Chapter 12 - AN

Question 1

What are 3 Types of Corporate Strategies and corresponding Examples?

Answer 1

1) Restructuring: Includes turnaround, divestiture, liquidation, and bankruptcies
2) Growth: Includes incremental, international, and mergers and acquisitions
3) Stability: Maintain Status Quo

Question 2

The consolidation of two organizations into a single organization

Answer 2

A merger

Question 3

What are the 3 different types of mergers?

Answer 3

1) Horizontal Merger
2) Vertical Merger
3) Conglomerate merger

Question 4

The merging of two competitors which combine to increase market power (i.e. Chrysler and Daimler-Benz)

Answer 4

What is a Horizontal Merger

Question 5

The merger of a buyer and a seller or supplier to achieve the synergies of controlling all factors affecting a company’s success (i.e. a real estate agency merging with a real estate developer)

Answer 5

What is a Vertical Merger

Question 6

The merger of two organizations competing in different markets (no competitive or buyer-seller relationship - (i.e. Tata primarily a successful motor company achieved grown by purchasing VSNL, an international telecommunication company to enter the telecom business.

Answer 6

What is a Conglomerate Merger

Question 7

The purchase of an entire company or controlling interest in a company

Answer 7

Acquisition

Question 8

The joining of two or more organizations to form a new organization

Answer 8

Consolidation

Question 9

One company acquiring a new company

Answer 9

Takeover

Question 10

What are 3 reasons why companies merger:

Answer 10

1) Strategic Benefits
2) Financial Benefits
3) Needs of the CEO or managing team

Question 11

What are 5 Financial Benefits associated with mergers:

Answer 11

1) Reduce the variability and risk of their cash flower ( diversifying so as not to put all eggs in one basket)
2) Organizations often use their own mature “cash cows” businesses too fund “star” operations. Can have negative impact on employees from the mature business as they fee neglected
3) There may be tax advantages (these vary by country). Considerable tax losses in the acquired firm may offset the income of a parent company.
4) Ability to enter new markets and develop new products easier/quicker
5) Possible financial gains from merging and getting the benefits of a good structure and administration

Question 12

What is a friendly merger (takeover)?

Answer 12

Simple, management of one organization contacts another

Question 13

What is a hostile takeover?

Answer 13

Dramatic and complex; one company takes over control of another
Managers may push for “poison pills” and seek for “white knights” to protect them

Question 14

right of key players to purchase shares in the company at a discount, making the takeover extremely expensive

Answer 14

Poison Pill

Question 15

buyers who will be more acceptable to the targeted company.

Answer 15

White Knight

Question 16

A ______ is a is a defensive maneuver, by which the targeted company makes a counteroffer for the bidding firm

Answer 16

Pac-Man

Question 17

Only about __% of all mergers ( and acquisitions successfully achieve financial goals)

Answer 17

15%

Question 18

What are some reasons why mergers fail?

Answer 18

• Integration difficulties
• Inadequate evaluation of target,
• Large or extraordinary debt
• Inability to achieve synergy
• Too much diversification
• Mangers focus too much on acquisitions, and neglect other parts of business
• Too large of an acquisition
• Culture integration difficult
• Reduced employee morale due to layoffs and relocation

Question 19

What are the financial impacts of Mergers?

Answer 19

Estimated financial returns are rarely realized
Many fail because buyer overextends themselves financially
Some forecasted economies of scale are never achieved

Question 20

important beliefs that members of an organization share ; mostly unspoken: Social glue that binds individuals together

Answer 20

Culture

Question 21

Mismanagement of culture is the reason for __% of merger failures

impact of culture is one of the mid-term short answer

Answer 21

85%

Question 22

What are 3 key elements of HR Planning for Mergers and Acquisitions?

mid-term short answer

Answer 22

1) The contingency plan
2) HR Due diligence
3) Transition team

Question 23

3 Elements of HR Planning for Mergers and Acquisitions: Contingency Plan

related to mid-term short answer

Answer 23

If board of director indicates interest in M&A, a contingency plan should be created which identifies, merger coordinator/management and contact person who would develop a plan similar to emergency plan which outlines chain of command, procedures, training, communication, negotiation skills and training, transition team, consultants etc.

Question 24

3 Elements of HR Planning for Mergers and Acquisitions: HR Due diligence

related to mid-term short answer

Answer 24

Process through which potential acquirer evaluates a target firm for acquisition (review collective agreements, employment contracts, benefit plans, pension plans, employment policies, complaints, cultural differences etc.

Determine Knowledge, Skills, Abilities, and other Attributes (KSAOs) of acquired employees by reviewing all employee documentation (resumes performance reviews etc), and conduct interviews
○ Determine contractual obligations (retirements, terminations, promised new jobs etc.)

Question 25

3 Elements of HR Planning for Mergers and Acquisitions: Transition Team

related to mid-term short answer

Answer 25

Appoint a transition team to deal with urgency (staffing decisions), information gaps, stress

Question 26

What are 5 goals of the transition team?

related to mid-term short answer

Answer 26

1) Retain talent
2) Maintain productivity
3) Select individuals for the new organizations
4) Integrate HR Programs
5) Begin the process of integrating cultures

Question 27

What are the 6 HR Planning Activities that need to be considered/addressed for M&andA?

related to mid-term short answer

Answer 27

1) Selection
2) Compensation
3) Performance Appraisal
4) Training and Development
5) Labour Relations
6) Evaluating Success

Question 28

What are ways of Evaluating Success?

related to mid-term short answer

Answer 28

• Financial (i.e. exceeded profit targets)
• Customer Service Metrics
• Human Capital (people) metrics (i.e. employee engagement scores
• Operational measures (i.e effiencies and synergies realized)