Chapter 12 - AN Flashcards
Definitions of – mergers, acquisitions, consolidations etc. Benefits of mergers – Strategic, financial, needs of CEO’s etc. Merger management process – 12.5 - Good to look at Roles and responsibilities of the team Impact of culture on mergers* HR Planning for mergers and acquisitions*
What are 3 Types of Corporate Strategies and corresponding Examples?
1) Restructuring: Includes turnaround, divestiture, liquidation, and bankruptcies
2) Growth: Includes incremental, international, and mergers and acquisitions
3) Stability: Maintain Status Quo
The consolidation of two organizations into a single organization
A merger
What are the 3 different types of mergers?
1) Horizontal Merger
2) Vertical Merger
3) Conglomerate merger
The merging of two competitors which combine to increase market power (i.e. Chrysler and Daimler-Benz)
What is a Horizontal Merger
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)
What is a Vertical Merger
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.
What is a Conglomerate Merger
The purchase of an entire company or controlling interest in a company
Acquisition
The joining of two or more organizations to form a new organization
Consolidation
One company acquiring a new company
Takeover
What are 3 reasons why companies merger:
1) Strategic Benefits
2) Financial Benefits
3) Needs of the CEO or managing team
What are 5 Financial Benefits associated with mergers:
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
What is a friendly merger (takeover)?
Simple, management of one organization contacts another
What is a hostile takeover?
Dramatic and complex; one company takes over control of another
Managers may push for “poison pills” and seek for “white knights” to protect them
right of key players to purchase shares in the company at a discount, making the takeover extremely expensive
Poison Pill
buyers who will be more acceptable to the targeted company.
White Knight
A ______ is a is a defensive maneuver, by which the targeted company makes a counteroffer for the bidding firm
Pac-Man
Only about __% of all mergers ( and acquisitions successfully achieve financial goals)
15%
What are some reasons why mergers fail?
- 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
What are the financial impacts of Mergers?
Estimated financial returns are rarely realized
Many fail because buyer overextends themselves financially
Some forecasted economies of scale are never achieved
important beliefs that members of an organization share ; mostly unspoken: Social glue that binds individuals together
Culture
Mismanagement of culture is the reason for __% of merger failures
impact of culture is one of the mid-term short answer
85%
What are 3 key elements of HR Planning for Mergers and Acquisitions?
mid-term short answer
1) The contingency plan
2) HR Due diligence
3) Transition team
3 Elements of HR Planning for Mergers and Acquisitions: Contingency Plan
related to mid-term short answer
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.
3 Elements of HR Planning for Mergers and Acquisitions: HR Due diligence
related to mid-term short answer
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.)
3 Elements of HR Planning for Mergers and Acquisitions: Transition Team
related to mid-term short answer
Appoint a transition team to deal with urgency (staffing decisions), information gaps, stress
What are 5 goals of the transition team?
related to mid-term short answer
1) Retain talent
2) Maintain productivity
3) Select individuals for the new organizations
4) Integrate HR Programs
5) Begin the process of integrating cultures
What are the 6 HR Planning Activities that need to be considered/addressed for M&andA?
related to mid-term short answer
1) Selection
2) Compensation
3) Performance Appraisal
4) Training and Development
5) Labour Relations
6) Evaluating Success
What are ways of Evaluating Success?
related to mid-term short answer
- 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)
