BUSINESS

COMMUNICATION

Mergers and
Acquisitions and
communication
Group Project

Submitted By:
Gaurab Kumar (3)
Ajit Kumar (23)
Arjun Mathur (32)
Ayush Gupta (41)
Ankit Shah (44)
Sushant Shah (47)

K. J. Somaiya Institute of Management Studies & Research

 Mergers and Acquisitions and communication

ACKNOWLEDGEMENT

We would like to thank Prof. Piya Mukherjee for her valuable guidance and advice on the
fundamentals. She has been a constant source of motivation and has inspired us to explore
various aspects of Business Communication.

We feel indebted to our batch mates and faculties who have helped us with valuable inputs.

The report has helped us to gain ample knowledge on the subject of ‘Role of communication
in Mergers and Acquisitions’.

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EXECUTIVE SUMMARY
The number of Mergers and Acquisitions taking place in today’s world has drastically
increased. The role of communication in the entire process is also gaining importance. Poor
integration and lack of communication of good consistent information is hurting the deals.
Thus a communication strategy needs to be devised to make sure that the deal doesn’t fail
due to lack of communication.

After the announcement of the deal, the company should move fast i.e. it should have well-
thought out plan. It should communicate the employees first. The companies should be
successful at gaining employee’s confidence. No deal can be successful without the backing
of its own employees. The companies should make sure that employees stay focused on
customers. The culture differences, language differences, new policies etc must be
communicated to the employees via formal communication. They should identify the leaders
quickly who are going to communicate with the employees during crisis situation. A multi-
functional transition team must be formed. It will consist of a member representing each
member from various departments and these people can me made point of contact.

Investor communication also plays vital role. The investors must be intimated with detailed
schedules and risk factors. Investors must be convinced that the deal would be value
enhancing. Short and precise press release notes must be released as part of Media
communication. Also all the stake holders like customers, suppliers, distributors, financial
regulators, government, legal department etc must be communicated with all the information
as an when required.

Thus Companies must understand that non communication is also a communication because
it sends out negative messages. Hence effective communication is required to ensure
common understanding of the business case for the merger and acquisition and the vision of
future, to help people understand and internalize change, to keep the organization focused on
customers and productivity, to reinforce desired behavior, to promote cultural alignment, to
help with retention and motivation of key talent and to control the rumours.

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Contents
1. INTRODUCTION:....................................................................................................................5
1.1 MERGERS AND AN ACQUISITIONS – A COMPARISON........................................................5
1.2 WHY MERGERS AND ACQUISITIONS:....................................................................................6
1.3 DISADVANTAGES AND REASON FOR FAILURE:............................................................7
2. ROLE OF COMMUNICATION:..............................................................................................8
3. THE IMPORTANCE OF HR IN THE M & A PROCESS:.....................................................10
4. LIVE EXAMPLES OF M & A’S............................................................................................11
4.1 GlaxoSmithKline:....................................................................................................................11
4.2 Air India and India Airlines Merger.........................................................................................13
4.3 Tata Steel and Corus................................................................................................................15
4.4 CSC-Covansys Acquisition.....................................................................................................17
4.5 Oracle Sun Acquisition:...........................................................................................................19
5. MEASURES FOR GOOD COMMUNICATION....................................................................21
6. CONCLUSION:......................................................................................................................24
7. REFERENCES:.......................................................................................................................25

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1. INTRODUCTION:

Mergers and Acquisitions are, should we say, an integral component of the corporate
evolution. In the 90s, Mergers and Acquisitions happened with great intensity. There may be
many factors favouring Mergers and Acquisitions such as competition, globalization,
expansions etc. Mergers and Acquisitions deal with the buying, selling and integration of
different organizations which may help in the rapid growth of an organization without the
need of creating another entity. Mergers and Acquisitions are complex in nature and have to
tackle various issues like tax and securities laws, antitrust laws and corporate laws. For a
Merger or an Acquisition to be successful, it is critical to define the objective of both the
buyer and the seller. It needs to be fair and balanced for both the sides reflecting the
economic needs for them and clearly communicating the real value to the stakeholders of
both the organizations.

Most of the problems that are faced in the case of a Merger or an Acquisition arise in the
initial stages of the deal or while integrating the organizations after closing the deal. The
initial issues faced may be as varied as trying to force a deal which really should not be
happening, and improper risk allocation. Integrating the organizations, once the deal has been
sealed, is the most complex part of it all due to the numerous pitfalls involved.

1.1 MERGERS AND AN ACQUISITIONS – A COMPARISON

A Merger is said to occur when two or more organizations combine to form a single
organization. An Acquisition is similar to a Merger accept that in case of a Merger, the
existing owners of the organizations involved maintain an evenly balanced ownership right in
the resulting organization. In the case of an Acquisition, one company purchases a bulk of the
other company’s stock, thereby creating an uneven balance of ownership. A company may
also completely buy the other company, thus ensuring complete ownership rights over the
combined entity. The entire process of Mergers and Acquisitions is generally kept as a secret
from the general public as well as the majority of employees of the involved organizations.

The definition of a merger states that a merger occurs when two companies of approximately
the same size decide to join forces and proceed as a single new company. The stocks of both
the companies are surrendered and a new company stock is issued. An example of such a
merger is the 1999 merger of Glaxo Wellcome and SmithKline Beecham. Both the firms
ceased to exist when they merged, and a new firm by the name of Glaxo SmithKline was
formed.

In practice, mergers between organizations of similar size are quite rare. Usually, one
company buys another and, as part of the deal's terms, simply allows the acquired firm to
proclaim that the action is a merger of equals, even if it is technically an acquisition since

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being bought out often carries negative connotations. An example of such a merger is the
1999 merger of Chrysler and Daimler-Benz.

An acquisition may be a private or a public acquisition depending upon the fact whether the
merging company is listed with the stock markets or not.

An acquisition is generally friendly or hostile in nature. In case of a Friendly Acquisition,

both the parties initiate the process with mutual consent and all the dealings and negotiations
occur in a friendly manner. In a Hostile acquisition, the takeover target company is
unwilling to be bought and is against the deal. In certain cases, the target company’s board
has no prior knowledge of the acquisition offer.

Acquisitions generally take place when a larger organization buys a smaller organization.
But, when a smaller organization buys a larger organization, it is known as a Reverse
Acquisition. Example will be the merger of Caritor and Keane.

A Reverse Merger is said to occur when an upcoming private firm buys an established listed
firm. Example of such a merger will be the merger of Tata Group with Corus.

A recent study has pegged the success rate of Acquisitions at 50%.

1.2 WHY MERGERS AND ACQUISITIONS:

A merger may occur due to a range of reasons.

1.) It may occur by combining a profit making company with one which is making
losses. In such a case, the losses can be used to write of tax by offsetting the profits
and also expanding the organisation as a whole.
2.) A merger with a competitor can result in an increased market share. This way, the
company can dominate the market by getting a relatively free hand with the pricing
part.
3.) A merger may also happen to combine companies which manufacture different, but,
complementary products. An example of such a merger can be the merger of PayPal
with eBay.
4.) A Merger or an Acquisition can be helpful in bringing down the fixed cost by doing
away with duplicate operations and departments. It can also bring down the overall
cost which results in higher economies of scale.
5.) Economy of scope can be achieved by accordingly increasing or decreasing the scope
of marketing for various products.
6.) New markets can be captured without having to invest highly in infrastructure and the
initial setup.
7.) There may be uneven distribution of resources in a particular organization. By
entering into a Merger or an Acquisition, better resource utilization can be achieved
which is instrumental to increase production levels.
8.) Similar businesses can be brought under single management control and similar
verticals can also be integrated to achieve higher efficiency of operation.

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1.3 DISADVANTAGES AND REASON FOR FAILURE:

1.) Bad basis of decision making on the part of the higher management is considered to
be one of the foremost reasons for the failure of a merger or an acquisition. In depth
research and planning is required in order to carry out a successful merger or
acquisition, and even a small error can lead to the failure of the complete venture.
2.) Overestimating the valuation of the acquired firm can also result in heavy losses and
subsequent failure of the venture.
3.) Failure to establish synchronization between the activities of the acquired or merged
firms is another factor which leads to an unsuccessful venture.
4.) Diseconomies in scale may occur if the business becomes too large subsequent to a
merger. This may lead to higher unit cost.
5.) Cultural differences may occur between the two firms in the merger or acquisition
which leads to reduced efficiency.
6.) A conflict of objectives may occur between the two components.
7.) A merger or an acquisition may highlight the need to do away with a portion of the
workforce. This can result in reduced motivation levels in the employees and lack of
job security.

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2. ROLE OF COMMUNICATION:

Normally the merging companies give more importance to financial matters and their
outcomes. Communication issues are the most neglected ones in the whole process. Some
other non communication reasons for the failure of Mergers and Acquisitions can be the fact
that a normal deal can easily destroy shareholder’s wealth. Also, when a deal happens
between two companies, usually the stock prices of the companies fall. It is also seen over the
years that the company’s stock prices lag behind their competitors for first few years. But
Facts and figures say that most of the mergers fail to bring out the desired outcomes solely
due to people related issues.

The Communication issues can happen in pre-merger/acquisition phase or post

merger/acquisition phase. In the pre merger/acquisition phase diligence plays an important
role whereas perfect integration procedures are required in the post merger/acquisition stage.
During the Pre merger/acquisition period, companies look to bridge the gap between their
cultures and other differences. The reason communication plays a role of sheet anchor is
because during the process, the employees of both the firms go through a traumatic phase.
The impact of this can range from anger to depression. This may lead to high turnover,
decrease in the morale, and decrease in motivation & productivity. Hence, this is the time
when the employees need to be communicated with properly. The human resource
department is the one that needs to take the control of the situation. When an employee is
informed about the acquisition, he/she normally may have following concerns:

 Will I be retained in the job by the new company which has acquired the older one?
 If I am retained, where will I fit?
 What am I supposed to do?
 Will I be relocated?
 Will the pay, benefits and working conditions change? Will they be better or worse?
 Will this acquisition be good for my career?

The above concerns are raised because employees see a clash between individual goals and
organization goals.

Different organizations have different culture. They have different set of beliefs and value
systems which usually clash during Merger and Acquisition process. The employees of the
company may be exposed to psychological state called culture shock. In this state the
employees not only need to abandon their own culture, values and beliefs but also have to
accept an entirely different culture. Thus this exposure sometimes works against the old
organization leading to stress among employees. What usually happens is dominant culture
gets preference in the organization which adds to frustration and the feeling of being lost for
some employees. The employees of non dominant culture may also experience a loss of
identity. Thus, dissimilar cultures produce discomfort which can lower the commitment and
cooperation on the part of employees.

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In certain cases, like in the acquisition of a lesser known or less profitable organization by a
better one, feelings of superiority complex amongst the employees of the acquiring
organization cannot be discounted. In such situations, employees of two organizations can
develop “us” versus “them” attitude which may hamper the growth.

If the compensation in the acquired firm is lesser compared to the acquiring firm, the
acquisition will raise employee expectations (for the employees of the acquired firm). They
will think of a possible hike in compensation which may not be realistic. On the other hand if
the compensation level of employees in the acquiring firm is lower, the employees may press
to have equal compensation across all the divisions of the firm. Thus the pay differential can
act as a de-motivator for the employees of the acquiring firm and may have long term
consequences. The compensation issues may also involve legal angles. Thus when either of
the case occurs, the organization needs to communicate to employees the rationale behind it.

The employee relation issues gain more importance in M & A activity. The power equation
between management and trade unions is bound to change with the process. Hence
management-union equation, employee contracts as per new rules, compensation related
clauses etc must be systematically communicated to the employees.

Often it happens that employees feel that their needs are being ignored. This is because
sometimes during merger and acquisition process, upward flow of communication is
restricted. Not only an employee’s suggestions are ignored and not implemented but also the
right to voice their personal opinion is forbidden.

These uncertainties in an organization during M & A activities make communication an

integral part of the process. It is this time when the concerned department should pitch in and
these questions/concerns must be addressed by formal or informal communication.

Timely and concise communication would build employee commitment and hence an
employee would be able to focus on day-to-day operations. The faster the employees feel
connected to the new organization and their work unit, the faster they will begin working
towards the business objectives and understand what is expected of them.

3. THE IMPORTANCE OF HR IN THE M & A PROCESS:

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The Following chart shows the number of companies that engage human resources
professionals for the communication purpose and hold them at a high level of involvement
across the various stages of a merger and acquisition:

Figure 1: Human Resources involvement in the Process1

Thus, as seen from the graph, organizations involve minimum percentage of Human
Resources professionals in the Initial Planning phase. Whereas, they engage maximum
percentage is in the Integration Phase. What this means is that in the initial stages the
company is not much involved in the internal or external communication. Thus, the above
mentioned problems like employee fear, curiosity, culture differences etc happen in the initial
phase. During the Investigative and negotiation phase, communication is required because it
is this stage in which employees give their valuable inputs. Thus, a company must understand
that communication plays an important role in all the four stages.

1
Source: http://www.professorfontaine.com

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4. LIVE EXAMPLES OF M & A’S

4.1 GlaxoSmithKline:

Also known as GSK, GlaxoSmithKline is a prime example of a successful merger. GSK is a

UK based pharmaceutical and consumer health care organization. GSK is the world’s third
largest pharmaceutical company in terms of revenue. The parent companies in the merger of
GSK were Glaxo Wellcome and SmithKline Beecham. The merger was formalised in the
year 2000.

HISTORY:

GLAXOWELLCOME:

Burroughs Wellcome & Company was formed in the year 1880 by Henry Wellcome and
Silas Burroughs. Glaxo was formed in New Zealand in the year 1904. In the year 1995, these
two companies merged to form Glaxo Wellcome.

SMITHKLINE BEECHAM:

The foundation of the Beecham group was laid by Thomas Beecham in the year 1843. In
1830, John Smith started off with his pharmacy venture and was joined by Mahlon Kline in
the year 1865 which came to be known as Smith, Kline & Co. After a merger with French,
Richard and Company in the year 1891, the organization was rechristened Smith Kline &
French Laboratories. Another merger later in the year 1982, this time with Beckman Inc, and
the organization expanded its operations and came to be known as SmithKline Beckman.
SmithKline Beckman then, in the year 1988, acquired its biggest competitor, International
Clinical Laboratories and then subsequently merged with Beecham in 1989, to finally
become SmithKline Beecham.

THE DEAL:

As stated earlier, a merger is a complex task and faces its fair share of issues, controversies
and negotiations before being formalised and the case of Glaxo and SmithKline Beecham is
no different. The negotiations for the merger of Glaxo Wellcome and SmithKline Beecham
had been going for quite some time and looked set to come into place in the year 1998.
Glaxo’s shareholders were supposed to have 59.5% of the new group and 40.5% was
SmithKline Beecham’s share. It was going to be a $110 billion deal, the largest of its kind.
But, after a last minute intense negotiation exercise, the deal was called off, much to
everyone’s surprise and anguish. There were subsequent widespread speculations to figure
out the exact reason for the deal to be called off. Some quarters claimed that Glaxo was not
happy with the terms and conditions of the deal and the new proposed leadership. There were
past rivalry issues between some of the top brass from both the organizations, which gave

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way to trust related issues between both the firms. Glaxo also feared that the deal may
eventually become a takeover by SmithKline Beecham.

The known facts about mergers and acquisitions were proved to be correct again when it
came to light that due to the failed merger attempt, both Glaxo and SmithKline suffered
majorly in the stock markets. Also, Glaxo was left without a strategic partner once the deal
failed to come through.

Another round of negotiations for the merger began when a top official at SmithKline
Beecham announced his retirement. He was perceived to be a hurdle as far as the leadership
issues at the new firm were concerned. But the biggest reason which is supposed to have
initiated the talks again was the report of an impending merger between giants Pfizer and
Warren-Lambert. The deal was supposed to create the worlds’ second largest drug maker.

Subsequently, Glaxo and SmithKline proceeded to sort out all the issues and the necessary
clearances were obtained from the regulators.

THE ISSUES:

The merger between Glaxo and SmithKline makes a very interesting case study since it
highlights basic issues which arise due to lack of communication and at times, the lack of a
structured approach to establishing effective communication between the two firms.

 It is widely believed that GSK failed to acknowledge the fact that a merger of such a
proportion would require establishing effective communication at each and every
stage between the parties concerned. There was lack of communication, which
eventually resulted in trust related issues.
 It was believed that the arrogant approach of the top management of both the firms
was another issue ailing the pre-merger talks. There was a mad scramble for
leadership roles at the proposed new firm, thereby bringing to the fore the importance
of a well defined framework required for such a deal to come through effectively.
 Widespread secrecy about the deal in both the organizations started getting to the
employees. This resulted in low morale amongst the employees and a subsequent
brain drain. Many employees, majorly at the middle management level, left the firms
in search of greener pastures and job security.
 There were widespread concerns about the post-merger details. Virtually no clarity
about the organization structure and framework lead to bitterness and internal turmoil.
 It was clear for everyone concerned that the organizations were targeting at high
savings post the deal. This resulted in speculations about job security.
 There were fears of large scale layoffs due to the availability of complementary and
overlapping research skills in both the organizations.
 There was a general consensus amongst the stakeholders that even though deals like
these needed a certain amount of secrecy, there definitely was a need for a certain
degree of clarity to avoid high levels of speculations.

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 The labour union was unhappy since they were not being consulted about the merger.
They feared a job loss number as high as 15000 which were approximately 14% of
the total workforce.
 It was felt that there was a need to find out and learn more about the cultural values
and the working environment at both the firms. This could prove vital in the final
amalgamation of both the firms and develop a synergy between employees from both
the firms.
 There were plans to completely restructure the new firm. Employees at pivotal
positions expected to be consulted on the restructuring details so as to ensure their
teams and their own best interest. This did happen to an extent, but still left a lot to be
desired.
 For a long time there was no briefing given to the employees and even higher level
managers about the future course the organization intended to pursue.

4.2 Air India and India Airlines Merger

On the eve of 1st March 2007, Air India and Indian Airlines were merged as a new company,
National Aviation Company of India Limited (NACIL). Air India and Indian Airlines were
state owned and administrated by Ministry of Civil Aviation. Air India was founded by Mr
J.R.D Tata in 1932 and was known as Tata Airlines at that time. Post Independence of India,
49% of the share was acquired by the Government and rechristened as Air India.

Indian Airlines was formed under Air Corporation Act 1953. The purpose of Air India was to
provide flying services between India and foreign countries, whereas Indian Airlines was
used for domestic purpose. The Air India and Indian Airlines were both well known air
carriers and renowned for their credibility and a common objective of serving people either
by public transportation or courier transportation. The idea of merging the two certainly
would’ve helped them to serve in a better manner and on a larger scale.

THE DEAL
The Idea of merging the two companies originated in 1999, but, the plan was approved on
2007 by the Union Cabinet. The main reason for this was the introduction of low cost airlines
like Air Deccan and Spice Jet in 2003-04, which was instrumental in bringing air travel
within the reach of large Indian middle class. This gave rise to serious competition between
the airlines and also brought opportunities for airlines to look at the new segment which was
being used to pull the upper middle class towards experiencing luxury of flying which was
quite new to them. Being in a situation where both the companies were struggling to make
profits, the conceptualization of an idea to merge the two companies which would help them
to serve a new potent segment of customers. The merger was expected to result in
considerable synergies by integrating routes and streamlining overlapping facilities and
infrastructure. The number of flights after the merger was expected to reach more than 30.

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An airline having such a huge fleet was expected to boost the morale of both the firms and
provide high customer value for money.

CONCERNS BEFORE THE MERGER:

Every company faces this situation before any merger or acquisition where employees of the
company start to worry about their future and companies like Air India and Indian Airlines
were no different despite being state owned. Initially there was opposition from the
employees of the two airlines as they feared that the merger would result in job cuts. The
Aviation Minister, Mr Praful Patel, had allayed their fears and assured the employees union
of the two airlines that employment conditions, wages, seniority and career progression,
would largely remain unchanged. He also said that a grievance redressal mechanism would
be set up to protect employee interests. The government also indicated that there would be no
layoffs. Despite of the assurances from the management and government, several analysts
warned that the merger may pose a serious challenge in terms of integrating the employees of
the two airlines, especially since they had followed completely different operational methods
before the merger. The two airlines also had different fleet compositions, which was bound to
create complications in inventory management, maintenance and repair establishments, and
pilot training. Being a dominant domestic aviation company and 16th largest airline in Asia,
Air India, after the merger, was supposed to have the highest number of employees as
compared to its competitors. A work force of over 20000 was supposed to be a tedious task to
handle.

EFFECTS OF THE MERGER:

After the merger, the name Indian Airlines was dissolved and both the carriers combined
came to be known as Air India. But after the marriage, as the common people and several
analysts termed the merger, the honeymoon period didn’t last long. Later that year, the
airlines began showing signs of financial crisis. Prior to the merger, the losses suffered by Air
India and Indian Airlines were estimated to be Rs 448 crore and Rs 240 crores respectively.
After the merger, Air India suffered a loss of approximately Rs 5548 crores in the year 2009-
10. Out of this, Rs 127 crores was lost in the strikes held by executive pilots and employees
over several issues. This was a whooping sum for a company which was already suffering
losses. In order to prevent such strikes, Air India Board constituted a Human Resource Sub-
committee to consider various issues and grievances of its employees. A company which
was incurring looses needed to convey the right messages to their employees and explain to
them the steps they were planning to take in order to overcome the crisis. But, Air India
continuously failed at employee management, and as a result, there were several strikes by
their executive pilots and employees. Cost cutting measures are important for a company
which is going through tough times. The message needs to be passed on to the employees by
the management. There were a few unsavoury incidents reported as well. Like on September
2009, the executive pilots of Air India went on strike over the 50% reduction in their PLI.
This reduction was aimed at managing losses worth Rs 770 crores (reference from Times of

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India dated 28th Sept 2009), without any prior intimation or meeting between the management
and labour unions over the issue. It lead to a 4 day strike by the pilots resulting in further
losses worth Rs 10 crores. This issue could have been handled in a better way by the
management through proper communication. Also, it could have averted losses incurred
through the strike. The major concerns for the strike was the communication gap between
management and employees which was pointed out by one of the labour unions ‘. The central
labour commission’ asked for an explanation over the pay cut and why there had been no
consensus reached in this regard.

Subsequently, there have been several further strikes till date at Air India and it is
experiencing a tough period. Financial losses are not helping their cause either. The losses
incurred through the strikes is just 5% of the net loss, yet it could have been saved but for
proper communication.

4.3 Tata Steel and Corus

To begin with; let’s see what a McKinsey study says: “Seventy percent of Mergers &
Acquisition after 2000 failed in revenue synergies”.

Merger and Acquisitions was word that was never used in Tata Steel till 2000, but later the
company started sending its top management to places like Wharton to learn on how to
acquire companies and it also became an important subject in the company's internal training.
Tata Steel acquired NatSteel of Singapore and Millennium Steel of Thailand in 2005-06. But
it was like David courting Goliath when Tata Steel, India's largest private sector steel
producer, made a bid in October 2006 for Corus, an Anglo-Dutch company four times its
size. On April 2, 2007, Tata Steel Limited acquired the Corus Group for US$ 12.1 billion.
The combined company went on to become the fifth largest steel producer in the world, up
from the 56th position.

Philippe Varin, chief executive officer of a Corus said “You don’t do this kind of thing twice
in a lifetime”.

It was a landmark deal since an Indian company had taken over an international company
four times its size. The fact that the deal was the largest out of India and generated by the
private sector venture far from Indian government influence made this a notable event.

Communication plays most important role in success of such acquisition deals as each and
every stakeholder should be convinced that it benefits to all and the entity.

When talks for acquisition started, many analysts, investors had criticized the deal. Their
argument was Tata steel management had gone overboard to buy Corus and overpriced
Corus, financially not so sound company at that time. It was struggling with sales and was
under huge debt. There were concerns as to how Tata steel was going to manage finances for

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this deal and its impact on Tata Steel balance sheets. Corus shareholders were also expecting
fair price for the company.

There was a sudden unexpected competition from a Brazilian steel maker Companhia
Siderurgica Nacional (CSN) and it turned out that at the end of the bidding conflict with
CSN, Tata ended up paying 35% more than what they had offered initially. It was very
critical for management to justify the price paid to acquire Corus, communicate the
advantage of the deal for both companies and how take over synergy between companies
would mutually benefit. Support of share holders, investors and lenders was a must for a deal
to be successful.

Half of the battle won at Corus side as Tata’s offered fair price to Corus shareholders,
investors. Brand Tata had already helped Tata Steel to garner Corus management support.

Tata Steel’s management’s confidence and handling of public relations for the deal all
throughout six months from October 2006 to April 2007 was one of the crucial factors. There
were no flip flops in decisions and many likely synergies between Tata Steel, the lowest-cost
producer of steel in the world, and Corus, a large player with a significant presence in value-
added steel segment and a strong distribution network in Europe were positively
communicated to the world.

Cultural integration was a big challenge. Long time Corus employees in UK were aghast
when they heard of the possibility that an "Indian" company will acquire them, and they will
have an Indian boss - whose name they cannot pronounce. Most of the Corus employees were
of the view that they would lose their identity as a Corus employee. They also felt that Corus
Company would also lose its identity following its acquisition.

Fears of job losses among Corus's 43,000 employees were put off for later by Tata Steel. It
also communicated to Corus employees that it will contribute to Corus’s under-funded
pension scheme. Common policies & procedures were designed for combined organisation
after taking everyone’s view into consideration.

Success in Mergers and Acquisitions need a motivated workforce with a shared vision. The
acquisition was carried out very smoothly as a lot of time had been spent on the explanation
and planning of the merger so that the employees of both companies are not against each
other which are usually the case in most Mergers and Acquisitions.

Cultural integration roadmap was built and under it separate meetings of 20 working groups
across all functions used to be conducted routinely to bring in cultural integration. The
Jamshedpur trade unions and English unions also interacted, and cross-visits took place under
cross consultant program.

All these measure built confidence in Corus employees and their unions who supported the
acquisition without any resistance and have continue to contribute post acquisition.

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Getting top and middle management teams to work cohesively is often a problem with many
Merger & Acquisition deals. Tata Steel inducted senior executives from the two companies to
sit on each other's boards as also a core steel team, but otherwise left the existing Corus
management intact.

At individual levels teams involved in acquisition and integration process were given a lot of
autonomy. It was decided that the process of integration to be carried step by step,
progressively move towards common strategy, finance, centralised purchasing, some
administrative procedures, communication and no time frame was put on it. Top management
of both sides first fitted to requirement. Corporate strategy was made very clear and
communicated in the beginning. Obvious synergies and areas of common interest were
indentified and were worked on.

Tata Steel also communicated with customers of Corus during merger and acquisition times
informing them about the benefits they will be able get post-merger and how this merger
would be helpful for them.

It did not hesitate to continue with Corus Brand name which was strongly established in
European market for two years and then went on rebranding exercise in Europe to name the
company as Tata Steel Europe when Tata Steel name was established in Western world.

Tata Steel today is a balanced company, strategically well placed to compete at the leading
edge of a rapidly changing global steel industry.

Corporate communication of Tata Steel aptly says “We started at number five, but we will
not stop here for long”.

4.4 CSC-Covansys Acquisition

In July 2007, Computer Sciences Corporation (CSC) completed its acquisition of Covansys
for $1.3 billion in an all-cash transaction. Computer Sciences Corporation is a leading global
information technology (IT) services company and Covansys a relatively smaller IT
company. After acquisition Covansys started operating as a separate business unit of CSC
and was known as Covansys, a CSC Company. Even after the acquisition, none of the
companies were ready to completely change their HR and other policies and hence the entire
internal HR policies and other processes were to be restructured and aligned as per the
considerations of employees in both the companies. Even the designations, compensations
and other benefits given to the employees were to be restructured to make it standard and
comparable in both the companies. But since there is a mismatch in the sizes of both
companies, there were high level of uncertainty in the original CSC employees regarding the
company’s future HR and employee policies. And hence, a lot of trusts building programmes
were initiated by the CSC management.

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In one such initiative a big cultural function was organised where employees of both the
companies were invited so that they can interact and understand each other better. Apart from
this, a T-shirt was distributed to all the employees in both the companies. The T-shirt carried
logo of CSC on one of its sleeves and logo of Covansys on other sleeves. It was a trust
building exercise which was planned to bring sense of belongingness in the employees of
both the companies.

In another such initiative, the administration tried to communicate with employees of both
the companies through the channel of newsletters. Over the several other months after the
acquisition was complete, the employees were sent various newsletters just to make everyone
aware of the entire process and to make them aware about the competencies of the new
company which is being acquired. The newsletters also justified the acquisition by
emphasising on how the deal can work in favour of both the companies and its employees.
Newsletters provides a very effective mean for internal communication even at time of
mergers and acquisition and CSC leveraged upon this very efficiently to develop knowledge
and trust during the acquisition of Covansys.

Other important thing about successful merger and acquisition is pre and post acquisition
communications. In case of CSC, the company used the two months between the day of
announcement and the completion of the deal. This actually helps the management to
successful communicate with the employees such that the employees feel that the deal was
well thought out and that management has things under control. At the same time post
acquisition communication is also important.

When CSC started working on designation and compensation restructuring, special care was
taken such that in the interest of neither of the company’s employee was compromised.

Another important area in case of mergers and acquisition is communication with the existing
clients of the company being acquired. The acquiring company must understand that the
existing clients of the acquired company are now its own clients. To keep the confidence and
trust of the existing clients, the company must communicate with all the clients personally
and assure them that the quality and commitments of any of the deliverable would not be
compromised. The acquiring company must also communicate with all the existing clients
and brief them about how the merger or acquisition with the new company will further
enhance its competence and expertise and how the company can serve its clients even better
with those newly acquired expertise.

In case of CSC, the management and marketing team of CSC had done proper B2B
campaigning to brief about the acquisition to all its clients. It also did a rebranding of the
entire CSC brand. It also advertises the new line of business and additional services being
offered by it after the acquisition. At the same time, CSC ensured that none of its existing
clients as well as the clients of the company being acquired suffers any interruptions or
glitches during the transition state.

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One other aspect of post acquisition communication was town hall meeting of the company
top management with its employees. Town hall meeting are very effective mode of formal as
well as informal communication between the management and the employees. About six
months after the Covansys acquisition, CSC management arranged town hall meetings at
different geographic locations and communicated the after math of the deal to all the
employees. It really helped CSC management to gain trust of the employees. Town hall
meeting are also useful in taking the feedback from the employees as it could be made an
interactive session and facilitate two way communication.

Finally, it’s not that the CSC-Covansys acquisition sailed through smoothly without any
problems. All such deals run into little problems initially in integrating the work force and
streamlining the processes. Even in CSC, employees initially protested regarding the major
changes in processes, perks and compensation. But the issue was resolved very rationally by
engaging everyone in effective communication. It was also a win-win situation for employees
as with the acquisition it was also as expansion of geographical reach. Employees got better
flexibility to work from different places.

Three years after the acquisition, CSC has successfully integrated its operations and other
policies. It has grown its work force from 8000 to 15000 in India with that acquisition. With
this acquisition CSC had also attained its strategic goals of increasing shareholder value and
growing businesses both organically and by acquisition. The company which was earlier
struggling with the challenges of integration and global delivery efforts has attained stability,
growth and profitability. Thus with effective communication, CSC has clinched the deal
successfully and today, CSC competes with companies like IBM, EDS, and Capgemini in the
global arena.

4.5 Oracle Sun Acquisition:

The software giant Oracle has acquired several companies in quick succession. Over the past
few years, it swallowed People-Soft, Siebel Systems, JD Edwards, India's i-flex and BEA
Systems. In its most recent acquisition it acquired Sun Microsystems in a $7.4 billion deal.

The biggest challenge for Oracle was to convince the shareholders for the acquisition. The
most important part of formal communication with the shareholders at the time of any
mergers and acquisition is the documents that company submits with the Securities and
Exchange Commission (SEC) or with Security and Exchange Board of India (SEBI) or to the
regulators of any of the exchanges where the company might be listed. Before the
acquisition Oracle came up with a press release of the Forward looking statement and the risk
involved in the acquisition. They also posted a Cautionary Statement Regarding Forward-
Looking Statements on their website.

In that press release Oracle explained the potential risks and uncertainties involved in the
acquisition. It also cautioned the shareholders to not place undue reliance on forward-looking

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statements. It highlighted that possibility that Oracle or Sun may be adversely affected by
other economic, business and competitive factors and hence it gave no assurances that the
acquisition will benefit the shareholders as anticipated by the forward-looking statements.

Such disclaimers are very important aspect of mergers and acquisitions as it provides a clear
picture of the event to the shareholders and also explains to them the kind of risk they are
exposed to. This information is crucial for the shareholder to decide if he wants to remain
invested in the entity or wants to quit. Thus it is ethically important for the company to
maintain the credibility and authenticity of such information.

Oracle has been very successful in all kinds of communications like shareholders
communication, employee communication and client communication in each of its
acquisitions. Oracle has seen phenomenal inorganic growth through mergers and acquisitions
in last few years. It has always followed transparency in its shareholders communications and
hence completed several successful mergers and acquisitions including acquiring the most
innovative product development company called Sun Microsystems.

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5. MEASURES FOR GOOD COMMUNICATION:

Based on our analysis and research of the various cases discussed, we have been able to
identify the following points to establish an effective communication channel:

 Quick identification of leaders:

The first priority is the need to address the leadership issues pertaining to the positions in
the new combined organization. Identifying leaders quickly and communicating it to the
employees would help them to focus on the business. It is not necessary that the leader
must be from the “acquirer” company. In fact sometimes it’s a bad idea. In such cases,
acquired company employees feel as if they are playing a minor role and hence may start
looking for other opportunities elsewhere. Usually, employees of the acquired company go
through a traumatic phase. Thus, a leader from the acquired company can handle this
situation in the best possible way because he knows the employees and he knows what
motivates them. Also, the employees of the acquired company would trust leaders from
the same company. This makes communication smoother and effective.

 Identifying a Multi-Functional Transition Team:

Usually the transition team works beneath leadership. The Transition team should
comprise of individuals from each department, division, or function of the company –
whether be sales, marketing, engineering, quality control, manufacturing, etc. Thus there
will be at least one person representing each group who would be looking at the details of
how transition would happen in their respective group. As a result of this the responsible
people would be accessible to the employees and the communication process won’t get
hampered.

 Giving something back to employees:

When an M & A is announced, a lot of companies start laying people off in different
phases. Everybody ends up sort of hanging on and saying “Well, let’s see what happens”.
But when that first set of layoffs happens, it becomes really difficult to retain the good
employees because they have seen the layoff process and feel that they are next. Hence in
this situation the manager needs to have communication going on with the survivor
employees. Concerned authority should call these survivors into a room and give them
assurance that they are safe. This immediate informal communication is critical for
keeping the people on board.

 Policies and Processes:

A comparison must be made keeping in mind the policies of both entities and the areas of
commonality and differences must be identified. The best of the policies must be selected
and the basis of the selection must be made completely transparent to the employees. The
selection criteria can be communicated to the employees through mail.

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 Investor Communication:
Long before the transactions are brought to the board, company executives must put
themselves in their investor’s shoes. Communication experts should pitch in as early as
possible to understand the transaction and strategic benefits so that they can start crafting
the communication package for its investors. The investors must be intimated with
detailed schedules, timetables and risk factors. The material provided to the investors must
clearly and logically explain how the deal is value enhancing for the company. If the deal
is diluting the short term profits, but would be making long term profits than the detailed
estimated profit sharing document must be shared. The deal can become successful only
when through communication the investors are convinced that company is capable of
delivering on its promises and they would be better off if the deal is completed.

 Media Communication:
The announcement made by the companies for Merger/Acquisition may not necessarily
seek media attention if hypothetical goals are announced. The communication teams from
both the organizations must get together and finalize consistent messages. The content
announced must be short and simple. Companies have a tendency to create too much
content, which then has to be approved by the decision-makers at the two companies for
the release. But at the end of the day media is interested in only the press release (which is
normally a short document), company timeline and maybe the new company logo/name.

 Communication for potential critics:

It is said that when someone criticizes you, it means you are growing. Thus when
companies announce M & A, there would be some critics. Thus to be on a safer side the
companies can prepare a question and answer document which addresses all the possible
questions that can be raised by the critics. This document can be communicated publicly
so that critics’ doesn’t get a chance to criticize. This document would also cover the
possible questions investor, analysts, and the media might ask when announcement is
made.

 Role of technology in communication:

Technology plays a supporting role in the communication process by providing the means
and opportunity for consistent and timely information to all stakeholder groups. The right
balance between high-tech, such as intranets and the Internet, and high-touch media, such
as team meetings with managers, must be applied so that the messages and information are
conveyed in the best way possible. What is important and frequently very tricky is to get
the information to employees using the right mix of several communication channels
simultaneously, while not overloading people with information.

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 Communication between internal auditors and top management

It is important that top management communicate to internal auditing team all the
necessary information about nonrecurring events. The internal auditing team identifies
risks involved and helps organization determine events or circumstances that could cause
obstacle in meeting company’s objectives. Thus effective communication between internal
auditors and top management is very much essential.

 Communicating Issues up the line:

Communicating issues whenever they surface is another important factor which can make
or break a deal. Communicating the issues can result in quick action with views/solution
coming from employees, stakeholders, suppliers, management etc. Thus, instead of a two
way communication model, it will be a continuous communication cycle.

 Customer Communication:
Focusing on customers should be the prime objective of the companies when they
announce M & A. As soon as the M & A is announced, the competitors will hound
company’s customers. Hence it is important to move fast and aggressively. The company
should immediately communicate to customers a compelling value story related to the
transaction and articulate the competitive advantage of the deal. Customers must be
reassured of a seamless transition with no disruption in services.

 Overcoming the Language Barrier:

Language barrier in communication during an M & A process is difficult to overcome
because it relates to tacit knowledge. Organization members may not be aware of the
differences in how they are communicating and if they are aware they may not be able to
explain the nuances of these differences if asked. This issue is quite common when one of
the merging firms is from a high context culture where communication is often subtle and
indirect and the other firm is from a low context culture where communication is explicit
and direct. The language barrier can prevent the transfer of information between the
merging partners at all stages of the acquisition process. During the integration phase,
language barrier may also hinder the company’s ability to gather basic information about
one another’s structures, systems and operating procedures. Thus prime objective should
be overcoming language barriers. This can be done by using common language as means
of communication or by employing special language translations department if there is no
common language.

 Legal Communication:
The larger the merger, the more difficulty there will be around understanding the legal
role. As communicators, if company can get close to the legal team and win its confidence,
its life will be a lot easier. Taking company’s legal department or concerned lawyer to
lunch is not a bad idea, because the company employee who is responsible for the
communication between company and legal department need to understand what they're

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doing, appreciate the timing constraints that they are going to be operating under and
consider the financial disclosure regulations of various markets in various countries if
company have a global merger.

 Removing the Fear-factor:

The biggest obstacle to any merger or acquisition is fear of the unknown, whether that's
community hostility or senior management paranoia. Acknowledge the fear. Tease out the
detail. What are you afraid of? Is it job loss, is it culture conflict, is it just general
uncertainty? Company should start to break down the fear, and then start to construct the
opportunity. Company should find ways to engage those employees, and see that what
they're saying is taken on board in some way.

6. CONCLUSION:
Effective communication is extremely critical in Initial planning, investigative, negotiation
and integration phase. Hence effective communication is required to help people
understand and internalize change, to keep the organization focused on customers and
productivity, to reinforce desired behaviour, to promote cultural alignment, to help with
retention and motivation of key talent and to control the rumours.

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7. REFERENCES:

 Mergers and Acquisitions by Broc Romanek

 Law and procedures for mergers, amalgamations, takeovers and corporate restructure
by K R Sampath
 www.wikipedia.org
 www.tata.com

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