to be needed in pre-planning.
4 Price paid and method of payment for the target. Other researchers by Hubbard have found
price paid to be one of the least important reasons for acquisitions failure. One of my investor
banker friends said that the buyer looses always, often the seller has described the unit in very
positive terms to get the price as high as possible. Then the same managers, who have made the
calculations for the pricing, are the ones to produce the business results in reality. Their feelings
for the acquisition can be more than confused: if we succeed with the deal, owners are happy, but
‘I am the one to show in practice that the calculations were right – and from where do I create
that cash flow and margin in the new competitive situations?’
5 People problems, like employee reactions. ‘Employees’ reactions to change are a principal
reason why over half of all mergers and acquisitions ultimately prove to be financial
disappointments’ (Marks and Cutcliffe, 1988, p. 30 in Hubbard 1999). In other parts of her book,
Hubbard (1999) reminds that the expectations created in the start of the implementation are
crucial to the success. People expect changes and try to find clues what the changes will be. The
more honest management is in the communication, the smoother the implementation process will
start.
6 Implementation issues, Hubbard’s research found that the greatest determinant of overall
acquisition success was not the fit issues but a carefully palled and well-executed
implementation process. The Coopers & Lybrand (1992 in Hubbard 1999) study found a
correlation between implementation success and overall acquisition success of 76 %. Other
studies have got results like Hunt 83 %, AT Kearney (Haber, Kroger and Tram in Hubbard 1999)
53 % that implementation management could be linked with merger failures. Pertti Nupponen
found in his research that the ‘will of the acquirer to succeed’ had a major impact on success.
7 Communication. Hubbard found communication to be a crucial step in overall acquisition

success, although not in it self enough to guarantee success. Other studies have found that
effective communication reduces ambiguity and employee stress thereby increasing chances of
success (Napier et. Al., 1989 in Hubbard 1999). Hubbard (2001) points out that the process
issues have the greatest impact on acquisition success and failure over which the acquirer has
almost total control.
Many of these reasons are interrelated. It is a question to manage peoples’ expectations. Merger
offers to the acquirer an enormous opportunity like no other to shake and shape the new
organization, for people expect change. Many of the reasons are people related. Everybody, who
has experienced a major merger, is able to say ‘it didn’t go untouched’. Mergers can be most
stressful for many: there is a threat to give up with your identity, both as a company man and as a
professional with a certain role in the organisation. There is a huge need for information, which
is often lacking. Survival comes as an obsession, people are thinking their status, their
possibilities to secure the employment, and they may have financial issues connected with the
contract concerning bonus and loans. People are worried of how their competences, talents are
valued in the new constellation. It is easy for them to listen to headhunters, who most certainly
are using the benefits of the situation to the favour of other firms. The stress is transferred to
homes, for the home and the family are often the safe bond to the employees. But if the
uncertainty time is long, it gets stressful for the family to share the worries of the employee, not
being able to help with any answers.
1.2 CHANGE MANAGEMENT THROUGH EFFECTIVE

INTEGRATION
1.2.1 CHANGE MANAGEMENT
Change is a fact of life. On the positive side, change may be seen as akin to opportunity,
rejuvenation, progress, innovation, and growth. But just as legitimately, change can also be seen
as instability, upheaval, unpredictability, a threat, and disorientation.
The concept of change management describes “a structured approach to transitions in
individuals, teams, organizations and societies that moves the target from a current state to
a desired state”.
Stated simply, change management is a process for managing the people-side of change. The
most recent research points to a combination of organizational change management tools and
individual change management models for effective change to take place.
To integrate companies following a merger, arguably the most important challenges involve
the top of the organization—appointing the right top team, structuring it appropriately, defining
its agenda, and building the trust that enables its members to work well together. Executives who
fail to overcome these challenges are responsible for the ego clashes and politics that are often
the root cause of spectacular failed mergers.
Unfortunately, recent thinking about change management no longer emphasizes the pivotal role
of the top team. The consensus on how to manage change has shifted to a dispersed approach
because too many initiatives designed to cascade down the hierarchy have delivered
disappointing results. The usual interpretation is that top-down change fails because at every step
messages get diluted, so that each succeeding one seems less compelling and less authentic.
While this may be true in certain circumstances, a merger requires direction from the top because
that is the only way to initiate change throughout an organization. The change required to
integrate companies cannot be driven from an entrepreneurial business unit, an innovative
functional unit, or the front line. Too much coordinated, programmatic change must be achieved
in too short a time for such approaches to succeed. The spirit of the project is determined at the
top, where the conditions are set for the whole integration effort.
But the top team must do more than just talk about the new company, adopt its language and
trappings, and act according to its norms. The team must become the new company in the full
sense. Its messages, processes, and targets must deeply incorporate the aspirations of the new
company in a way that is visible to managers, employees, and even outside observers. As the top
team goes on to integrate the company down the line, it in effect re-creates itself. The company
is not just rolling out messages, processes, and a set of targets; it is rolling out itself.
In the best cases, members of the top team signal the kind of company they are creating and their
commitment to that new company. In other cases, the team visibly lacks the requisite quality, and
its weaknesses inevitably spread throughout the merging companies. The power of the signals
emanating from the top team reflects the fact that they are not just signals: they create concrete
realities.
The important signals fall into three categories:
(1) Senior appointments

(2) The top team's alignment, and

(3) Clarity about roles.
SENIOR APPOINTMENTS
One of the most memorable things during an integration effort is the way managers, employees,
and even other stakeholders closely watch to see who ends up on the top team. This attentiveness
represents much more than a voyeuristic interest in the human drama taking place. The
appointments provide strong clues about the new company's direction and, more subtly, about
the degree of its commitment to its proclaimed course. Managers and employees will, of course,
also interpret appointments to the top team as signals about their own future.
Timing is crucial: in general, the earlier the decision-making process begins and ends, the better.
In one study of 161 mergers, the early appointment of a top team was a strong predictor of the
long-term performance of the combined organization.
Understanding the impact of these signals on each side of the boundary between the merging
companies is critical because the signals may depart from expectations in very different ways.
Creating a new company at the top is particularly problematic in a merger of equals because
managers are sorely tempted to maintain the identities of the predecessor organizations. To be
sure, the proclaimed strategy usually calls for their full integration.
Yet compromises on people issues may fatally obstruct this effort and ultimately undermine the
merged company's pursuit of value. The resulting mess will often be attributed to "incompatible
cultures," as if the failure of integration was the inevitable result of trying to mix oil and water.
Another source of failure at the top is an unwillingness to face the prospect of job losses among
close colleagues who have performed well for years—even though many more job losses are
likely among people further down the line.
Alignment of the top team
Although appointment decisions can be difficult, at least in the end it is clear to all what has been
decided. Top-team alignment, by contrast, is a rather nebulous outcome of many diverse
activities. People know when a company really has it, but at various stages along the way they
ask, "Are we aligned yet?"
In a merger, the top team must fashion its own identity vis-à-vis the external world of business
partners, competitors, customers, and regulators to reach this level of agreement. Research shows
that when top teams turn their attention to the external environment, they often experience a
catalytic effect, which carries them past the usual internal frictions much more quickly.
Compared with the pressing need to thrive in the marketplace, these frictions simply do not
matter very much. This effect is particularly striking when an external crisis suddenly emerges.
Getting to that level of agreement without a crisis is mostly a matter of discipline. A carefully
limited dose of team-building exercises can also help, but with two important caveats. First,
managers on both sides may have very different perspectives on what constitutes a constructive,
business-like exercise. If one side perceives an activity to be a touchy-feely distraction, it is not
worth doing and could be counter-productive. Second, senior managers the world over have very
limited patience for time spent on anything other than "real work." This is all the more true under
the intense pressure of integration. It is best to focus on outputs whose value is clear even if they
are intangible (for example, a set of behavioral norms for the new company).
Role clarity
The members of the top team share responsibility for the merging companies' future as a whole,
but they also have distinct individual responsibilities. They must work together in a
complementary way not only to help the companies integrate successfully but also to lead the
combined one through its other concurrent and future challenges. To do so, the team must define
roles very clearly and quickly—particularly roles directly involved in the integration effort.
From the perspective of a company's long-term corporate health, the future needs of the business
are an equally strong factor in defining roles. Creating the top echelon of the new company is as
important for its long-term performance as for the near-term success of the integration effort.
Establishing the top team poses a critical and immediate challenge for merging companies. The
new company's leaders must appoint the best possible top team for achieving its goals, and the
top team's members must be aligned around them. To collaborate effectively, its members must
be clear about their individual roles. All this is sensible enough and easy to say, but in practice
that degree of leadership can be hard to achieve during the hectic period leading up to a merger
or even in its immediate aftermath
1.2.2 LEWIN’S THEORY OF CHANGE

Kurt Lewin (1951) introduced the three-step change model. This
social scientist views behavior as a dynamic balance of forces working in

opposing directions. Driving forces facilitate change because they push

employees in the desired direction. Restraining forces hinder change
because they push employees in the opposite direction. Therefore, these
forces must be analyzed and Lewin’s three-step model can help shift the
balance in the direction of the planned change.
• According to Lewin, the first step in the process of changing behavior is

to unfreeze the existing situation or status quo. The status quo is
considered the equilibrium state. Unfreezing is necessary to overcome
the strains of individual resistance and group conformity. Unfreezing
can be achieved by the use of three methods. First, increase the
driving forces that direct behavior away from the existing situation or
status quo. Second, decrease the restraining forces that negatively
affect the movement from the existing equilibrium. Third, find a
combination of the two methods listed above. Some activities that can
assist in the unfreezing step include: motivate participants by
preparing them for change, build trust and recognition for the need to
change, and actively participate in recognizing problems and
brainstorming solutions within a group.
• Lewin’s second step in the process of changing behavior is
movement. In this step, it is necessary to move the target system to a
new level of equilibrium. Three actions that can assist in the movement
step include: persuading employees to agree that the status quo is not
beneficial to them and encouraging them to view the problem from a
fresh perspective, work together on a quest for new, relevant
information, and connect the views of the group to well-respected,
powerful leaders that also support the change.
• The third step of Lewin’s three-step change model is refreezing. This
step needs to take place after the change has been implemented in
order for it to be sustained or “stick” over time. It is high likely that the
change will be short lived and the employees will revert to their old
equilibrium (behaviors) if this step is not taken. It is the actual
integration of the new values into the community values and
traditions. The purpose of refreezing is to stabilize the new equilibrium
resulting from the change by balancing both the driving and
restraining forces. One action that can be used to implement Lewin’s
third step is to reinforce new patterns and institutionalize them
through formal and informal mechanisms including policies and
procedures
Therefore, Lewin’s model illustrates the effects of forces that either promote
or inhibit change. Specifically, driving forces promote change while
restraining forces oppose change. Hence, change will occur when the
combined strength of one force is greater than the combined strength of the
opposing set of forces.
1.2.3 INTEGRATION AND CHANGE MANAGEMENT
The main goal of companies is to create value. If well managed, mergers help companies to
achieve higher efficiency, productivity, and profit by creating opportunities for growth.
According to a research conducted with the participation of 115 companies around the world,
58% of mergers result in failures. Mergers involve two critical phases that affect the outcome.
Based on researches, 30% of the outcome is affected by activities during the pre combination
phase, while 70% depends on activities during the post merger period.
All merger interventions are complex change initiatives, and post merger integration
activities are key elements for the success of the change.
As in all change management interventions, the challenging dynamics of post merger period
requires a well structured planning. Management should have a clear understanding about the
change, and be prepared for the outcomes.
Companies often ignore the importance of developing a merger integration plan, assuming that
the employees will adapt to change with no preparation. However, employees are directly
affected by the change. Therefore, successful integration requires extensive planning.
The effectiveness of human resources strategies and practices are highly important for the
success of post merger integration phase. The main tasks of human resources strategies are to
communicate change openly, and in a timely manner with all levels of the organization, and to
motivate the members of the organization to support and adopt to change.
Cultural integration activities are also crucial for the success of merger interventions. These
activities mainly involve the assessment of companies’ cultures through questionnaires and
interviews and identify the key areas that will accelerate the integration process.
Creating a trusting environment for employees and customers is another critical factor.
Constructing an environment in which employees and customers feel safe and satisfied help
companies to sustain change and make it part of the corporate structure. During this process, it is
necessary to:
• Manage expectations.
• Communicate decisions with right channels in a timely manner.
• Give consistent messages about strategies to all stakeholders.
• Assign management as change agents.
Post merger integration projects involve three major phases:

1. Identifying organizational strategies,

2. Establishing integration plan, and
3. Implementing plan.
In all of the phases, the critical success factors are to encourage employees to participate in to the
process, clarify expectations, and share information consistently and openly.
CASE ANALYSIS- TATA TETLEY ACQUISITION

1.1 INTRODUCTION
“Tata Tea, after the acquisition of Tetley, has become the world’s second largest branded
tea company.”
Tata Tea Globalization at a glance
• World's second largest global branded tea operation with product and brand presence in 40
countries.
• Significant presence in plantation activity in India and Sri Lanka.
• Subsidiary in the US overseeing operations in the country, joint ventures in Pakistan and
Bangladesh to sell tea
• Acquisition of Tetley, a company that had a turnover three times the turnover of Tata Tea in
India
• This was the biggest ever cross-border acquisition by an Indian company at that time and was
also the first leveraged buyout by an Indian firm.
BACKGROUND
Tata Group
Tata Tea, set up in 1964 as a joint venture named Tata Finlay, with UK-based James Finlay &
Co to develop value-added tea, was among India's first multinational companies. In 1983 the
Tatas acquired the entire shareholding of James Finlay to rechristen the company as Tata Tea
Limited. In the mid 1980s, to offset the erratic fluctuations in commodity prices Tata Tea felt it
necessary to enter the branded market and launched its first brand Kanan Devan in polypack,
thus heralding the polypack revolution in the country.
Today Tata Tea and UK-based Tetley Group represent the world's second largest global
branded tea operation with product and brand presence in 40 countries and a significant,
albeit consciously declining presence, in plantation activity in India and Sri Lanka.
The worldwide branded tea business of the Tata Tea Group contributes around 88 per cent of its
consolidated turnover with the remaining 12 per cent coming from bulk tea, coffee, and
investment income. Tata Tea is headquartered in Kolkata (West Bengal) and owns 26 tea estates
in India as an entity. With an area of 15,000 hectares under tea cultivation, the company
produces around 40 million kilogram’s of black tea annually. Its tea estates are located in the
states of Assam and West Bengal in eastern India and Kerala and Tamil Nadu in the south. The
company has a strong distribution network in India reaching out to over 1.7 million retail outlets
in India. Full-fledged research and development centers of the company focusing on the branded
tea business include a facility at Teok (Assam) and a product development center at Bangalore,
Karnataka focused on the entire range of tea operations.
The Tata Group companies are the largest shareholders of Tata Tea with a stake of 29 percent,
followed by the public with around 23 percent stake. Foreign institutional investors, foreign
companies and non-residents hold around 18 per cent stake, with the remaining stake held by
Indian financial institutions, mutual funds, banks and other companies.
Products and Brands
While Tata Tea is the second largest tea company in India after Hindustan Lever, it owns the
single largest tea brand in the country, Tata Tea Premium. The company has five major brands in
the Indian market catering to all major consumer segments for tea. Under the Tata Tea portolio,
three brands cater to the premium, popular and economy segment – Tata Tea Gold, Tata Tea
Premium and Tata Tea Agni respectively. In addition Tata Tea in India has three very strong
regional brands in the four Southern states, which are either number one or number two in their
respective geographies. These are Tetley, Kanan Devan, Chakra Gold and Gemini. Tetley in
India, though a niche brand, is presented as the new face of tea – innovation brand. The Tata Tea
brand leads market share in terms of value and volume in India. Tetley acquired in 2000 is the
market leader in the UK and Canada with 26 per cent and 40 per cent market share respectively
by value. Tetley has also launched iced tea under Tea of Life brand in UK, which is making good
progress. Tetley is establishing a presence in the ready-to-drink segment, for which Tetley Ice
Tea has been launched in UK and Australia. Chayya, a recently launched Chai Latte brand in
UK, is the first of its kind and is showing great promise. Besides Tetley also boasts of a wide
range of fruit and herbals and specialty tea. In order to build its business in these high value
segments, packaging innovations such as the “stay fresh” flip top carton are being introduced.

1.2 INTEGRATION PROBLEMS

A variety of problems existed in integrating the two companies:
1. How to Integrate: The Tatas decided that the best way to integrate was not to integrate
initially but to maintain a “joint-venture” type of arrangement. Furthermore, the integration
process was not rushed in order to protect Tata Tea from the risk of Tetley’s debt. Tata Tea did
not want to change that structure until the debt level was manageable. The arms-length
relationship required that Tata Tea retain existing management at Tetley. Ken Pringle remained
as the Tetley Group CEO, and Tata management took new positions on the Tetley board of
directors.
2. Size Difference: Tata Tea was half the size of Tetley in terms of revenues and number of
upper management. Tata Tea feared a domination of Tetley’s corporate culture.
3. Financial Constraints: There were three financial constraints restricting integration. The first
constraint was that legal and capital controls in India made the listing of Tetley shares in India
unattractive. The second constraint was that Tata Tea did not want to carry the heavy debt
burden held by the SPV, particularly as Tata Tea was an A-rated Indian company. The third
constraint was the restrictive covenants at Tetley as a consequence of the LBO, which meant that
changes in Tetley’s structure needed to be pre-approved by bankers.
4. Regional Players: Soon after the merger, the highly fractionated regional tea makers in India
grew faster, putting pressure on Tata Tea’s market share and profitability at home. Regional
players gained 6 percent market share in 2001.
5. Operational challenges: The merger posed a variety of operational questions, such as:
• Growth issues: How could the combined corporate vision of “Challenging for leadership
in tea around the world” be achieved? The merger required vertical integration between a
tea production company and a global marketing company, and the question was what
growth targets needed to be defined for the individual companies?
• Supply chain: How should they set up processes to harness the synergies on tea sourcing
and blending, purchasing, packing, logistics, and supply to allied functions to the mutual
advantage of both companies?
• Support processes: How should they integrate various support processes covering
Finance & Legal, IT, R&D, HR, and Communications so that the objectives of both

companies were in sync? The back-office integration was complicated by the fact that
Tetley reported in UK GAAP, while Tata Tea adhered to Indian GAAP.
• Commercial processes: How should they put in place benchmarked processes, which
would be adopted uniformly by the two organizations?
6. Cultural/Racial: There was a great deal of concern that British employees would resent
having Indian managers. These concerns were largely the result of the fact that India was a
former British colony. Anecdotally, Tetley employees were given substantial retention packages
to avoid exodus, which may have created negative feelings among Tata Tea employees. Mr
Kumar also noted that, Culture was a huge issue and had to be handled carefully. . . . Tata
executives would complain about being kept waiting when visiting Tetley’s UK head office
reception centre, despite being the senior partners. Meanwhile, Tetley people would complain
about being run by Tata, which knew only about India and nothing about Western markets.
7. Corporate Philosophy: The two companies had different opinions on how the business should
be run. Tata Tea was a collection of estates that just happened to sell package tea and focused on
Asia (excluding China), Middle East, and Eastern Europe. Tetley was a marketing and packaging
company that had relationships with tea estates and focused on North America, Australia, and
Western Europe. Due to the significant differences in customer base, the two companies had
dissimilar products. In Tata Tea’s markets, tea was usually brewed in pots, so Tata Tea was an
expert in bulk and loose teas, while Tetley was an expert in tea bags and instant tea. This gave
rise to three types of differences:
• Objectives of the company: Tata Tea was an integrated tea company, with its dual
emphasis on plantation as well as domestic marketing, whereas Tetley was primarily a
global marketing company. Whose approach was correct?
• Geographical spread: Tata Tea’s international presence was limited to bulk tea sales,
whereas Tetley was into brand marketing with sizable international presence. Which
customers should the organization focus on?
• Differences in skill-sets: Tata Tea was a plantation company whose major strengths
were managing the estates, dealing with a huge work force, and making teas. There was a
drive since the mid-80s to create domestic brands and export bulk teas. In contrast,
Tetley’s strength lay in its ability to buy quality teas worldwide; perfect its blending
skills, bring about innovation in packaging, and combine good logistics with management
skills. How were people to be cross-trained?
8. Kenya vs. India: It was initially believed that huge synergies would be achieved because
Tetley could source teas substantially from Tata Tea’s estates. Unfortunately, the majority of
Tetley’s teas were of a different flavor, quality, and cost from teas found in Tata’s estates.
Therefore, the integration process had to focus more on new products than on substitution.
9. Branding: Both companies had very strong brand names in their respective regions. There
was debate as to the surviving name of the new entity. The Tata name was not strong in Western
markets, while Tetley was relatively unknown in Tata Tea’s markets. There were also talks about

pensioning off the lovable—but old fashioned—Teafolks in favor of promoting tea as a modern
lifestyle choice.
10. Conglomerate: Tata Tea was ultimately part of a huge conglomerate. The impact of the
conglomerate on the operations of a related foreign entity and the strength of Tata Tea within the
conglomerate was unknown to Tetley employees. The Tata organization required group
companies to pay fees for the use of the Tata name and adhere to standards of financial and
social responsibility. The ramification of these standards on Tetley was still a mystery.
11. Auctions/Commodity Price: The acquisition of Tetley by Tata Tea came at a time when the
prices of raw materials for making Tea were increasing. There were also rumors in the market
about Hindustan Lever Limited and Tata Tea controlling the price of Tea.
12. Demand for Tea: The general demand for tea in many of Tetley’s core markets was slowing
or decreasing. This was partly because tea was viewed as a boring or sophisticated drink. Sodas,
coffee, and juices were gaining significant ground. There were a number of questions about how
to revitalize tea as a drink of choice.
13. Exchange Rate: The rupee was strengthening relative to the pound, which caused the
acquisition of teas from India to be more expensive for Tetley and made the transfer of money
back to the Tata organization less remunerative.
Changes Required
There were substantial challenges to realizing the synergies, which Khusrokhan effectively
summarized:
 The first challenge is that the acquirer company in this case is smaller than the company
it acquired.
 The second challenge is that since this was a cross-border acquisition, it is bound to have
its fair share of cultural problems. Getting people in two companies in the same country
to come together can be a problem; cross border integrations are even tougher.
 The third difficulty is that, because this is a heavily ring-fenced, leveraged acquisition,
banks can have a say in what is being done. We will have to carry the banks with us for
anything that could be construed to be a structural change to Tetley’s operations. . . .
[attitudinal and mindset change among employees] is very much a part of any integration
process. I call it the “learning-to-think-for-two” phase, where each organization has to
begin to appreciate that there are two ways of looking at every issue and to appreciate
each other’s point of view. It is something like the adjustment phase in a marriage, which
starts immediately after the honeymoon.

1.3 Formulating Integration Logic and Performance

Goals
Tata Tea, as part of its stated strategy to globalize, has charted out its vision to be the
market leader in the country and increase reach in the global market. For this the company
has followed a strategy of forming subsidiaries or entering into alliances in countries that have a
significant presence in the tea market, both from the producer as well as consumer side.
• The first move towards globalization was the formation of its 100 per cent subsidiary in
the USA in 1987.
• This was followed by its presence in the plantation industry in Sri Lanka.
• Over time the company realized that in order to go global; acquiring an international
brand would be preferable to building one afresh the world over. Hence in 1995, the
company bid for Tetley, a well-known innovator in tea packaging, buying, blending and
logistics management and the second largest seller of tea in the world after Unilever, but
failed. The reasons being that company as big as Tetley wasn’t affordable. Tetley was
bigger that TATA TEA.
• This however did not deter the company from reaching out again when the opportunity
arose in the year 2000. It was a major landmark in the history of the company in that year
when it acquired Tetley.
The company decided to acquire through a leveraged buyout. However it had some
implications. The integration team was often hampered by the due interference by the Banks.
The acquisition took place through a special purpose vehicle (SPV) Tata Tea (GB) Limited at a
cost of GBP 272 million, funded through a mix of debt and equity. This acquisition made Tata
Tea the world's second biggest tea company after Unilever. It was the biggest ever cross-border
acquisition by an Indian company at that time and was also the first leveraged buyout by an
Indian firm.

1.3.1 DERIVING THE INTEGRATION LOGIC
Tata offered following reason to acquire Tetley
• In the branded tea segment Tetley is second only to Unilever, while in UK it is number
one.
• Its UK operation was a mixed bag, wherein volumes were good while margins were
difficult to maintain. Primary reasons for under-pressure margins were substantial
increase in African tea prices (Tetley buys majority of its tea from this market) and retail
price remaining low throughout the year. In UK price control is largely in the hands of
retailers, as 70% of FMCG goods are sold through them. However, Q1 FY 2001 results
were mirror image of last year results, as tea prices from Kenya dropped and retail prices
showed some improvement, thereby requiring less promotional costs. Tetley has
embarked its continued efforts of cost reduction and has even closed down its unviable
London factory, one of the two factories it operates in UK.
• Canada is the second most important market for Tetley. Volumes were good in Black Tea
and company increased its market share to 40%. In Specialty Sector Company increased
its market share and emerged as brand leader.
• Company sees US as a difficult market.
• In France also company was successful in increasing market share to 10%.
• Company overall sees better prospects in current year.
Benefits from Tetley:
• Tata Tea and Tetley now work on common agenda, with representations in each company
from other. The major advantage will be increased outsourcing of tea from South India
upon quality improvement program undertaken by Tata Tea.
Others:
• Management of supply chain cost, benefiting both companies.

• R&D initiatives helping Tata Tea producing more for Tetley.
• Training given to Tata Tea personnel in buying and blending tea, which would make it
suitable for exporting to Tetley.
• To take Tetley name across the world and even introduce Tetley brand in India
leveraging Tata Tea’s distribution and financial strength.
• Tetley was a company that had a turnover of GBP 280 million, three times the turnover
of Tata Tea Ltd.
• The acquisition was the perfect blend - Tata Tea the leader in India in the packaged tea
segment with a presence in developing countries through exports and Tetley the second
largest tea brand in the world, with a presence in developed economies of US, Canada,
Europe and Australia.
• The integrated vista offered access to new markets and products to both companies, as
well as synergies in tea buying and blending.
• Tetley manufacturing facility based at Eaglescliffe, in the north east of England, is

believed to be the largest tea bag factory in the world. The combined portfolios of
branded offerings cater specifically to the US, Canada, Western Europe, Australia,
Middle East, West Asia, Africa, Poland, Russia and Kazakhstan markets in addition to
the manufacturing and supply operations of Tetley’s subsidiary companies. More than 70
per cent of the consolidated sales of the company now come from outside India.
• Tetley has a customized portfolio of offerings for each country, ranging from black,
green, fruit and herbal teas, iced ready-to-drink teas and an extensive range of exotic
specialty tea.

1.3.2 SELLING THE INTEGRATION LOGIC
Over time the Tata had realized that in order to go global; acquiring an international brand would
be preferable to building one afresh the world over. Hence in 1995, the company bid for Tetley,
a well-known innovator in tea packaging, buying, blending and logistics management and the
second largest seller of tea in the world after Unilever, but failed. The reasons being that
company as big as Tetley wasn’t affordable. Tetley was bigger than TATA TEA.
Tata Tea knew of Tetley via their joint venture in Southern India as well.
Tata Tea had actively competed with Sara Lee to acquire Tetley and the potential of Tetley
completing its own initial public offer and the largest cross border acquisition in India (in terms
of UK).
Comparison of two firms is shown in table 1
(3/31/00)- (3/31/01) TATA TEA TETLEY
Turnover $ 207 Million $ 417 Million
Operating Profit $36 Million $42.6 Million
Employees 59,740 1,100
Tea Estates 54 0
Key Markets India Britain, Canada,

Australia, United States
Thus for buying Tetley again, there wasn’t enough troubles to convince the board. Tetley was
acquired in 2000, considered a landmark deal in India. However what followed next was
complicated.

1.4 Creating the Integration Plan
When the Board finally sat down to plan the integration the following synergies between Tata
Tea and Tetley had been identified.
• Purchasing: Tetley bought about 8000000 kgs of Indian teas annually fragmented from
sources. It envisaged that Tata Tea could help in sourcing or supplying Tetley
requirements of Indian teas.
• Brands: Markets where only one or the other company had worked singly could be
developed jointly leveraging the internationally known as Tetley brand name. Tata Tea
could help launch Tetley in India, the Middle East, and Russia, traditional bastions of
Tata Tea.
• Technology: Tetley would give Tata Tea access to specialty products such as: flavored
teas, herbal teas, and organic teas and decaffeinated teas. These additions were thought as
useful introduction to Indian market.
• Cost Synergies: Both companies could jointly relocate manufacturing of teas both
packets and bags and utilize a supply chain approach and common platforms for the
InfoTech, MIS, and finance conditions. While the geographic spread of operations were a
constraint in moving people around, it was anticipated that virtual teams using
information technology could work together without physically moving across the
country boundaries
• Infotech: The acquisition was seen as an opportunity to improve the infotech
infrastructure of Tata Tea, improving the connectivity to remote plantations adopting an
Enterprise Resource Planning System to create a global supply chain based on Tetley’s
SAP based ERP solution.

1.4.1 Initial Ring Fenced Structure

Tetley initially continued to operate, after the acquisition as a separate company with its own
goals and objectives predominantly as a consequence of a ring fenced structure chosen for the
acquisition. Tata tea is in fact smaller than Tetley. It acquired Tetley by the means of a leveraged
buy put. Tata tea put up only one third of Tetley acquisitions cost with banks and lenders putting
in the balance funding.
A leveraged buy-out has perforce certain limitations attached to it, in terms of what you can and
can’t do as long as the high leverage continues. Therefore, in the early days following the
acquisition, Tata Tea restricted its role to an advisory one:
• Monitoring,
• guiding and
• Watching over Tetley’s operations.
A few months ago, after having seen an encouraging performance by Tetley, Tata Tea decided to
put in some more money from Tata Tea and Tata Sons into the acquisition by way of ‘quasi-
equity’, which brought down some of the very high-cost debt, incurred on the acquisition and
simultaneously enhanced our ownership stake.
However such attitude didn’t work. From the results, it was clearly seen that a formal integration
had to be done in order to drive out the synergies between the two entities.
Winners Curse and a Financial Shortfall
It was clear that Tata Tea had paid too much for Tetley, almost pound 100 million more than the
next highest bid. Tata Tea had hoped to achieve cash flows of at least pound 48 million in order
to repay the principal and interest created by the leveraged buyout. Tetley’s financial
performance had been deteriorating with cash flows of pound 10 million in 1999. The pressure to
generate increase in cash flow created intense pressure and conflict internally at Tata Tea and
between the two organizations. Meeting the cash flow targets established during the merger was
not going to be easy as tea was loosing grounds to sodas, juices and coffee. At the same time the
raw material was increasing. Tata Tea realized that they would have to increase the amount of
equity in the SPV to reduce expensive debt.
The only areas where Tata Tea and Tetley worked closely together were in the areas of tea
buying and blending. In order for Tata Tea to be useful to Tetley in sourcing or supplying their
requirements of Indian teas needed to have its people trained to know exactly what Tetley was
looking for in terms of quality and process of the Teas required for their two blends. The entire
Tata Tea buying and blending team was trained in Tetley methods and the two companies
began operating seamlessly in their area.
The Tata Tea hence established a new post merger strategy in order to derive the synergies.
1.5 Operational Integration
By February 2002, it was apparent that by all the metrics, the acquisition of Tetley was not going
well. The failure of Tetley to make the required cash flow targets, coupled with the high debt
burden, required Tata Tea to make some changes, The first major blow was that Tata Tea would
have to increase the amount of equity in the SPV to reduce the expensive debt. In September
2001, Tata Tea invested an additional pound 60 million of equity. The company also sold
Tetley’s private label tea business in US to Harris Tea for 15 million pounds. The “seamless
integration” was not working, because they were still to separate companies. With the
investment of quasi-equity by Tata Tea and Tata Sons which brought down some of the very
high-cost debt incurred on the acquisition and simultaneously enhanced the Tata Tea’s
ownership stake, Tata Tea could finally begin contemplating greater integration.
Tata Tea decided to hire the Boston Consulting Group to develop an Operational Agenda.
BCG took its first steps by asking the top management at both entities to identify their
strength and weaknesses. Rather than having two separate companies running their own
business, it was finally the decision that there should be one entity with one central
command.
Senior officials from both the sides from Tetley and Tata Tea met in Goa to kick start the process
of integration and develop a structure. During this meeting they created a task force of neutral
members (non executive board members), whose tow main objectives were to launch a premium
Tetley brand in India and to introduce Tetley branded iced tea in United States. Accomplishing
these goals could bring two organizations closer together. The senior officials also had to decide
on how to begin restructuring global facilities and how to enter new markets. One good sign was
that from March to December 2001, Tetley group had a 3% increase in sales and a 34% increase
in EBIT. The problem was that Tata Tea was loosing market share itself to regional players and
to HLL.
An apex “Executive Committee” of six people led the integration effort from the two
companies. The executive committee was in charge of the broad strategies and policies
associated with the integration process. R.K. KrishanKumar, Tata Tea, headed the
supervisory board. The other members included:
(1) Homi Khusrokhani M.D. Tata Tea

(2) Percy SiganPoria, Deputy MD, Tata Tea
(3) Ken Pringle , CEO, Tetley Group
(4) John Nicholas, Tetley Group
(5) Peter Unsworth, Tetley Group
A parallel project team structure was also formed to look into specific areas of the integration
process. The task force created was split up into teams to complete all aspects of the integration.
Teams were assigned tasks as:
(1) Assimilation of systems of financial, information technology and data management.

(2) Review of procurement, packaging, and related cost savings.
(3) Issues related to tea buying and blending.
(4) Harmonization of personnel and human resources policies and an attempt to solve
cultural issues created by geographic divide and British Colonization of India
(5) Innovation and new product development.
The “steering group” also included two nominees from BCG. Also , the project coordinator
team would see one member from BCG assisting Tata Tea- Tetley team.

1.5.1 The Integration Process

Following the meeting, Tata Tea and Tetley group agreed to merger the entities into a single
entity and the first step began to integrate “operations”. The entire exercise was to complete in
18-24 months. The two companies would have a single CEO to look over the operations.
Phased Integration Process

Integration was to be completed in 3 phases
(1) In the first phase, the end points were development of a common vision, goals and
synergies for both the companies and also a creation of a road map for capturing
synergies and taking process further.
(2) The second phase was devoted to actual working together and captures these synergies.
(3) Ultimate phase would have been legal mergers which could be done once the debt in
Tetley was reduced.
Four cross functional teams with representatives from both Tata Tea and Tetley were set up.
Each team had defined objectives for the processes under their charge, which spelled out the way
forward with measurable goals and estimated timelines. They were closely monitored both
internally and by the teams and also by the executive committee for meetings through at regular
intervals. Integration of SAP environment between Tata Tea and Tetley was commenced to help
in sharing the data under common platform and to facilitate decision making.
Though the Tetley acquisition was perceived negatively by the market for the next three years,
the company carefully chose an approach to integrate the processes and explore synergies
between the two companies with absence of any time pressures, while maintaining operational
independence. The emphasis throughout was on revenue and growth and not on cost reduction. A
common Mission-Vision-Values statement and strategy for both the companies was formulated
after a debate in a joint managerial group of the two companies. A structure that facilitated joint
working in several areas was implemented. A well-thought through process was adopted for the
integration of the two companies with some of the highlights being:
 Identification of common beliefs: An international consulting firm was commissioned

to identify the common beliefs between the two companies and suggest ways to bring the
two closer together.
 Creation of a structure: A structure was put into place to create a steering committee
with several task forces reporting to it and comprising managers of both companies.
Some teams were given time-bound tasks while others worked on unification of some
processes. This structure was then folded into the operations of both companies.
 Refinement of structure: The Steering Committee became a Supervisory Board

reporting to the Board of Tata Tea, which started taking decisions on matters concerning
both companies. Four integration teams supported this Board, one, a growth team having
an agenda to drive geographical and product category growth and improve operational
performance and the other three to drive common business processes. These include the
Commercial and Business Processes Team top streamline and standardize marketing, the
Global Supply Chain Team to handle raw materials, finished products, delivery and
distribution, and the Support Team to look at finance, research, communications,
Information Technology and Human Resources.
An intense benchmarking process was conducted in Tata Tea Tetley as well as other companies,
the end result of which was to have world-class processes that are endemic to the branded
business.

1.6 STRATEGIC INTEGRATION

After the acquisition, Tetley initially continued to operate as a separate company with its own
goals and objectives, predominantly as a consequence of the “ring-fenced” structure chosen for
the acquisition. In the early days following the acquisition, Tata Tea restricted its role to an
advisory one: monitoring, guiding, and watching over Tetley’s operations. The only areas where
Tata Tea and Tetley worked closely together were in the areas of tea buying and blending. In
order for Tata Tea to be useful to Tetley in sourcing or supplying their requirements of Indian
teas, Tata Tea needed to have its people trained to know exactly what Tetley was looking for, in
terms of the quality and prices of the teas required for their blends. The entire Tata Tea buying
and blending team was trained in Tetley methods and the two companies began operating
seamlessly in this area.
Commenting on the synergies soon after the acquisition, R. K. Krishnakumar, chairman of

Tata Tetley and vice chairman and CEO of Tata Tea, told the Economic Times, “I see us fusing
all these entities into one super global company, … seamlessly operating as one entity, deriving
all the efficiencies of integration and imparting the necessary aggression in the marketplace to
gain market share. The synergies between the two companies are very strong and bringing them
together does make sense. But this is only at a conceptualization stage. We aren’t working on
anything. It may take a while to happen.”
Ratan Tata, Chairman of Tata Tea, best summarized the integration process when he said, It
will take three to four years for the benefits of the acquisition to be felt.”
By February 2002, it was apparent that by all metrics, the acquisition of Tetley was not going
well. The failure of Tetley to make the required cash flow targets, coupled with the high debt
burden, required Tata Tea to make some changes. The first major blow was that Tata Tea would
have to increase the amount of equity in the SPV to reduce expensive debt. In September 2001,
Tata Tea invested an additional £60 million of equity. The company also sold Tetley’s private
label tea business in the United States to Harris Tea for $15 million. The “seamless integration”
was not working, because they were still two separate companies. With the investment of quasi-
equity by Tata Tea and Tata Sons (the Tata group’s primary holding company), which brought
down some of the very high-cost debt incurred on the acquisition and simultaneously enhanced
Tata Tea’s ownership stake, Tata Tea could finally begin contemplating greater integration.
Tata Tea decided to hire Boston Consulting Group (BCG) to develop an operational
integration agenda. BCG took its first steps by asking top management at both entities to
identify their strengths and weaknesses. Rather than have two separate companies running their
own business, it was finally the decision that there should be one entity with one central
command.
BCG’s suggestion of having one entity stood in contrast to the Tetley Chairman and Tata Tea
Vice Chairman, R. K. Krishnakumar’s position. Commenting on the decision to hire a consulting
firm, Krishnakumar said, “We recognize that with the acquisition of Tetley, there is a need to

synchronize operations. The consultants will map out a blueprint that will help us with logistics
and marketing plans that keep both identities intact.
Meeting in Goa
Senior officials from both sides from Tetley and Tata Tea met in Goa to kick-start the process of
integration and develop a structure.4 During this meeting they created a task force of neutral
members (nonexecutive board members), whose two main objectives were to launch a premium
Tetley brand in India and introduce Tetley-branded iced tea in the United States.
Accomplishing these goals could potentially bring the two organizations closer together. The
senior officials also had to decide on how to begin restructuring global facilities and how to enter
new markets. One good sign was that from March to December 2001, the Tetley group had a 3
percent increase in sales and a 34 percent increase in EBIT. The problem was that Tata Tea was
losing market share itself to regional players and to Hindustan Lever Limited.
The integration effort was led by an apex “Executive Committee” of six people from the two
companies. The Executive Committee was in charge of the broad strategies and policies
associated with the integration process. The supervisory board was headed by R. K.
Krishnakumar, vice chairman, Tata Tea. The other members included Homi Khusrokhan,
managing director, Tata Tea; Percy Siganporia, deputy managing director, Tata Tea; Ken
Pringle, CEO, Tetley Group; and John Nicholas and Peter Unsworth of Tetley group.
A parallel project team structure was also formed to look into specific areas of the integration
process. The task force created was split up into teams to complete all aspects of integration.
Teams would be assigned tasks such as
• Assimilation of systems for financial, information technology, and data management;

• Review of procurement, packaging, and related cost savings;
• Issues related to tea buying and blending;
• Harmonization of personnel and human resources policies and attempt to solve the
• Cultural issues created by the geographic divide and British colonization of India; and
• Innovation and new product development.
The steering group also included two nominees from BCG. Also, the project coordinator team
would see one member from BCG assisting the Tata Tea-Tetley team.
The Integration Process

Following the meeting, Tata Tea and the Tetley group agreed to merge the two entities into a
single entity, and, as a first step, began to integrate operations. “This [the merger] is move rather
quickly on functional integration,” said Ken Pringle, Tetley CEO. The entire exercise was
expected to be completed within the next 18-24 months. The two companies would have a single
CEO overseeing the operations of both companies.

The phased integration process

The integration process was to be completed in three phases. In the first phase, the end points
were the development of a common vision, goals, and strategies for both companies, and also the
creation of a road map for capturing synergies and taking the process further. The second phase
was to be devoted to actually working together to capture these synergies. The third and ultimate
phase could be a legal merger, which could be done once the debt in Tetley was reduced.
Four cross-functional teams with representatives from both Tata Tea and Tetley were set up.
Each team had defined objectives for the processes under their charge, which spelled out the way
forward with measurable goals and estimated time lines. These were closely monitored both
internally and by the teams and also by the executive committee for adherence through meetings
at regular intervals. Integration of the SAP environment between Tata Tea and Tetley was
commenced to help in sharing of data under a common platform and to facilitate decision
making.
• The Commercial and Business Processes Team will streamline and standardise
marketing.
• The Global Supply Chain Team will concern itself with raw materials, finished
products, delivery and distribution and
• The Support Team will look at finance, research, communications, IT and HR. “We have
cut across individual operation areas and gone though an intense benchmarking process
in Tata Tea, Tetley as well as other companies. The end result of this exercise will be that
we will have world-class processes that are endemic to the branded business,” says Percy
Siganporia, Tata Tea.
• A fourth team, known as the Growth Team, is looking at geographical and product
category growth.
The cultural integration, which is often an issue in many a merger or acquisition, has been
smooth for Tata Tea and Tetley. Mr Nicholas says, “We are different but we are learning
from each other. For instance, Tetley is very process oriented while Tata Tea is quicker to
respond and more action-oriented.”
Mr Pringle emphasises, “We have focused on bringing together skill sets of both teams. We can
add to each other’s knowledge and skills and create business with better value prospects.”
For instance, Tetley is well known for its packaging innovations. Its round bags in the 1990s
were received with greedy gulps by consumers, who saw it as a faster and better brew.
Laminated packaging replaced cardboard and changed the consumers' perception on the
freshness of tea.
In India, however, taste preference is stronger than brand loyalty. Says Mr Khusrokhan, “Most
consumers have a personal recipe for making tea and stick to the one brand that gives them that

satisfaction. The name of the game is raising the consumers’ curiosity, arousing interest and
encouraging them to try something different.”
While Tetley is standardised, Tata Tea has strong regional brands and different blends for
different areas as each region has its own taste preference. Speciality and herbal teas are high
growth segments but in India they are a very small, niche segment. In the US,s cold tea is the
biggest segment but again in India, it is tiny.
CHANGE MANAGEMENT AT TATA-TETLEY

NEW MISSION, VALUE STATEMENT
Their Vision, Mission and Corporate Purpose Statement were framed by the Company's senior
management in February 1999. This formed the basis of the Company's direction and strategy
over the past few years. It marked the realization within the Company that "Customer is
paramount". Much of this statement remains valid and is of considerable relevance even today.
With the acquisition of Tetley in 2000, and commencement of a formal process of integration,
the process of evolving corporate thinking onto a global canvas was initiated. In 2002, the
"Supervisory Board" of Tata and Tetley put forth a new Vision Statement, "Challenging
the World for Leadership in Tea", embodying a modified set of Values, in line with the
Tata Group Purpose.
"Challenging for leadership in tea around the world"
1. Challenging … A state of mind throughout the organization, never being satisfied with
the status quo, constantly striving to be better and to do new things, in new ways and a
principle by which we manage our brands in the marketplace, creating relevant
differentiation and confidently projecting clear brand identities.
2. Leadership….Not just in size, but more importantly in the eyes of our customers and
consumers, through our thoughts, ideas, behavior and achievements
3. Through innovation, which will enable us to build stronger relationships with our
existing consumers, reach out to new consumers and keep the category vibrant.
4. Tea…The product scope of our vision, encompassing the widest definition of the
category; the production and marketing of black and green teas, specialty fruit and herbal
teas, ready-to drink teas, tea serving systems and retailing of tea.
5. The World- The geographic scope of our vision; building a global business by leveraging
and building our brands and forging partnerships to mutual advantage.
Tata-Tetley- Our Values
• We believe that our customers and consumers define the success of our organization and
that they should be top-of-mind in everything that we do.
• We believe that our people are at the heart of our organization; and that we should give
them the freedom to achieve, through clarity of direction and the creation of an informal,
barrier free culture
• We believe in tea and in our products, and their role in adding to the well-being of people
the world over
• We believe in earning the respect of all those who know us
• We believe in making a positive contribution to the people and communities our business
touches
• We believe that by striving to deliver our vision and by living our values we shall create
more valuable business and hence over the long term increase returns to our shareholders.

• The Vision and values which have evolved over time gives the desired impetus for
sustainability thinking and is sharpened further through stakeholder engagements to
arrive at key issues.
NEW CORPORATE GOVERNANCE SYSTEM
Tata Tetley devised a new corporate governance structure and was managed by the Managing
Director under the supervision, control and direction of the Board of Directors. The Board was
set up the following Committees:
a. Executive Committee
b. Audit Committee
c. Investors Grievance Committee
d. Remuneration Committee and
e. Ethics and Compliance Committee
In addition the Business Review Committee (BRC) for the Company reviews the medium and
long-term strategies of the Company and recommends/suggests changes that the Committee may
consider necessary. The day-to-day operations are run by the Managing and Deputy Managing
Director with the assistance of two Executive Directors.
Important issues relating to strategy are referred to and discussed at Executive Committee
meetings which are chaired by the Vice Chairman. The Company also has a Management
Committee and each of the Strategic Business Units (SBUs) have their own Board where all
issues relevant to the SBU are discussed TTL is guided by the internal code of conduct as framed
by Tata Sons Ltd. (TSL) covering all its employees at various levels. It clearly specifies the
norms under which- Business transactions, Behavioral standards with external agencies and
Social responsibilities as corporate citizen to be conducted. In addition the corporate governance
code as enunciated in the Listing Agreement entered into with the various Stock Exchanges is
adhered to. The basic objective is to ensure transparency in all dealings and the functioning of
the management and the Board. The policies pursued focus on long-term shareholder value
creation through integrity, social obligations and regulatory compliance.
As on 31.3.2003 the composition of the Board of Directors is given below with the relevant
percentage. The Board had appointed an Alternate Director in the case of a foreign director.
Category of Directors Number %

Promoter's Nominees 28.57%
Managing & Executive Directors 28.57%
Non Executive Independent Directors 28.57%
Nominee Director (considered as independent) 7.14%
Other Non Executive Director 7.15%
TATA TETLEY EMPLOYEES

Tea companies depend heavily on their employees especially the plantation workers. Thus at
Tata Tetley they took special care of our workforce. As on March 31, 2003, Tata Tea Ltd in
India had a total permanent full-time workforce of 56,031 supplemented by 64 employees
working on contract and 20,784 temporary blue-collar employees.
There was been a significant reduction in the work force due to decrease in employment of
temporary workers, and reduction of the permanent workforce by about 2% as part of cost
control measures. The Company however does not keep a record of workers employed by
contractors for carrying out various activities.
Employee benefits
TTL had set up the Tata Tea Employee Welfare Trust with a corpus of over Rs 1 million to
promote employee (including casuals) welfare through measures such as providing medical
assistance to non-executive employees and their dependants, providing scholarships varying
between Rs 500 and Rs 1000 per month to employees' children studying in intermediate classes,
rehabilitating victims of cyclones and other natural disasters, etc. TTL paid out Rs. 1,02,500/-
during 2002-03 towards these issues. Retired executives and their spouse enjoy medical
insurance benefits comprising both hospitalization and domiciliary components, in addition to
drawing pension. Employees also have access to well stocked libraries, recreation clubs, etc.
Labor/Management Relations
Unionised employees constitute 98% of the total permanent workforce. All permanent
employees other than executives, junior management staff, and employees on contract are
represented by independent trade union organizations (labour, subordinates and clerical staff are
included).
TTL consults and negotiates either directly with recognised trade unions or through associations
like Indian Tea Association (ITA) or United Planters' Association of South India (UPASI). The
Company promotes organizational communication through the publication of in-house
magazines: Tatean (published for the whole company), Samachar (published primarily for the
eastern plantations) and Seithigal (published primarily for the southern estates). The Company
invites employees to share their ideas through a formal suggestions scheme, WinIdea, which has
provisions for recognizing ideas of use to the Company.
The Company discusses various work related issues with the trade unions and involves them in
making decisions on issues like welfare measures, tasks, recreation, holidays, etc.
Health and Safety

The disease profile of different workplaces are maintained regularly and monitored routinely.
Occupational diseases are treated in estate hospitals. Any accident that may take place during the
course of employment are reported to the authorities concerned as per requirement of the
Factories Act, 1948 / Plantation Labour Act, 1951 / Workmen's Compensation Act, 1923.
Link Workers (and Mahila Mandal in NIPO) discuss various health and safety issues in the
presence of doctors and welfare officers in their monthly meetings. These associations have
representations from staff and workers on the estates. All factory workers are medically checked
once every year and records maintained. There has been one case each of work related fatality
during the year under review in both NIPO and SIPO. A proposed HIV / AIDS policy for Tata
Tea has been drafted pending top management approval.
Training and Education

TTL provided 2.29 mandays of classroom training per executive during 2002-03. Other indices
pertaining to executive training were also given. Training to non-executives is mostly on the job
training and hence difficult to quantify. Illustrative examples of classroom training for non-
executives are shown below:
TRAINING FOR NON-EXECUTIVES DURING 2002-03
• Professional Selling, Sales Effectiveness, Strengthening Selling Skills

• Workshops, Seminars on Finance, Taxation and Audition
• Computer Refresher Course, MS Projects
• Training Programme on Effective Purchase Procedures
• Safety, Health & Hygiene Work Shop, Cleanliness of the Work Area, Handling of
Chemicals, and Quality Control
• Operating Procedure for Equipment, Calibration and Maintenance Procedure of Lab
Instruments,
• Training Programme on Energy Efficiency
• Training on Quality
While Tata Tea did not currently have any formal career ending training programmes, it is
committed to helping employees in managing career endings through generous employee
separation schemes. It invests in updating employee skills by nominating them to various internal
and external programmes as listed in below:
MANAGEMENT DEVELOPMENT PROGRAMMES
• Organisational Renewal for Competitiveness

• Managing and Measuring Business Performance
• Continual Improvement through Cost of Quality
• Effective Marketing
• Sales Management
• Labour Reforms and Social Safety Net
• Sexual Harassment at Workplace
• Building a Truly Value-Driven Organisation
• Creative Excellence in Management
• Competency Mapping and Assessment
• Accounting Standards and Its Practices
• Training on TBEM
• Corporate Public Relations
• Corporate Governance Issues for Managers

• Core Managerial Skills for Health Professional
• Manufacturing Management
• Plant level Energy Audit Practice for Energy Conservation
• Supply Chain & Logistics Management for Global Trade
• IT for Agri-Business
The Company nominates its employees to training programmes conducted by reputed institutions
such as the IIMs, XLRI, ASCI, NITIE, etc., in addition to organizing various in-house
programmes of general interest.

IMPLICATIONS AND CONCLUSION

HP COMPAQ
Analysis of the strategic dynamics of the HP-Compaq acquisition integration in terms of four key
processes and feedback loops between them presents a mixed story of significant progress but
also of key unresolved issues. It was found that the process of formulating the integration logic
and performance goals was generally well carried out.
The pre-clearance process of establishing the integration planning approach and the integration
tools developed for that purpose were first rate and recognized as such by many observers. The
operational integration process similarly was executed quite well and beat the short-term goals
set for the merger.
With the benefit of hindsight, however, it was found that the feedback loop between the
operational integration process and the process of formulating the performance goals could have
been stronger. While understandable in light of the heavy demands on everybody involved
during the operational integration process, a weak feedback loop prevented top management
from timely revisiting the initial assumptions on which the – perhaps too explicitly stated –
longer-term performance goals were based, and from testing the new corporate strategy with key
customers.
Because the strategic integration process was not clearly recognized as a distinct one by top
management, we found an even weaker feedback loop back to the longer-term performance
goals, as well as a failure to pay sustained attention to executing the multi-year strategic
activities necessary to meet the longer-term goals.
Victory was claimed too soon, and the opportunity costs of the acquisition integration not fully
appreciated. Viewing the execution of the acquisition integration process primarily in terms of
the operational integration process prevented top management from clearly seeing the need to
augment its own bandwidth. Yet, while the exact nature of the integration team changes as the
integration process progresses and the heavy team structures of the integration planning and
operational integration were perhaps not necessary for the strategic integration process, the
opportunity to increase top management’s bandwidth resided in the capabilities for large-scale
change developed by the integration planning team. These should have been kept in place for the
time necessary to execute the strategic integration process.
By splitting part of the integration team and focusing it on starting to execute the key multi-year
initiatives the feedback loop necessary to keep the acquisition integration ahead of environmental
change would have been much stronger, raising top management’s continued alertness to the
rapidly evolving competitive challenges. This, in turn, might also have prevented top
management from underestimating the time and effort required during the strategic integration
process to execute on the strategic initiatives necessary to compete effectively and
simultaneously on multiple fronts against world-class competitors with fundamentally different
strategies and capabilities.

Highlighting the importance of the four processes involved in acquisition integration, the role of
feed-back loops in managing the strategic dynamics of acquisition integration and the role of the
integration planning team, as well as providing insight in why intelligent and hard driving top
managers may fail to pay enough attention long enough to the strategic integration process offers
potentially useful guidance for the top managements and boards of directors of other companies
contemplating major acquisitions and the management of their strategic dynamics.
EVALUATION OF THE CHANGE MANAGEMENT AT HP COMPAQ
Merging two workforces, cultures and product lines, spanning printers and storage devices to
notebook, handheld and desktop PCs, is never easy, but the global scale of the HP/Compaq
merger made it a mammoth task. HP had 88,000 employees and Compaq 65,000, all spread
across the globe. According to Mike Taylor, HR director for HP UK & Ireland states, “All
organisations know that the success of a merger is down to the people-you have to get your
people focused in the right way. HR’s role remains pivotal for the success of the merger, not
much could have happened without the intervention of HR.”
A huge amount of core HR work was planned and executed. For this, Clean Room was
developed. Here, a virtual team was assembled from both companies to plan for the merger. The
team adopted an HR strategy and an HR plan that tackled these issues one by one. This included
harmonizing terms and conditions and implementing new job architecture and a new
performance-management system right across the organization. The need to focus employees
meant it was vital to have the necessary communication and information channels in place.
Traditional media such as posters and leaflets and regular briefings from senior executives did
their part. But the most effective delivery mechanism was its intranet employee portal, @HP.
The self-service HR portal, which was originally rolled out in 2000 and has around 141,000
users, received two million hits on day one of the merger. It enabled HP to disseminate a mass of
information during the run-up to the merger which included the rationale behind the move and
the role employees could play within the new organization. It included training materials
which enabled sales people to go out and represent the company to customers in an appropriate
way.
The portal was a 24/7 tool which helped prepare for the merger, but the company put a raft of
other initiatives in place; the most significant of these from a people perspective was its Fast
Start seminars. At the planning phase, the Clean Room team constructed training modules that
managers could use to get their newly appointed team up to speed on the company.
The Fast Start sessions were further followed up with a Fast Forward programme to have a
smooth transition into the final phases. It also strengthened the culture. These programmes were
developed within HR to help organization meet its business objectives. It was ensured that HP
can take advantage of the technology to move up the value chain and HR was developed as
genuine business partners. After the merger, HP employees also wanted to know about the
decision making process and the components of product lines and how they would be supported.
The seminars worked at a strategic level but were also tactical to get people thinking about how
they were going to operate.

One of the major challenges was to ensure the best of both side’s processes and practices were
adopted, with speed and agility among the new company’s core values, HP used an “Adopt and
Go” approach when it came to deciding on processes which meant that instead of saying ‘those
processes could be improved let’s design a new one’, it would have been time consuming so they
took the best from whichever world and went with it.
Now HP is a complete mix of pre-merger HP and pre-merger Compaq built in and integrated
across the organization.

IMPLICATIONS AND CONCLUSION-TATA TETLEY

The international marriage – success lies in complementing each other .The year 2000 saw the
Tata group acquire the Tetley group based in UK where the deal; was closed for 271 million
pounds. The merger was undertaken on two counts.
• For one, Tata Tea had their global ambitions well in place, as they wanted to take Tata
Tea to the global markets.
• The second reason, from Tata’s side was the fact that they wanted to understand the
global distribution system.
The deal was a rare example of an Indian company taking over a larger British group. Initially,
culture was a huge issue and had to be handled very carefully.
For example, Tata executives would complain about being kept waiting when visiting Tetley’s
UK head office reception centre, despite being the senior partners. Meanwhile, Tetley people
would complain about being run by Tata which knew only about India and nothing about
Western markets.”
The cultural integration, which is often an issue in a merger or acquisition, has been smooth for
Tata Tea and Tetley. The companies were different but were learning from each other. For
instance, Tetley is very process oriented while Tata Tea is quicker to respond and more action
oriented. Tata was quite aware that it needed to be sensitive to the potential cultural challenges of
combining the two groups.
Both the groups were aware of the culture difference that existed and rather than trying to
dominate each other, they adopted a focused approach to blend the two cultures. They
appreciated and worked towards adding to each other’s knowledge and skills and create business
with better value prospects. The best part was that both the companies decided to leave behind
the separate cultures of Tata and Tetley and move towards defining a single company. It was the
first step towards a merger. The Merger was being seen as something beneficial for both the
parties given the synergies that were expected. The key learning’s from this merger were –
pre-estimating the importance of cultural differences, adopting a non-threatening
approach and absence of time pressure. This actually helped Tata Tetley improve results.

Conclusion
Different cultures make different assumptions about others based on own values. Thus, while
going for a merger activity, it is important to see them with our eyes not theirs. It isn’t enough to
say, “We are two big companies coming together to form a giant, so this is a time to be happy”.
From due diligence to integration, being able to qualify and quantify cultural differences and
synergies is the key to protecting shareholder value and reducing the risk of failure and a happy
and everlasting merger.

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LITERATURE REVIEW

MERGERS & ACQUISITIONS

According to company experts and economists there is no alternative to globalization.

According to Helsingin Sanomat arguments for globalisation are

• World GNP grows faster than ever

Arguments against globalisation are

• To be present for the customers all over the world (customers).

2 DISSERTATION REPORT BY PRIYANKA RAJPUT

3 DISSERTATION REPORT BY PRIYANKA RAJPUT

1.1.3 TYPES OF ACQUISITIONS

4 DISSERTATION REPORT BY PRIYANKA RAJPUT

The effort in control may be a prelude

5 DISSERTATION REPORT BY PRIYANKA RAJPUT

1.1.4 THE AMOUNT OF MERGERS AND

• Changing market conditions

• Market penetration to get market power

7 DISSERTATION REPORT BY PRIYANKA RAJPUT

In 1996-1998, national transactions accounted for 53 % of all operations involving EU

1.1.5 MAJORITY OF ACQUISITIONS FAIL

1.1.6 REASONS FOR FALUIRES

10 DISSERTATION REPORT BY PRIYANKA RAJPUT

1 Size issue, especially big differences in sizes have a strong influence.

11 DISSERTATION REPORT BY PRIYANKA RAJPUT

7 Communication. Hubbard found communication to be a crucial step in overall acquisition

1.2 CHANGE MANAGEMENT THROUGH EFFECTIVE

The important signals fall into three categories:

(1) Senior appointments

(2) The top team's alignment, and

1.2.2 LEWIN’S THEORY OF CHANGE

16 DISSERTATION REPORT BY PRIYANKA RAJPUT

opposing directions. Driving forces facilitate change because they push

• According to Lewin, the first step in the process of changing behavior is

1.2.3 INTEGRATION AND CHANGE MANAGEMENT

Post merger integration projects involve three major phases:

18 DISSERTATION REPORT BY PRIYANKA RAJPUT

1. Identifying organizational strategies,

CASE ANALYSIS- TATA TETLEY ACQUISITION

Tata Tea Globalization at a glance

Products and Brands

20 DISSERTATION REPORT BY PRIYANKA RAJPUT

1.2 INTEGRATION PROBLEMS

21 DISSERTATION REPORT BY PRIYANKA RAJPUT

22 DISSERTATION REPORT BY PRIYANKA RAJPUT

23 DISSERTATION REPORT BY PRIYANKA RAJPUT

1.3 Formulating Integration Logic and Performance

24 DISSERTATION REPORT BY PRIYANKA RAJPUT

1.3.1 DERIVING THE INTEGRATION LOGIC

Tata offered following reason to acquire Tetley

• Company sees US as a difficult market.

• In France also company was successful in increasing market share to 10%.

• Company overall sees better prospects in current year.

Benefits from Tetley:

• Management of supply chain cost, benefiting both companies.

25 DISSERTATION REPORT BY PRIYANKA RAJPUT

• R&D initiatives helping Tata Tea producing more for Tetley.

• Tetley manufacturing facility based at Eaglescliffe, in the north east of England, is

26 DISSERTATION REPORT BY PRIYANKA RAJPUT

1.3.2 SELLING THE INTEGRATION LOGIC

Comparison of two firms is shown in table 1

(3/31/00)- (3/31/01) TATA TEA TETLEY

Turnover $ 207 Million $ 417 Million

Operating Profit $36 Million $42.6 Million

Employees 59,740 1,100

Key Markets India Britain, Canada,