Mergers and Acquisitions

Chapter - 16
 Classifications of Mergers
 Horizontal mergers
 producing similar product in the same industry.
 Vertical mergers
 working at different stages in the production of the same good
 Congeneric or concentric mergers
 in the same general industry, but without mutual buyer/customer or supplier
relationship,
 Conglomerate mergers
 firms operating in different industries.
 Classifications of Acquisitions
 Friendly
 Hostile
 Equals
 Unequal
 Reverse takeover
Motives behind Mergers
 Synergy
 Increased market or revenue
 Cross-selling to each others customers
 Taxation
 Economies of Scale
 Geographic diversification
 Resource transfer
 Vertical integration etc.
 The top 10 acquisitions made by
Indian companies worldwide (see Mergers and
Acquisitions.doc)
 More than 50 p.c. of the mergers and
acquisitions are not successful
Mosaic – Smartfone Merger: A
Cultural Mismatch?
 Mosaic – one of the largest ISP in India
 Intends to expand base from .8m to 1m
 Possible only through added value and innovative services
 Identifies VoIP as a vehicle for future growth
 Smartfone – pioneer in internet telephony
 Did extensive work on VoIP but no finances to provide extensive
services
 Makes an offer to Mosaic
 Market reacts possitvely
 Merger team formed – for finance, operations and marketing
issues
 Top management of both cos accepted but employees
protested – for obvious reasons
 Merger took place despite resistance
Cultural differences at Mosaic and
Smartfone

 Mosaic
 Bureaucratic type system
 Little freedom to employees (from dressing to reporting)
 Strict rules and regulations
 Plan focused
 Risk avoiding
 Smartfone
 Participative type system
 More freedom to employees
 Rules relaxed to facilitate performance
 Innovative and creative
 Young and dynamic workforce
 Experimental and Risk taking approach
Kilnco – Maha Cements: A Merger
Gone Wrong?

 Kilnco Cements
 Largest cement company in South India
 Four functioning plants [TN (2), Ka (1) Ke (1)]
 More than 15000 employees
 Producing 2m tones per annum
 Maha Cements
 Smaller, with operations in AP
 Hitech Korean plant
 Superior quality at less price
 Strong distributor relationship
 Defeated attempts of Kilnco for hostile takeover
Labour problems at Maha Cements
 Workers demand a wage on par with Kilnco and Rudra
Cement
 Management refuses due to inability
 Strike – for 40 days
 Rs. 4 cr. loss
 On the verge of bankruptcy
 Kilnco proposes merger
 With a assurance of wage revisal
 Kilnco found many other issues post merger
 Lawsuits
 Non-compliance of safety norms
 Violation of The Workmen Compensation Act, Bonus Act etc
Strategic Management of Human
Resources during Mergers and Acquisitions

 Preparation of due diligence report

 Creation of a manpower plan
 Communication
 Retention strategy
 HR integration
 Cultural integration
 Period Employee Behaviour
Day 1 Denial and fear
After a month Sadness (slight improvement)
After a year Acceptance (significant
improvement)
After 2 years Relief, liking, enjoyment,
business development activities
Role of HR Dept and HR Professionals in
Mergers

 Formulating a strategy
 Creating teams
 Creating structure
 Developing a communication plan
 Creating a transition system
 HR Manager assume the following roles
 Facilitator
 Educationalist
 Team builder
 Culture integrator
 Strategy formulator and implementer
How to avoid job cuts during
Mergers?
 HR is as important as other resources
 Adopt a proactive approach during a
merger
 Educate employees
 Consult employees on certain issues
 Develop confidence
 Develop retention strategies
ICICI takeover of BoM

 3 times in size but 1400 employees as against 2500

of BoM
 ICICI turned all its departments into profit centers
 Bonus on individual performance
 Appointed Hewitt Associated for uniform
compensation, work culture and change
management problems
 Communication for ‘fear of unknown’ and
 Adequate training for ‘fear of inability’
 Transferred 300 ICICI employees to BoM and 450
to ICICI