Case Report on Strategic Alliances for their Effectiveness

Post-M&A Integration.

Submitted in partial fulfilment for the requirements of the course

Human Resource Management

Instructor: Prof. Anjali Bansal

Indian Institute of Management, Lucknow

Submitted on 13th March, 2021

Abhishek Singh – PGP37392

Aditya Prasad – PGP37393
Akanksha Chuahan – PGP 37394
Akash Gupta – PGP37395
Akash Singh Lodhi – PGP37396
Akshat Kapoor – PGP37397
Alok Sharma – PGP37398
Anamika Gupta – PGP37399
 INTRODUCTION
Merger refers to when two companies combine, or the assets of two companies come under the control of
one company that will go on to exist.

Acquisition refers to when one company buys assets of another company to assume ownership control of
its management.

Mergers and acquisitions are a key part of the company’s strategic growth plan, though planning is often
time taking and thought out, no two M&A deals are similar- each one can vary based on numerous factors
like differences in strategic objective of the transaction, HR-related objectives etc. Mostly, M&A deals
relate to one of the four strategy categories- transformation, expansion, assimilation and add on.

(Source: Deloitte, Driving M&A value through HR integration)

STAGES OF M&A

M & A processes are typically long-term irreversible processes and need long term planning from both
the parties involved in the M&A process. The four major stages involved in the M&As process are as
follows:

1. Partner Assessment:
● Define acquisition criteria to identify the potential targets of M&A
● Collect data points of potential targets, and apply the acquisition criteria to evaluate potential fit
with the target company

2. Pre-merger/ due diligence phase:

● Conduct Financial / Accounting and Tax diligence
 ● Perform business due diligence, including commercial, operations, IT, and HR
● Negotiation’s execution, including deal valuation and target valuation

3. Integration planning:
● Operating model and overall structure redesign blueprint
● Develop and execute a communications strategy

4. Integration execution:
● Execute and manage integration plans
● Develop a support system for post-acquisition queries

OBJECTIVES

1. To analyze four strategic alliances for their effective post-M&A integration.

2. To investigate the change implementation.

METHODOLOGY

We conducted interviews through telephone/google meet with the leadership of both the mergers and
acquisitions side. In order to understand the nuances of the merger and get internal insights on questions
related to the the following:

1. Employee Behavior before and post merger and acquisitions

2. Policies adopted by HR Managers during and post merger and acquisitions
3. Role of Top Leadership in mergers and acquisitions
4. How to ensure harmony of the organization post M&A
5. How to ensure a smooth transition
 MERGER: VODAFONE IDEA

Background of Companies:
Idea: Birla Communications Ltd, a subsidiary of Idea Cellular Ltd, was founded in 1995 to provide
communications services. The company combined with Tata cellular in order to achieve a larger market
share. In 2006, Tata withdrew its ownership from Idea cellular and applied for a patent.

Vodafone: Vodafone India was founded in 1994 as a joint venture between Hutchison and Vodafone.
Whampoa and the Max Group were successful.

Vi Post Merger:

Vodafone and Idea each own a separate percentage of the combined company, while the rest is owned by
public shareholders. After the merger, Vodafone will own 45.1 percent of the joint venture after selling
the remaining 4.9 percent to Aditya Birla Group for Rs 3,900 crore.

Reason of Merger:

The key motivation for the Vodafone-Idea merger was to counter Reliance Jio's growing dominance in
the Indian telecoms sector. While merging firms are usually confident in their synergy benefits, most
observers agree that the Vodafone-Idea merger has the potential to save money.

Analysis:

After discussing with leaders of both companies we find out that merger was needed for 3 main reasons:
 1. To increase Market Share
2. To compete with pricing strategy of competitors
3. To increase the communication spectrum

But this merger was not smooth as per discussion with Executive Vice President of Vodafone and Idea
employee, who continued in the firm (Vi) post-merger. The following issues in the merger were
highlighted:

1. Cultural differences in Two companies were not managed properly: As said by VP of

Vodafone - ‘Initially there were no apprehensions, but eventually cultural differences were
highlighted around 3 months before the merger. The HR Department failed in marrying the two
culture’. The cultural differences in the two organizations were highlighted well before the
merger. However, the HR department did not formulate any policies or procedure to handle the
cultural differences.
2. Leadership Opinion Differences: It took a lot of time to decide on every action plan at the
Executive level. As the philosophy of both the companies was very different. As quoted in the
interview - ‘Egos and superiority related complexes coming in way’
3. Horizontal Merger leads to more fear of Job Loss: Horizontal merger in the same industry and
services serving the same geography can lead to duplication of human resources which leads to
fear of job loss. In case of Vi around 4000-5000 employees were laid off.
4. Alignment of Culture and People ideology is the core for Building Employee Trust : The
employees underwent a series of change in reportee reporter relationship in a merger alongwith
various policies and procedure changes. It is very important to make sure that the employees have
faith in the new merged entity. As mentioned in the interview - ‘There has to be a leader who
understands the challenges of both the culture’

Vodafone – Idea underwent a rebranding in September 2020. The corporation renamed itself 'Vi' after the
initials. The rebranding came roughly two years after the merger, it exemplifies the spirit of cooperation.
'Vi' is pronounced as 'we,' according to the company's statement.

Conclusion:

From a financial perspective, It might be stated that the merger was necessary in order to combat Reliance
Jio's aggressive pricing strategy.

From Human Resource perspective, The merger was not a success as the difference between culture of
Vodafone and Idea was not handled well and It lead to exodus of several talented workforce during and
post-merger. To make the merger successful, there was requirement of a person who understands both the
culture minutely and builds consensus among team members
 ACQUISITION: PAYU-WIBMO

Background of the Companies:

Wibmo, a leading technology and service provider for the financial services industry was founded in
Cupertino, CA in 1999. It is a global full-stack PayTech company and an industry leader in payment security
and digital payments, partnering with 130 banks across 25 Countries.

PayU is a Netherlands-based payment service provider to online merchants. The company was founded in
2002 and is headquartered in Hoofddorp. It allows online businesses to accept and process payments
through payment methods.

Objective behind the Acquisition:

The main objective for Wibmo behind this acquisition deal was that although it had been the leader in
banking transaction authentication for almost two decades,it wanted to expand itself globally in order to
become market leader. The lack of necessary employee strength in Wibmo was well suited by strength of
PayU money. PayU money also wanted to invest in Fintech space where Wibmo already had presence in
India. The objectives of both the companies aligned which lead to the merger in 2019.

Analysis:
Following are some of the key takeaways from this acquisition deal:

1) This deal came as a shock for few of the Wibmo employees who were associated with the
organization for a long time. They did not feel inclusive of the deal and any of its benefits. This
also affected the productivity of the employees along with the exodus of employees long
associated with the organization. Therefore the conclusion is that the The employees need to be
communicated and informed about these decisions well in advance.

2) Employee’s social change should be kept in mind. The rapid takeover from the PayU side
resulted in a few disagreements, and finally all prior stakeholder's shares in Wibmo were
encashed or converted into PayuMoney shares, and new top positions were held up by employees
from the PayuMoney side.
 3) Improving the transition process: Although engaging employees from both sides would take
more time, it is imperative that the organizations follow this. The internal tensions should be
addressed at the same time in order to create a good working environment in the first place.

4) Internal stakeholders should be consulted during the decision-making process, to make sure
that they feel comfortable with this transformation as well as to cultivate the sense of
inclusiveness in them.

Conclusion:

From a financial perspective, It might be stated that this acquisition was necessary in order to mutually
benefit both the firms.It resulted in Wibmo expanding its services to the International clients, while PayU
was able to improve services to its growing number of merchants in India.
If we talk about the Human Resource perspective, this acquisition cannot be termed as a success since
integration of the work culture could have been better. Post acquisition, there was a sense of a loss of trust
between Wibmo's employees and the upper management. It also led to an undesired effect on productivity
as well as loss of talent.

ACQUISITION: TATA STEEL BSL

Background of the companies:

Tata Steel Limited

One of the largest companies with diversified steel producers globally that has a production capacity of
more than 34 million tonnes per annum.

Bhushan Power and Steel

Established in 1970, the company set up its initial facility in Chandigarh and eventually expanded its
operations and manufacturing in other regions. Bhushan Power and Steel is a company that manufactures
and markets steel products.

Post-acquisition: Tata Steel BSL Limited

Right after the acquisition in November 2018, Bhushan Steel’s assets and operations came under the
control of Tata steel. The name of the company was changed, and according to the official statement, it is
a part of integrating and aligning the functions of both the companies while also giving it the brand and
singular sense of identity of being part of the Tata Group.

Reason of Merger:

● Matching downstream business output: Tata Steel is the world's lowest-cost iron ore producer,
thanks to its own mines. It may use that ore for Bhushan Steel's operations, allowing it to make
more money with the same assets.

● Maintaining Auto Sector Dominance: Tata's acquisition of Bhushan will improve its position in
the auto-grade steel industry and provide it with wider access to the Northern market. Auto steel,
a high-margin industry, accounts for roughly 20-25 percent of Tata Steel's total revenues, and
with Bhushan's acquisition, that number might rise dramatically. The Ghaziabad factory of
Bhushan Steel provides companies such as Maruti Suzuki. It also operates a plant in
Maharashtra's Khopoli, which is close to auto manufacturing centres like Pune and Gujarat.

● Capacity expansion goals: The acquisition will enable the world's largest steelmaker to meet its
ambitious goal of tripling capacity by 2022. Tata Steel currently has a 13 MTPA operational
capacity, with a brownfield expansion of additional 18 MTPA approved by the board. With the
acquisition, that number might climb to 23 MTPA.

Analysis
After discussing with leaders of both companies we find out that merger was needed for 3 main reasons:

1. To increase the production capacity from 13 MTPA to 23 MTPA by the year 2022.

2. Increasing dominance and sustainable growth in the automobile sector.

3. Generating higher profits for the Bhushan Steel plant using common assets.

Problems faced during the M&A:

1. Employees of the acquired side resisted change in the maintenance practices they’d now have to
adhere to once Bhushan Steel came under the control of Tata Steel. A shift from time-based
management to predictive maintenance.

2. Change in payroll and other HR practices was not received well by some of the employees.

3. Overall decreased motivation; Tata steel hired an outside contract party to ensure implementation
of changes across the organization, but the contracted party did not perform up to the expectations of
the management.

Conclusion:

From Tata Steel perspective this acquisition fits perfectly in their long term plan. To become the
largest company they had to acquire the Bhushan steel and all the environmental variable were
favorable.

From HR perspective it was challenging in the start but Tata steel took the right measures to resolve
all the conflicts.

ACQUISITION: WALMART FLIPKART

Background

Flipkart was India’s largest indigenous E- commerce marketplace and Walmart is the world’s biggest
retailer. Flipkart was in a tough battle with Amazon and other smaller organisations to take the top
spot in the country and Walmart was also looking for a local partner to make its own stand against
Reliance, Amazon and other players strong. Walmart acquired Flipkart in 2018.

Analysis

1. Flipkart’s management was very open with communication and informed employees about each
step as and when it happened.

2. Walmart was happy and satisfied with Flipkart’s processes, and first took time learning from
them rather than coming in with draconian changes.

3. Flipkart management ensured 2-way communication with employees, and the CEO himself held a
town-hall meet.

4. Flipkart employees were compensated for going through the acquisition ordeal.

5. Job security was communicated from the get-go and the promptness from HR department was the
key behind employee’s optimism and welcome for the deal

Conclusion

Flipkart and Walmart were an amazing marriage because Flipkart was looking for a big partner who
could support it strongly, and Walmart was not looking to make significant changes in Flipkart in the
short term as they were satisfied by them. The candid and open communication from the
management and HR department were key to the employee- psychology. Walmart was very
respectful of Flipkart’s processes and policies and had the motive of first understanding it well rather
than coming in and changing everything. Flipkart was also happy to come under Walmart’s umbrella
because they were also looking for some strong financial backing to pick battles with larger
competitors like Amazon. An expedited integration was also avoided which enabled a natural
acceptance of each other’s presence.

Limitations
 1. There could be personal biases in the interview conducted with the managerial level.
2. There could be lack of understanding of the work of HR Department.
3. The sample size is less which makes it difficult to get the true picture of M&A.

 
References:

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"Human resource management in merger and acquisition planning", Journal of Organizational
Change Management.

2. Napier,  N.  K.  (1989).  Mergers and acquisitions,  human resource issues and outcomes:  A 
review and suggested typology.

3. Schweiger, D., and J. Walsh. 1990. Mergers and acquisitions: An interdisciplinary view.
Research in Personnel and Human Resources Management.

4. Birkinshaw, J.  and Bresman, H.  2000. ‘Managing the  PostAcquisition Integration Process:
How  the Human  Integration and  Task  Integration Processes  Interact to Foster Value Creation.

5. Soundarya, M B., Lavanya S M., & Hemalatha, S. (2019) "Merger and Acquisition of Business
Organization and Its Impact on Human Resources"