Merger and Acquisition

MEANING
Merger means “to combine”.
 A merger is when one company is combined with

another.
Acquisition means “to acquire.”
 An acquisition is the process used to transfer assets

from one company to another.

 DEFINITION OF MERGER
 Merger refers to the mutual consolidation of two or
more entities to form a new enterprise with a new
name.
 In a merger, multiple companies of similar size agree

to integrate their operations into a single entity, in

which there is shared ownership, control, and profit.
 It is a type of amalgamation. For example M Ltd. and

N Ltd. joined together to form a new company P Ltd.

 Types of Merger
 Horizontal Mergers: when two organizations
producing a similar product combine.
 Vertical Mergers: when two organizations working

at different stages in the production of the same

product combine.
 Conglomerate Mergers: when two organizations

operate in different industries.

DEFINITION OF ACQUISITION
 The purchase of the business of an enterprise by
another enterprise is known as Acquisition.
 This can be done either by the purchase of the assets

of the company or by the acquiring ownership over

51% of its paid-up share capital.
 In acquisition, the firm which acquires another firm is

known as Acquiring company while the company

which is being acquired is known as Target company .
 Types of Acquisition
1. Horizontal Acquisitions: Acquirer and acquired
companies compete in the same industry.
2. Vertical Acquisitions: Firm acquires a supplier or
distributor of one or more of its goods or
services,Leads to control over additional parts of the
value chain.
3. Related Acquisitions: Firm acquires another
company in a highly related industry ,Creates value
through synergy and integration of resources and
capabilities
 DIFFERENCE
BASIS OF COMPARISON MERGER ACQUISITION

The merger means the When one entity purchases

fusion of two or more than the business of another
MEANING
two companies voluntarily entity, it is known as
to form a new company. Acquisition.

FORMATION OF NEW
Yes No
COMPANY

The mutual decision of the Friendly or hostile decision

NATURE OF DECISION companies going through of acquiring and acquired
mergers. companies.
To decrease competition
PURPOSE and increase operational For Instantaneous growth
efficiency.
 The size of the acquiring
Generally, the size of
company will be more than
SIZE OF BUSINESS merging companies is more
the size of acquired
or less same.
company.

LEGAL FORMALITIES More Less

Dilution of ownership of
Dilution of ownership of
OWNERSHIP both.
one firm

More time consuming Less time consuming.

TIME CONSUMING
Reasons for Merger & acquisition
1. Increase market share
2. Learning and developing new skills
3. Economies of Scale
4. Acquiring Assets Cheaply
5. Synergy
6. Acquisition of technology, assets or talent
7. Increasing capabilities & sharing expertise
8. Diversification of products and services
 Merger & Acqusition procedure
 Pre acquisition review
 Search & Screen Targets
 Investigate & Value the Target
 Acquire through Negotiation
 Post Merger Integration
IMPORTANCE OF HR IN M&A
HR in Merger & Acquisition: Success of merger and
acquisitions depends on the people who drive the
business, their ability to drive, lead, and formulate
strategy, execution and implementation. It is very
important to involve HR professionals in merger &
acquisition.HR professionals play an active role in the
change process by offering their interventions to help
ensure a successful merger and acquisition.
 Task of HR Merger & Acquisition
HR plays a vital role in
 Employees coping up with change and culture
 Organizational hierarchy structure,
 Maintaining the productivity by placing of right people at

right place
 Alignment of compensation, benefits and welfare schemes
 Job security
 Relocation
 Compliance of local labour laws
 Employee communication
 Taking care of personal records
Best practices to be followed by HR
during and after merger & acquisition:

 Identify leaders from both the companies for effective

implementation, transition and communication of the same to
employees.
 Train managers on the nature of change
 Explain new roles to the people
 Orientation programs on policies and procedures
 Orientation programs on performance management,
compensation, benefits and welfare schemes
 Identify the skills of people and mapping them appropriately.
 Team building activities
The Dynamic Role of HR in M&A

Analyzing Organizational Cultures

HR helps figure out if the organizational culture of two
companies partnering together are compatible enough to
be meshed as one. When two corporate cultures
integrate, it is the responsibility of human resources to
enable a smooth transition by assisting the employees to
grab a new organizational culture. Human resource is
responsible for analyzing the cultural amalgamation of
two companies by taking the demographics of the
partnering organizations into consideration .
 Boosting the Morale of Anxious Employees
During the process of M&A, some employees may be
resist to adapt to the new work culture thus, creating a
serious culture clash. It is a common human tendency to
resist change and since M&As bring in an element of
concern and change for the employees of both merging
companies, Human Resources in both the organizations
should act as a comforting factor and take measures for
sorting out the transition process for employees.
Solving Employee Benefits Issues
The objective of due diligence process in M&A is the
verification of Seller’s financials by the Buyer
Company, along with the confirmation of all deals,
customers and other relevant information. This is done
by the buyer to assess if the M&A deal make any
financial or strategic sense. HR department of the
buyer company particularly evaluates the benefit
structure of the seller company to discover the
likelihood of any imminent problem such as inadequate
funds for pension plan or continuation of any medical
insurance plan that may cost an arm and a leg to the
organization in the long run.
Changing Roles and Structure
When one company merges with or acquires another,
some changes to both organizations may occur, such as
eliminating desired positions or combining teams and
departments. Human resources plays a vital role in the
changes. Human resources communicates to employees
changes in who they report to within the company, what
team or work group employees are assigned to as well as
any changes to different positions’ roles in the
organization. Human resources may work with
management and employees to alter the job descriptions
of various positions, ensuring everyone understands his
role in the newly altered organization.
 Failure of Merger & Acquisition
 They don't follow the companies policies
 Lack of the authority with in the hands of HR.
 They don’t openly communicate with the employees.
 They don’t build a trust worthy relationship among

the organization.
 They don’t express vision clearly.
 They don’t perform their task on time.
 How to prevent failure on part of HR
1.Continuous communication
2.Transparency
3.Training to employees
4.Create joint culture
5.Work according to proper rules
6.Job security
7.Friendly atmosphere
 EXAMPLES
 Merger of Fortis Healthcare India and Fortis
Healthcare International.
 Flipkart’s acquisition of eBay India
 Vodafone-Idea merger
Thank
you