VOLUME 17 • NUMBER 2

The Role of HR in Cross-Border

Mergers and Acquisitions:
The Case of Indian Pharmaceutical Firms
Pawan S. Budhwar, Arup Varma,
Anastasia A. Katou, Deepa Narayan

Abstract: Mergers and acquisitions (M&As) are increasingly be-

coming a strategy of choice for companies attempting to achieve and
sustain competitive advantage. However, not all M&As are a success.
In this paper, we examine the three main reasons highlighted in the
literature as major causes of M&A failure (clashing corporate cultures,
absence of clear communication, and employee involvement) in three
Indian pharmaceutical companies, and we analyze the role played by
the HR function in addressing them. Also, we discuss the importance
of gaining the commitment and focus of the workforce during the
acquisition process through employee involvement.

Keywords: Human resource management, mergers and acquisitions

(M&As), cross-border, India

Introduction
Over the last two decades or so, mergers and acquisitions (M&As) have
become an increasingly popular strategic choice for numerous organi-
zations (Galpin and Hemdon 1999; Lodorfos and Boateng 2006; Schuler
2001), perhaps because organizational leaders believe that M&As have
the unique potential to help rejuvenate companies and to contribute to
business restoration (Angwin 2001; Salama, Holland, and Virten 2003). In-
deed, organizations realize very clearly that rapid growth, flexibility, and

Pawan S. Budhwar, Work & Organizational Psychology Group, Aston Business School, Aston University, Birmingham B4
7ET, UK, Tel: +44-121-2043049, Fax: +44-121-2043327, E-Mail: p.s.budhwar@aston.ac.uk

Arup Varma, School of Business, Loyola University Chicago, 1 East Pearson Street, Chicago, IL 60611, USA, Tel: +1-312-915-
6664, Fax: +1-312-915-6231, E-mail: avarma@luc.edu

Anastasia A. Katou, Teaching Fellow in HRM and OB, Department of Marketing and Operations Management, University
of Macedonia, 540 06 Thessaloniki, Greece, Tel: +30-2310-819921, E-Mail: akatou@uom.gr

Deepa Narayan, Aston Business School, Aston University, Birmingham B4 7ET, UK

Pawan S. Budwar, Arup Vrma, Anastasia A. Katon, Deepa Narayan 89

 THE MULTINATIONAL BUSINESS REVIEW

efficiency are critical for them to be competitive in the global economy

(Schuler and Jackson 2001), and M&As can provide them with these at-
tributes. However, it should be noted that a significant number of M&As
fail, and depending on the industry, the reported failure rates vary any-
where from 50 to 80 percent (Tetenbaum 1999; Bryson 2003; Erez-Rein,
Erez, and Maital 2004; Lodorfos and Boateng 2006). The history of M&A
activity shows that, for the most part, M&As fail to live up to the expec-
tations (The Economist 1999). At the third annual M&A summit (China
Summit 2006), it was reported that at least 50 percent of the M&As fail to
achieve their original objectives, and over 80 percent of mergers are un-
successful one year after the completion of the deal. Despite this, M&As
continue to find favor with organizational leaders (Bryson 2003), often
with the specific purpose of achieving competitive advantage (Porter 1985)
through achieving synergy between the involved companies (Cartwright
and Cooper 1995). Also, the M&As initiated by firms from emerging mar-
kets like India (e.g., acquisition of Land Rover and Jaguar by Tata) and
China (e.g., acquisition of part of IBM by Lenovo) is on the increase (Pil-
lania 2009). Since this is an evolving phenomenon, there is, consequently,
very little literature on what contributes to the success of M&As pursued
by multinational companies from emerging markets. This paper makes an
attempt to fill this gap.

In this connection, lack of “strategic fit” and inappropriate management

during the integration process are often cited as the primary reasons for
poor performance in most M&As (Chatterjee, Lubatkin, Schweiger, and
Weber 1992; Schuler and Jackson 2001; Lodorfos and Boateng 2006). Fur-
ther, many authors argue that incompatible cultures, loss of key talent,
poor communication, and reduced involvement of employees during the
M&A process are the primary reasons for the failure of M&As (Daniel
and Metcalf 2001; Evans and Mendenhall 2004). It is then clear that the
management of people and people-related processes during the M&A
is a critical determinant of the success or failure of M&As (Buono and
Bowditch 1989; Bijlsma-Frankema 2001; Evans et al. 2002). Experience of
successful M&As suggests that ideally HR should be involved from the
very beginning (i.e., from the due diligence stage) until the closing of the
deal. Nevertheless, many times HR issues are neglected during M&As for
a number of reasons. For example, decision makers are not aware about
the importance of HR during M&As, HR is not the priority during M&As,
perhaps HR is not represented at the top management level to highlight
its importance, and the absence of a robust framework to utilize HR (see
Evans et al. 2002; Schuler et al. 2004; Dowling et al. 2008).

90 The Role Of HR In Cross-Border Mergers And Acquisitions: The Case Of Indian...

 VOLUME 17 • NUMBER 2

In light of the above, the aim of this paper is to explore and understand
the role played by the HR function in the success of cross-border M&As
pursued by Indian Pharmaceutical companies. It should be noted that
numerous studies have emphasized the key HR issues arising in Ameri-
can and European pharmaceutical M&As, such as Friedman (1997) who
studied the Swedish-American merger of Pharmacia and Upjohn, as well
as Llewellyn (2000) who has empirically studied the Anglo-Swedish As-
tra Zeneca merger. However, to the best of our knowledge, there is no
published research on the role played by the HR function in cross-border
M&A processes with respect to Indian firms in general and the pharma-
ceutical industry in particular. Given the increasing importance of India
on the world economic scene and the increasing number of M&As being
pursued by Indian multinational companies, we believe our investigation
is timely because it has the potential to shed light on the key role of HR
during the M&A process in the Indian context. Specifically, we examine
three major cases of acquisitions made in Europe by Indian pharmaceuti-
cal MNCs.

To better understand the M&A phenomenon, we investigate the extent

to which there is uniformity in the acquisition archetype and HR strategy
adopted by the three Indian MNCs, that is, ethnocentric, polycentric, and
global/geocentric approaches (Perlmutter 1969). We further analyze the
role of HR during the three stages of M&As and the issues likely to arise
at each stage, that is, pre-combination, combination, and integration of
the partners, as well as solidification and advancement of the new entity
(Schuler and Jackson 2001). We also investigate the role of national and
organizational cultures in managing the acquired organization(s) and ex-
plore the extent to which expatriates in the acquired companies influence
the success of the said acquisitions.

In the next section, we briefly present definitions relevant to M&As. Fol-

lowing that, we discuss the methodology adopted for our study and de-
scribe the sample and data collection approach. The next section presents
the main results of the three case studies. Finally, we discuss the key find-
ings and present the conclusions.

Background
In order to better understand the M&A phenomenon and the underly-
ing processes, we briefly discuss the various definitions and archetypes
reported in the literature. Researchers have suggested that the M&A pro-
cess has three distinct stages: (1) pre-combination; (2) combination (inte-
gration of the partners); and (3) solidification and advancement of the new

Pawan S. Budwar, Arup Vrma, Anastasia A. Katon, Deepa Narayan 91

 THE MULTINATIONAL BUSINESS REVIEW

entity (Charman 1999; Habeck, Kroger, and Tram 1999; Schuler and Jack-
son 2001). However, the key HR issues that arise during M&As are likely
to depend not only on the stages of the M&A but also on the forms, types,
and their archetypes. There are different types of mergers – the merger
of ‘equals’ (e.g., Ciba and Sandoz forming Novartis) and the merger of
‘unequals’ (Chase and JP Morgan creating JP Morgan-Chase). Similarly,
there are distinct types of acquisitions, such as those involving ‘integration’
(as in the case of Cisco Systems) and those involving ‘separation’ (such as
between Unilever and Bestfoods).

Authors (e.g., Bower 2001; Aguilera and Dencker 2004) have also offered
other descriptions of M&As, such as (i) Overcapacity M&A, where the
acquiring company seeks to eliminate excess capacity by creating a more
efficient corporation that aims to achieve economies of scale, (ii) Geo-
graphic roll-up M&A, where companies seek to expand geographically
to achieve economies of scale and scope, (iii) Product or market extension
M&A, which refers to the case of expanding product lines or expanding
across borders with the aim of achieving economies of scale, (iv) M&A
as a substitute for R&D, where a company is aiming at gaining access to
new R&D knowledge by acquiring firms with technological innovative
capabilities instead of developing R&D in-house, and finally, (v) Industry
convergence M&A, where the target is to create a new industry from exist-
ing industries whose boundaries are eroding.

In terms of archetypes of M&As, Clark (1991) has offered the following

four typologies: (i) Takeover, which involves absorption of the acquiree’s
operations and identity by the acquirer, thus erasing the identity of the
acquired company; (ii) Makeover, where the acquirer’s approach is laid on
the acquiree’s foundation; (iii) Re-strategy, where the best practices from
each organization are combined to evolve a highly successful organiza-
tion; and finally, (iv) Confederation, where each organization is left alone
without any influence exercised by the parent company on the acquired
company.

In this connection, it should be pointed out that irrespective of the forms,

types, and archetypes of the M&A, it is the HR professionals that are
responsible for the following four roles in the involved organizations
(Ulrich 1997; Bjorkman and Soderberg 2006): (i) strategic partner, (ii)
change agent, (iii) employee champion, and (iv) administrative expert.
The first two roles are strategic in nature and can have a significant
impact on the success or failure of M&As by helping organizations achieve
successful integration of their cultures and people.

92 The Role Of HR In Cross-Border Mergers And Acquisitions: The Case Of Indian...

 VOLUME 17 • NUMBER 2

As indicated above, in order to succeed during M&As, it is critical that

the involved organizations align their HRM and business strategies (Fom-
brun, Tichy, and Devanna 1984; Datta and Grant 1990; Datta 1991; Aguilera
and Denker 2004). For example, if the acquirer follows the strategy of a
merger of unequals, this may lead to an ethnocentric HRM strategy, result-
ing in the staffing implications being shared unequally (Kay and Shelton
2000). Similarly, if the acquirer follows the takeover approach, imposing
on the acquiree the policies and practices, culture, and values of the domi-
nant company, this may again lead the acquirer to adopt the ethnocentric
approach in HR by placing key staff in key positions in the acquired
company.

Irrespective of the level of fit between a firm’s HR strategy and its busi-
ness strategy, it is widely accepted (Buono and Bowditch 1989; Salama et
al. 2003) that the role of HR is critical throughout the M&A process, right
from the due-diligence to the post integration stages. Unfortunately, many
organizations involve HR only at the integration stage, often leading to
wrong partner selection, which results in a number of irresolvable dif-
ferences like culture clash (Lindquist 2007). Further, three critical issues
have to be dealt with by the HR teams of both involved companies, that
is, blending the culture, ensuring the free flow of communication, and
involving employees in the change process, which can aid in achieving the
synergies expected from the M&A.

While integrating the two cultures, it is necessary to pay attention to the

national culture as well as the distinctive organization culture (Schuler
and Rogovsky 1998). Not surprisingly, research has also shown that the
stress and uncertainty experienced by employees, termed the “merger
syndrome” (Marks and Mirvis 1998), can lead to high turnover and nega-
tively affect the overall productivity and brand image of the organization.

Method
Sample
For the present study, we examine three major cross-border M&As made
by three Indian pharmaceutical MNCs, namely, Ganga, Jamuna, and
Saraswati1. We chose to study the pharmaceutical industry because of the
increasing number of cross-border M&As that have taken place in this
sector since 2000 and also the rapid growth of this sector in India.

1 The names of the organizations have been changed at their request.

Pawan S. Budwar, Arup Vrma, Anastasia A. Katon, Deepa Narayan 93

 THE MULTINATIONAL BUSINESS REVIEW

Data collection
Five semi-structured interviews were conducted with senior executives of
each of the companies, including the HR heads and their team members.
Apart from members of the HR team, we also interviewed executives from
other functions (e.g., Marketing), in order to understand the internal cus-
tomers’ views on the level of integration of HR in the M&A process. The
interview protocol was developed to encompass the whole M&A process
and included both open and close-ended questions. Each interview lasted
approximately 45 minutes. Specifically, the interview schedule is divided
into four main sections. The first section focuses on the demographics of
the company. The second section deals with the factors considered before
undertaking the M&A and the role of HR in the pre-combination stage.
The third section focuses mainly on the integration stage, inquiring about
the impact of culture, communication, and employee involvement in the
change process. Here, we also inquire about the post-acquisition chang-
es made in the HR systems, as well as general management policies and
practices of the acquired company. The final section includes questions
about the role played by expatriates, employee acceptance of the change,
and how the organizations go about building employees’ trust and com-
mitment in the new entity. The responses received from the interviews
were voice-recorded, as well as simultaneously noted. The recorded data
were transcribed and later content analyzed. A copy of the transcribed
material was sent to the interviewees for validation.

The Case Studies

As Salama et al. (2003: 315) note, ‘any kind of merger scenario is unique,
therefore, it is important to understand and carefully analyze what strat-
egies made a case into a success story.’ In keeping with the spirit of the
authors’ recommendation, we focus on the practical steps employed by
the companies involved in the three acquisitions to understand the com-
panies’ efforts during the process.

Case 1 – Ganga’s Acquisition of C-Pharma

Characteristics of the Participants: Ganga Pharmaceuticals is an Indi-

an MNC engaged in the manufacturing of pharmaceuticals and related
R&D. With an estimated market capitalization of more than US$ 1 billion,
Ganga’s annual turnover is around US$ 285 million. The company has a
separate hospital division and has one of the biggest biotechnology parks
in India. Ganga has acquired companies in the USA, Ireland, France, and
the UK and employs a total of around 7000 employees worldwide. The
company has invested significant amounts in R&D, resulting in several

94 The Role Of HR In Cross-Border Mergers And Acquisitions: The Case Of Indian...

 VOLUME 17 • NUMBER 2

breakthrough biotechnology products, over 250 patent applications, and

a pipeline of promising new molecules. It has acquired five companies in
Europe, including C-Pharma, which was acquired in 2003 for around 11
million pounds.

Type of Acquisition: Ganga has a mix of the three types of M&A, namely
geographic roll-up, product or market extension, and as a substitute to
R&D. Ganga adopts the strategy of acquiring C-Pharma, a loss making
unit, to achieve economies of scale by manufacturing bulk drugs in India
and drugs requiring extensive R&D and high technology in the UK plant.
It thus benefits from both cheap labour and better technology. Ganga not
only wanted to increase its product lines by adding C-Pharma’s manufac-
tured drugs under the Ganga brand, but also wanted to expand its markets
in the UK as well as in Africa and the Middle East. C-Pharma has 225 UK
marketing authorizations and 258 foreign market authorizations, which
could make it extremely easy for Ganga to enter these markets. The three
main problems identified by Ganga in C-Pharma, which are the reasons
why C-Pharma was put up for sale, are its extremely high costs, its failure
to keep up with competitors, and its ineffective management team.

Specifically, C-Pharma had an estimated excess labor force of about 300

employees, which was extremely unproductive, and the company also
faced a huge financial burden because of its pension policy. In addition, it
had high manufacturing expenses, which led to unreasonably high prod-
uct prices. Further, the company had a very small portfolio of drugs in
comparison to its competitors and primarily relied on the sales of ani-
mal insulin for its revenue stream. However, advances in research allowed
its competitors to replace this with biotechnology insulin, thus leading to
a significant drop in sales and profitability at C-Pharma. As a result, C-
Pharma was unable to compete on price and started incurring substantial
losses. According to the executives we interviewed, the management team
at C-Pharma was unable to address or rectify the situation, leading to the
company being put up for sale.

Archetype of Acquisition: Ganga adopted the “takeover” strategy by

completely absorbing C-Pharma’s operations and erasing its culture for
the most part. The mission of Ganga was to “create value by combining
the needs of the customer with an uncompromising drive for excellence.”
Ganga’s HR team was involved in the acquisition process from the pre-
combination and due diligence stage, where they evaluated the worth of
the existing human resources in C-Pharma, identified the key employees
they wished to retain, and also focused on legal compliance and trade
union issues. Among the steps they took to engender commitment, one

Pawan S. Budwar, Arup Vrma, Anastasia A. Katon, Deepa Narayan 95

 THE MULTINATIONAL BUSINESS REVIEW

was to sign retention agreements with the most critical employees at C-

pharma. In other words, the HR team at Ganga had a clear understanding
of the objectives and plans, and they clearly aligned their HRM strategy
with the acquisition archetype by adopting the “ethnocentric approach.”
This was reflected in the integration stage through the new HR policies
and practices framed for C-Pharma, which were similar to that of the
parent company. As a result, the performance appraisal system and the
recruitment and selection methods of Ganga India were fully implement-
ed in the acquired company.

HRM functions: The HR department at Ganga utilized the existing

performance appraisal scheme to help weed out unproductive labour at C-
Pharma, thereby reducing manufacturing costs. Similarly, they introduced
a competency-based framework for recruitment, selection, and training
purposes. This framework recognizes 11 key areas of personal develop-
ment, each with its own sets of skills and capabilities including areas such
as domain knowledge, system orientation, and drive for achievement.

Expatriates: The HR team replaced the incumbents of numerous lead-

ership positions at C-Pharma by recruiting expatriates from Ganga In-
dia. Replacing host country executives by expatriates is typical of the
“ethnocentric” approach. Indeed, the HR team consciously decided to
change the culture and values of employees at C-Pharma by focusing on
productivity, quality, cost, and speed – values that were less emphasized
prior to the acquisition. However, the HR department at C-Pharma did not
undergo major restructuring, except for a few internal promotions within
the department.

Culture: Interestingly, the HR department did not conduct cultural due

diligence at the pre-combination stage, which resulted in serious cultural
clashes. As an example, Ganga’s performance appraisal scheme linked
pay to performance and involved the setting of quarterly goals for all
employees at the junior, middle, and senior management levels. The goal
setting was to be done in agreement with the employees’ immediate boss
as part of the monthly review meetings. This system of performance-
related pay was new to the C-Pharma employees and they refused to ac-
cept it. Further, Ganga commanded an extremely competitive workforce
that was willing to put in extra working hours. Here, it is worth noting that
India’s national culture is rather high on power distance and is masculine
and collectivistic (Hofstede 1980; Budhwar 2001). In comparison, the UK
is low on power distance and is highly individualistic (see Budhwar and
Sparrow, 2002, for a comparison), which led to cultural discomfort experi-
enced by Indian expatriates and C-Pharma employees at the integration

96 The Role Of HR In Cross-Border Mergers And Acquisitions: The Case Of Indian...

 VOLUME 17 • NUMBER 2

stage. Somewhat surprisingly, neither the expatriates from Ganga nor the
employees at C-Pharma were given any kind of cross-cultural training at
the pre-combination and integration stages.

Communication: During the interview, the new Indian CEO at Ganga

(UK) noteed that after their acquisition, there was an outbreak of the
“merger syndrome” amongst the C-Pharma employees. He attributed this
to the downsizing of C-Pharma by 300 employees and the sudden changes
brought about in the top management ranks, as well as the implementa-
tion of the performance management policy without sufficient communi-
cation and employee participation. This led to unrest in C-Pharma, result-
ing in a loss of trust and confidence among the employees who started
quitting the company. It is not difficult to trace the reasons behind this
exodus, which was due to the failure of HR to communicate and involve
employees on the above-mentioned key decisions at the pre-combination
and integration stages. The HR team failed to “educate and delegate” to
help the employees understand the need for change and then commu-
nicate it to other employees. As a result, employees did not know what
role they were expected to play in facilitating change. Employees were
not helped to prepare themselves for changes like downsizing, accepting
new leadership, and the new performance management system. The em-
ployees had preconceived notions about the Indian style of management,
assuming it to be extremely directive and bureaucratic and viewed Ganga
as being against employee welfare.

However, post-acquisition the new CEO took it upon himself to help

change the employee mindset at C-Pharma by acting as a change leader
and building strong “personal contact” with employees by involving them
in his decision making. As the HR President at Ganga noted: “Post-acquisi-
tion, the HR team was extremely active in tackling the resistance to change
from the employees and the cultural discomfort they were experiencing.
They started by adopting the strategy of ‘selling’ the logic for change to
employees and effectively communicating the benefits that the employ-
ees would derive from the new performance management and other such
schemes. Further, HR also provided counselling sessions for stress man-
agement and repeated training to employees regarding their new roles.
Finally, HR undertook cross-cultural training and training on setting
clear-cut goals and objectives after the performance appraisal. However,
given that these efforts came late in the acquisition process, it took almost
a year of intense HR efforts before the company felt that the acquisition
would succeed.” Indeed, the executives we interviewed specifically noted
that erstwhile C-Pharma employees now feel proud of the fact that they
are part of the Ganga family.

Pawan S. Budwar, Arup Vrma, Anastasia A. Katon, Deepa Narayan 97

 THE MULTINATIONAL BUSINESS REVIEW

Role of HR: Looking at the role played by HR in the acquisition of C-

Pharma, it is clear that several interventions should have been initiated
much earlier in the acquisition process. This case clearly points out the
need to conduct cultural due-diligence and to choose the right commu-
nication levers to bring about successful change. Further, according to the
top executives, the two major lessons they had learned were (i) executing
redundancies at an appropriate time interval and not immediately post-
acquisition, and (ii) to involve and communicate with employees at each
and every stage in order to avoid resistance to change from the employees.
Finally, the role played by expatriates (e.g., the CEO of Ganga-UK) was
critical in the ultimate success of Ganga’s plan to merge C-Pharma fully
with the parent company.

Case 2 – Jamuna’s Acquisition of B-Pharma

Characteristics of the Participants: Jamuna is another leading Indian

MNC in the Pharmaceutical industry, employing over 8500 people world-
wide including a sales force of over 2000. The company has wholly-owned
subsidiaries in the US, UK, Russia, Germany, and Brazil, as well as joint
ventures in China, South Africa, and Australia, with representative offices
in sixteen other countries. The various businesses of the company include
APIs, branded formulations, generics, biologics, specialty products, and
NCEs. Jamuna is the largest pharmaceutical company in India by revenue
and has been ranked as one of the best employers in several surveys. Ja-
muna acquired the fourth-largest German generic drug maker B-Pharma
for Euro 480 million (approximately Rs 2,550 crore) in 2006.

Type of M&A: The type of acquisition in this case was “product and mar-
ket extension.” By acquiring B-Pharma, Jamuna gained entry into the Eu-
ropean markets. This also enabled Jamuna to increase their product line
with new generic drugs and ready patents, as well as multiply the pro-
duction of drugs in high demand. As in the case of C-Pharma, the prime
reason for the sale of B-Pharma was poor financial performance and inef-
fective management. The HR ineffectiveness was seen from the huge wage
bills and under-utilized labor force. The senior management at B-Pharma
was unable to tackle the mounting problems, leading to an absence of ef-
fective leadership and control.

Archetype of M&A: During our interviews with the senior executives, it

was revealed that Jamuna adopted the “Re-strategy” archetype of acquisi-
tion by deciding to merge the best practices from both the parent company
as well as the one being acquired. The HR team did not disturb the exist-
ing policies and practices of B-Pharma and only focused on integrating

98 The Role Of HR In Cross-Border Mergers And Acquisitions: The Case Of Indian...

 VOLUME 17 • NUMBER 2

the culture of the two companies. The “geo-centric” approach to HR was

adopted by mixing the best of both the companies to achieve a synergistic
effect. With regards to adopting the geocentric approach in HRM, the HR
head at Jamuna noted:

“We believe the policies and practices at best need to be left with the merged/
acquired company, while providing a global guideline. Each company/
country has a distinct set of policies and practices. Where the changes are
being made, the same must be discussed with the KOLs (Key Opinion Lead-
ers) and communicated to the larger mass.”

HRM functions: The HR team at Jamuna has framed a unique perfor-

mance management system that is noteworthy. In the interview with
one of the M&A team members, the performance management system
was described in detail. As per the description, the company practices a
unique 360-degree feedback system that allows for a ‘two-way’ dialogue
between the evaluator and the employee being assessed (such a system is
often ignored in the standard 360-degree feedback appraisals). Further, in
addition to the employee’s immediate supervisors and colleagues in the
business unit or function, the employee also has dialogues with colleagues
in other functions in the same business unit. In addition, the system is
geared to allow the employee to express his/her disagreement with the
evaluation, and s/he is given a period of six months to correct/justify the
performance level.

Expatriates: In the case of Jamuna, individuals in key leadership positions

were replaced by newly recruited host country executives and through inter-
nal promotions. Unlike Ganga, no expatriates were sent to replace B-Pharma’s
executives in key roles and/or to infuse Jamuna values. The HR team con-
ducted a detailed job analysis and recruited new host country executives, in
addition to offering internal promotions to individuals whose competencies
were deemed appropriate and highly matched with their job descriptions. It
was pointed out that these initiatives were widely accepted at B-Pharma since
the executives were host country nationals with the same national cultural
values. In connection with the issue of integration, an M&A team member
noted, “At Jamuna, we believe in integration of thoughts and ideas from step one and
not just brand recall. HR initiated a number of meetings at every stage of integration
with the willingness to exchange ideas and values so as to avoid the post acquisition
cultural clashes. The Germans were invited to visit the R&D centres in India and
develop a know how of the practices and policies in India. We believe in complete
transparency in all our policies and practices and therefore our HR team ensured that
there was a perfect understanding of our values system among our employees through
continuous dialoguing.”

Pawan S. Budwar, Arup Vrma, Anastasia A. Katon, Deepa Narayan 99

 THE MULTINATIONAL BUSINESS REVIEW

Culture: Jamuna did not face any resistance to change or management

control issues during the whole acquisition process as the HR department
took appropriate steps to ensure smooth cultural integration through
communication and involvement of employees of B-Pharma. At the post-
integration stage, the HR team intensified its efforts by offering training
in cross-cultural communication and reinforcing the Jamuna mission and
brand. In response to the question of the successful strategy adopted by
Jamuna, an M&A team member said: “We believe in bringing about slow and
steady change, over time, as we believe in winning employees’ trust and commit-
ment and getting familiarised with the organisation’s internal environment. This
will help us to identify the faulty areas and frame suitable policies and also help
the employees to accept the change willingly.”

Communication: The need for transparency in communication and in-

volvement of employees was clearly recognized by Jamuna. The integra-
tion teams ensured smooth flow of communication right from the due-
diligence stage in B-Pharma and at Jamuna. The managing director/CEO
sent electronic mails to all employees informing them of Jamuna’s deci-
sion to acquire B-Pharma, the reasons for taking this step, the benefits
that employees at Jamuna and B-Pharma would derive from it, and the
cultural changes that were likely to result at the two companies. In addi-
tion, the HR team at Jamuna conducted numerous seminars and training
sessions to reassure employees and help them accept the new organiza-
tion culture.

Role of HR: According to the HR head, HR gave a clear sense of direc-

tion to the whole integration process. At the pre-deal stage, HR performed
the functions of evaluating the worth of human capital and identifying
inefficient staff. At the integration stage, the HR team at Jamuna did
not undertake any downsizing activities as it believed in stabilizing the
internal environment before undertaking any restructuring activities.
No changes were brought in the key HR policies and systems like the
performance management systems, remuneration schemes, ESOPs, and
pension schemes.

As in the case of Ganga, the HR team at Jamuna took steps to identify

key personnel in B-Pharma and included them as part of the acquisition
agreement. This approach resulted in high retention of valuable human
resources. Although Jamuna did not send expatriates to occupy key mana-
gerial positions, unlike Ganga, the senior management of Jamuna from
the Finance, R&D, Marketing, and Project Management functions visited
the German company for short time periods to ensure that the integration
process carried on smoothly. The parent company officials gave a clear

100 The Role Of HR In Cross-Border Mergers And Acquisitions: The Case Of Indian...
 VOLUME 17 • NUMBER 2

sense of direction by clearly defining roles of each employee and setting

objectives for them. In an interview with an M&A member handling the
marketing function, she said, “Jamuna is extremely renowned for its employee
oriented approach which was the “striking” factor that helped it to win the deal
for B-Pharma. We were in a neck-and-neck fight with another competitor to win
the deal. But our strong brand value and belief in our employees to be the source
of competitive advantage helped us win the battle.”

Case 3 – Saraswati’s Acquisition of A-Pharma

Characteristics of the M&A Participants: Saraswati was established in

1988 and has licensing agreements and JVs with numerous international
companies. The company mainly aims at being the leader in the domestic
pharmaceuticals market rather than adopting a rapid overseas expansion
strategy like that of Ganga. It primarily aims at building a strong de-risked
international business around its core strengths in manufacturing, mar-
keting, and R&D. From the interview with the HR executive, the mission of
Saraswati is, “To make a difference to the quality of life by reducing the burden
of disease.” Saraswati deeply encourages innovation and values intellectual
capital, as a result of its belief in using its human resources as a tool for
gaining competitive advantage. The Saraswati group acquired A-Pharma
in the UK in December 2005, which significantly strengthened the com-
pany’s contract research and manufacturing services.

Type of M&A: From the interview with the HR executive, it was learned
that the motive behind the acquisition was not only “product and market
extension” but also to “substitute R&D.” Acquisition of A-Pharma helped
to improve Saraswati’s market position in the UK, indeed, as A-Pharma
was performing very poorly financially and the Saraswati team was able to
successfully rectify this problem and reap substantial profits.

Archetype of M&A: The company followed the “makeover” acquisition

archetype by choosing to rectify only the problem areas in A-Pharma to
increase its effectiveness in functioning. The foundations of A-Pharma
were untouched by Saraswati, and the company adopted the ‘geocentric’
approach to HRM. At the pre-integration stage, HR performed the role
of analyzing the 4Cs, namely, capability, compatibility of goals, comple-
mentarities of resources, and commitment of A-Pharma. It also undertook
the evaluation of human capital and had an effective communication cell
that communicated to all employees at A-Pharma the benefits they would
derive from the acquisition.

Pawan S. Budwar, Arup Vrma, Anastasia A. Katon, Deepa Narayan 101

 THE MULTINATIONAL BUSINESS REVIEW

Table 1 summarizes the main characteristics of the three case studies pre-
sented above.

Table 1: Main Characteristics of the Three Case Studies

Ganga Acquires Jamuna Acquires Saraswati Acquires
M&A Companies
C-Pharma B-Pharma A-Pharma
Acquisition
Takeover Re-strategy Makeover
Archetype

HRM Approach Ethnocentric: Geocentric: Geocentric:

Parent company Best practices of both Best practices of
culture companies both companies

Employee No effective Extremely Good

Communication communication; transparent in communication;
and Involvement employee communication involvement of
involvement at the right from the due- employees through
pre-combination diligence stage; communication cells
and integration very high employee and conduction of
stage leading to involvement “cultural sensitivity”
strong resistance to workshops;
change consultative style of
decision making

Post Acquisition • Parent company’s •Parent company’s • Parent company’s

Changes performance performance broadbanding
appraisal system appraisal system system is
is adopted is in the process of implemented and
• Undertakes 300 implementation used to evaluate
redundancies • Replacement of performance
• Installs more inefficient managers • Creation of new
of the parent by new host country mixed culture
company values executives • Expatriates
and practices • New composite are sent to key
such as more culture positions to ensure
hours of work •Expatriates act as proper control
• Expatriates play guides to the change
a very crucial process, setting clear
role as change direction
agents, replacing
host country
executives in
key leadership
positions
• New Indian CEO
is appointed

102 The Role Of HR In Cross-Border Mergers And Acquisitions: The Case Of Indian...
 VOLUME 17 • NUMBER 2

HRM Functions: According to the HR executive we interviewed, at the

integration stage, the HR team formed a special task force to bring about
process improvements, where they discovered a significant problem
with the performance management system at A-Pharma. Employees at
A-Pharma were paid according to certain grades, which had little or no
correlation with their performance. The management team at Saraswati
therefore decided to adopt the parent company’s system of broadband-
ing. This was undertaken mainly to standardize their performance man-
agement system and to monitor the efficiency of employee performance.
As per this system, employees are promoted into the next band based on
their performance, and their pay too is increased.

Expatriates: HR sent numerous expatriates for various functions like

finance, project management, and a few for research. However, their
assignments were designed keeping in mind the overall strategy of
the company. Further, they were all provided cultural training prior to
departure to avoid cultural clashes. Also, the role played by expatriates was
reviewed periodically to ensure proper execution of the assigned duties.

Culture: In this case, the Saraswati executives and the HR team were
cautious to address the cultural issues right at the outset and carried on
continuous dialogue with employees at A-Pharma to help build accep-
tance for the new leadership team and the new performance manage-
ment system. In keeping with their theme of ‘vigilance’ on cultural factors,
they arranged “cultural sensitivity” workshops for the expatriates to avoid
post-merger clashes. Also, the HR team of A-Pharma was retained, but the
activities were coordinated and supervised by the HR department in India.

Communication: The need for transparency in communication and

involvement of employees was recognized and appropriately addressed
by Saraswati right at the beginning. The HR department at Saraswati
conducted various seminars and training sessions to help employees
relax and make them ready to accept and incorporate the new organiza-
tion culture.

Role of HR: According to the HR executives involved in the M&A, at the

post acquisition stage, HR reviewed the policies and practices framed for
A-Pharma and continued its efforts to strengthen its relationship with all
employees through continuous dialogue and by addressing any griev-
ances speedily and effectively. Saraswati continues to emphasize the pur-
suit of world-class standards in their People, Products, Processes, Partner-
ships, and Performance. The acquisition of A-Pharma was a clear success,
which according one of the members of the HR team is due to the fact

Pawan S. Budwar, Arup Vrma, Anastasia A. Katon, Deepa Narayan 103

 THE MULTINATIONAL BUSINESS REVIEW

that “Saraswati empowers its employees and encourages innovation and

entrepreneurship in the environment, which makes work fun.”

Discussion And Conclusions

The findings of the three case studies are compared with the existing
literature on (a) the role of HR in the three stages of an M&A, (b) the
impact of culture in an M&A, (c) the importance of communication and
employee involvement in handling the merger syndrome, and (d) the role
of expatriates in the integration of involved organizations. To a great extent
there is agreement with existing research findings. First, it seems that the
significant role played by HR at all three stages of an acquisition is further
confirmed by our case studies. In this investigation, all three companies
incorporated HR right from the due diligence stage to the solidification
stage to avoid adverse post-acquisition consequences. Second, from the
three case studies, it is evident that national and organizational cultures
have a significant influence on the integration of the involved organiza-
tions (also see Newbould 1970; Firth 1980; Weber, Shenkar, and Raveh
1996; and Deloitte & Touche 2001, who highlight that cultural conflicts are
a major impediment to M&A success).

Next, it is clear that failure to communicate with employees, especially

those of the organization being acquired, heightens cultural differences
and creates tensions (Lodorfos and Boateng 2006). While Jamuna commu-
nicated with and involved employees from the very initial stages of the
acquisition, Ganga failed to do so and therefore faced numerous hurdles
and delays in its attempts to integrate employees of C-Pharma. To reduce
communication problems, it is suggested that managers must not only
share all relevant information but also actively involve all stakeholders,
especially the employees, in the M&A processes. According to Haspeslagh
and Jamison (1991:1414), “In order to create an atmosphere that supports
cultural changes, organisations should understand each other’s culture
and people in both organisations should be willing to work together af-
ter the merger, something that could only be achieved with socio-cultural
integration and communication between the employees of the two organi-
sations.”This exactly matches the tasks undertaken by HR at Jamuna, and
to a certain extent, Saraswati.

A significant finding that is not considered in many case studies is the type
of change model used by HR team of the acquiring company to manage
change at the post-acquisition stage of M&A. The model can be either a
planned change or emergent change. It can be interpreted that all three of
our case studies are using the OD model of planned change. In the Indian

104 The Role Of HR In Cross-Border Mergers And Acquisitions: The Case Of Indian...
 VOLUME 17 • NUMBER 2

Pharmaceutical industry, it seems that the concept of emergent change is

taken less into consideration. The change is planned in advance and the
various steps of OD are practiced. Depending on the organization’s goals
and objectives, the changes in HR systems and processes are initiated and
the driving and restricting forces are identified and balanced. The prob-
lems are then handled using appropriate intervention tools like using HR
as a change agent, introducing effective leadership, and linking HRM sys-
tems to achieve the desired outcomes. For example, in the case of Ganga,
the primary force causing resistance to change in performance-related pay
was employee attitude. The company used HR as an intervention tool by
having coaching sessions on goal setting and clearly explaining the advan-
tages of the system. Once implemented, the effectiveness of the system
was evaluated after a year, which revealed high employee acceptance of
the system and clarity in goal setting. Indeed, both Jamuna and Saraswati
have followed a similar pattern of HR intervention in handling change.

Another significant finding is the difference in strategic thinking between

CEOs of the companies. In the words of the HR President at Ganga, “Gan-
ga believes in rapid growth and expansion through acquisitions.” After acquir-
ing and successfully integrating C-Pharma, Ganga has acquired numer-
ous other organizations in Germany, Ireland, and France. On the other
hand, Jamuna believes in making acquisitions at a slow pace and extract-
ing maximum benefits from every acquisition, whereas Saraswati’s man-
agement strategy reflects a zero-risk mindset in acquisitions, thus forcing
it to prefer joint ventures and partnerships with the hope of reducing and
sharing the risk of failure.

To summarize, HR has a very significant contribution in all three acquisi-

tions, primarily performing the role of a change agent by initiating re-
structuring moves in the acquired organizations. While the HR teams of
Jamuna and Saraswati did not undertake significant restructuring moves,
Ganga brought about significant changes immediately after the acquisi-
tion. Both Jamuna and Saraswati believe in adopting the “geocentric” ap-
proach and mixing the two cultures, while Ganga believes in adopting the
“ethnocentric” approach by establishing the parent company culture and
practices. In this connection, Stanwick and Stanwick (2001) note that the
value merging organizations attach to each other is closely related to the
skills and knowledge the other organization’s employees possess. The HR
team at Ganga fails to communicate effectively and involve employees in
implementing the necessary changes, which results in a severe resistance
to change. On the other hand, the HR teams at Jamuna and Saraswati
recognize this need in advance, which helps them facilitate and manage
the change process smoothly. However, it is worthwhile to note that none

Pawan S. Budwar, Arup Vrma, Anastasia A. Katon, Deepa Narayan 105

 THE MULTINATIONAL BUSINESS REVIEW

of the three companies undertook cultural planning or cultural due-dili-

gence although other functions like valuation of human capital and track-
ing union issues were performed.

The above findings provide support for a more integrative approach to

studying mergers and acquisitions by considering the role of HR in all
three stages: pre-combination, integration, and solidification. We believe
that this study is an important empirical addition to the understanding of
the variety of strategic, human resource, and organizational factors that
influence successful M&As. This study is intended to contribute to the
field of HRM by highlighting the need to consider HR issues right from
the pre-deal stage to the post-acquisition stage of an M&A to ensure a
high probability of post-acquisition success. We study the differences in
the choices of overall organization and HR chosen by the three companies.
As the Indian Pharmaceutical industry is growing at a fast pace, with an
ever increasing number of overseas M&As, our findings should help HR
managers of MNCs to better understand the impact of national and or-
ganizational cultures during M&As. Further, this paper helps add to the
literature on communication and employee involvement during the M&A
process.

Our analysis should also prove useful to management practitioners and

researchers in the field of International HRM as we explore the extent
to which HRM practices can be standardized and transferred from the
home country to the host country. The three cases suggest that although
the cultural/institutional framework of any country might inhibit a whole-
sale transfer of HRM practices, it is possible for MNCs to transfer some
HRM practices successfully.

Finally, our study has some limitations. First, we investigate the “people”
factor affecting M&As only in three Indian Pharmaceutical MNCs, lim-
iting our ability to generalize. Clearly, there are other major players in
the Indian pharmaceutical industry and their strategies and experiences
could be different, which is worth exploring in future studies. Second,
this study has focused purely on cross-border M&As; however, it would
be interesting to consider the role that HR plays in M&As within India.
Third, we take a qualitative approach to analyzing our data. Future studies
should employ numerical data and quantitative analyses for more spe-
cific information. Lastly, all three acquisitions are based in Europe, which
clearly leaves open the possibility that other issues could occur in differ-
ent cultural contexts. Having said that, we believe our study adds impor-
tant information and insight to the literature on M&As and helps explain
the underlying factors that lead to the success or failure of such ventures.

106 The Role Of HR In Cross-Border Mergers And Acquisitions: The Case Of Indian...
 VOLUME 17 • NUMBER 2

We also strongly believe that as firms from emerging markets continue to

internationalize their operations, such investigations are needed to help
researchers and practitioners better understand the factors underlying
the M&A process.

References
Aguilera, R.V., and J.C. Dencker. 2004. The role of human resource
management in cross-border mergers and acquisitions. The Interna-
tional Journal of Human Resource Management 15(8): 1355-1370.
Angwin, D. 2001. Mergers and acquisitions across European borders:
National perspectives on pre-acquisition due diligence and the use
of professional advisers. Journal of World Business 36(1): 2-57.
Bjorkman, I., and A.-M. Soderberg. 2006. The HR function in large-scale
mergers and acquisitions: The case study of Nordea. Personnel Review
35(6): 654-670.
Bijlsma-Frankema, K. 2001. On managing cultural integration and cultural
change processes in mergers and acquisitions. Journal of European
Studies 25: 192-207.
Bower, J.L. 2001. Not all M&As are alike and that matters. Harvard Business
Review 79(5): 92-100.
Bryson, J. 2003. Managing risk in a merger. Employ Relations 25(1): 14-30.
Budhwar, P. 2001. Doing business in India. Thunderbird International Business
Review 43 (4): 549-568.
Budhwar, P., and P. Sparrow. 2002. Strategic HRM through the cultural
looking glass: Mapping cognitions of British and Indian HRM man-
agers. Organization Studies 23 (4): 599-638.
Buono, A.F., and J.W. Bowditch. 1989. The Human Side of Mergers and Acquisi-
tions. San Francisco, CA: Jossey-Bass.
Cartwright, S., and C.L. Cooper. 1995. Organisational marriage: “Hard”
versus “soft” issues? Personnel Review 24(3): 57-70.
Charman, A. 1999. Global mergers and acquisitions: The human resource
challenge. International Focus (Society for Human Resource Manage-
ment).
Chatterjee, S., M.H. Lubatkin, D.M. Schweiger, and Y. Weber. 1992. Cultural
differences and shareholder value in related mergers: Linking equity
and human capital. Strategic Management Journal 13: 319-334.
China Summit. 2006. 3rd Annual Mergers & Acquisitions in China Summit.
http://gicglobal.com/06m&acn.html
Clark, P. 1991. Beyond the Deal, Optimising Merger and Acquisition Value.
New York: Harper Business.

Pawan S. Budwar, Arup Vrma, Anastasia A. Katon, Deepa Narayan 107

 THE MULTINATIONAL BUSINESS REVIEW

Daniel, T.A., and G.S. Metcalf. 2001. The Management of People in Mergers and
Acquisitions. Westport, CT: Quorum Books.
Datta, D.K. 1991. Organizational fit and acquisition performance: Effects of
post-acquisition integration. Strategic Management Journal 12: 281-
297.
Datta, D.K., and J.H. Grant. 1990. Relationships between type of acquisition,
the autonomy given to the acquired firm, and acquisition processes:
An empirical analysis. Journal of Management 16: 29-44.
Deloitte & Touche. 2001. Solving the merger mystery. Financial Times,
February 12.
Dowling, P., M. Festing, and A. Engle. 2008. International Human Resource
Management. London: Thomson.
The Economist. 1999. How to make mergers work. The Economist 9(1): 99.
Erez-Rein, N., M. Erez, and S. Maital. 2004. In L.M. Pablo and M. Javidan
(Eds.), Mergers and Acquisitions: Managing Culture and Human Resourc-
es. Oxford: Blackwell.
Evans, P., and M. Mendenhall. 2004. In K.G. Stahl and M. Mendenhall (Eds.),
Mergers and Acquisitions: Managing Culture and Human Resources. Stan-
ford, CA: Stanford University Press.
Evans, P., V. Pucik, and J.L. Barsoux. 2002. The Global Challenge: Frameworks
for International Human Resource Management. New York: McGraw
Hill.
Firth, M. 1980. Takeovers, shareholders’ returns and the theory of the firm.
Quarterly Journal of Economics 94: 235-260.
Fombrum, C., N. Tichy, and M. Devanna. 1984. Strategic Human Resource
Management. New York: Wiley.
Friedman, A. 1997. A case of corporate culture shock in the global arena.
International Herald Tribune 23 April, 1997.
Galpin, T.J., and M. Hemdon. 1999. In The Complete Guide to Mergers and Ac
quisitions. San Francisco: Jossey-Bass.
Habeck, M.H., F. Kroger, and M.R. Tram. 1999. After the Merger. London/
New York: Financial Times/Prentice Hall.
Haspeslagh, P.C., and D.B. Jamison. 1991. Managing Acquisitions: Creating
Value Through Corporate Renewal. New York: Free Press.
Hofstede, G. 1980. Culture’s Consequences: International Differences in Work-
related Values. Beverly Hills, CA: Sage.
Kay, I.T., and M. Shelton. 2000. The people problems in mergers.
The McKinsey Quarterly 4: 29-37.

108 The Role Of HR In Cross-Border Mergers And Acquisitions: The Case Of Indian...
 VOLUME 17 • NUMBER 2

Lindquist, K. 2007. HR’s role in mergers and acquisitions. Strategic HR

Review 6(3): 3.
Llewellyn, S. 2000. ‘A to Z integration?: Managing the merger at Astra-
Zeneca. Paper presented to the 16th EGOS Colloquium, Helsinki School
of Economics and Business Administration, Finland, July 2-4.
Lodorfos, G., and A. Boateng. 2006. The role of culture in the merger and
acquisition process: Evidence from the European chemical industry.
Management Decision 44(10): 1405-1421.
Marks, M., and P. Mirvis. 1998. Joining Forces: Making One Plus One Equal
Three in Mergers, Acquisitions, and Alliances. San Francisco, CA: Jossey-
Bass.
Newbould, G.D. 1970. Management and Merger Activity. Liverpool:
Guthstead.
Perlmutter, H.V. 1969. The tortuous evolution of the multinational corpora-
tion. Columbia Journal of World Business 4(1): 9-18.
Pillania, R.K. 2009. Special issue guest editorial multinationals and emerg-
ing markets, Multinationals Business Review, Forthcoming.
Porter, M. 1985. Competitive Advantage: Creating and Sustaining Superior
Performance. New York: The Free Press.
Salama, A., W. Holland, and G. Virten. 2003. Challenges and opportunities
in mergers and acquisitions: Three international case studies –
Deutsche Bank – Bankers Trust; British Petroleum – Amoco; Ford –
Volvo. Journal of European Industrial Training 27(6): 313-321.
Schuler, R. 2001. Human resource issues and activities in international joint
ventures. The International Journal of Human Resource Management
12(1): 1-52.
Schuler, R., and S. Jackson. 2001. HR issues and activities in mergers and
acquisitions. European Management Journal 19(3): 239-253.
Schuler, R., and N. Rogovsky. 1998. Understanding compensation practice
variations across firms: The impact of national culture. Journal of
International Business Studies 29(1): 159-177.
Schuler, R., S. Jackson, and Y. Luo. 2004. Managing Human Resources in Cross-
Border Alliances. London: Routledge.
Stanwick, P.A., and S.D. Stanwick. 2001. Designing your international M&A
strategy. Journal of Corporate Accounting & Finance 12(6): 11-16.
Tetenbaum, T. 1999. Beating the odds of merger and acquisition failure:
Seven key practices that improve the chance for expected integration
synergies. Organizational Dynamics 28(2): 22-36.
Ulrich, D. 1997. Human Resource Champions: The Next Agenda for Adding Value
and Delivering Results. Boston, MA: Harvard Business School Press.

Pawan S. Budwar, Arup Vrma, Anastasia A. Katon, Deepa Narayan 109

 THE MULTINATIONAL BUSINESS REVIEW

Weber, Y., O. Shenkar, and A. Raveh. 1996. National and corporate cultural
fit in mergers/acquisitions: An exploratory study. Management Science
42: 1215-1227.

110 The Role Of HR In Cross-Border Mergers And Acquisitions: The Case Of Indian...