Mergers, Acquisition & HR

1. Mergers, Acquisition & HR • Objectives: • Understand what mergers and acquisitions are • Understand why they occur • Understand the key issues involved • Discuss the role of HR in integrating multiple organizations

2. What are they? • A merger is when one company is combined with and totally absorbs another • An acquisition is the process used to transfer assets from one company to another

3. What is the difference? • Acquisition is a generic term to communicate transfer of ownership • You can do an acquisition followed by a merger • You can do an acquisition by means of a merger • You can do an acquisition in which no merger occurs

4. Why merge or acquire? • To create added value by: • Enhancing the strategic capability of both firms • Improving the competitive position of either or both • Leveraging existing capabilities, products, markets, and management practices

5. Legal Environment • Hart-Scott-Rodino Antitrust Improvement Act of 1976 • U.S. Department of Justice • Federal Trade Commission (FTC)

6. Exercise 1: • Market Segment • Companies Within Market Segments • Potential Combinations • Within market segments • Across market segments

7. M&A Categories • Rescue • Response to a raid or financial bail-out • Partnership • Both parties actively desire the combination

8. M&A Categories: cont. • Adversarial • Only one firm has a strong interest in the deal • Hostile Takeover • Acquisition target actively resists the take-over

9. Rescue • Usually a result of major weaknesses in operations or management of one company • Cooperation tends to be high • Completion of audits often rushed • Significant issues not dealt with during the negotiations

10. Partnership • Goodwill and respect prevail • Management retention packages and agreements to keep key talent is critical • Surprises are rare • Once the financial deal is done, management often ignores integration details

11. Adversarial • Negotiations are aggressive • Resistance is extreme • “Us versus them” atmosphere prevails • Consolidations, layoffs and closures surface

12. Hostile Takeover • Animosity toward the raider is generated • Substantial residue of ill-will remains during the integration • Strong win-lose atmosphere prevails • Talents leaves first • Human resource failures most likely in this type of M&A

13. Visible Costs of the Deal • Profits • Assets and stocks • Customer and vendor base • Facilities

14. Hidden Costs of the Deal • Cost of FTC compliance • Replacement of key talent that leaves • Productivity drop-off • Loss of competitive position • Customer attrition • Power struggles and cultural differences

15. Critical HR Tasks • Integrate policies and programs from both companies • Process retention, compensation and benefits packages • Identify key talents and expertise • Advise leadership on organization capability

16. Critical HR Tasks: cont. • Recognize customs, symbols, language and ceremonies needed for cultural assimilation • Design new performance and reward systems • Create communication strategies • Educate organization on what to expect and on new skills

17. Exercise 2: • Success Case Study • Star-Excel Building Corp. • Failure Case Study • Great Southern Railroad

18. Process of Integration • Five integration phases: • Due Diligence • Organize • Mobilize • Implement • Perform

19. Predictable Dynamics of M&A • Stages of Resistance • Betrayal • Denial • Identifying Crises • Search for Solutions

20. Exercise 3: • Planning the integration • Completed templates as examples of content you would expect to see • Blank templates to be completed using the information in the Success Case Study for input