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Mergers and acquisitons > Final exam > Flashcards

Final exam Flashcards

1
Q

Name a few examples of Israeli M&A Acquisitions in Recent years.

A

Salesforce acquired Datarama (850 M)
Metronic acquires Mazor Robotics (1.6 B)
Facebook acquires redkix
In 2019, Nvidia buys Mellanox (huge Acquisition!)

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2
Q

Define joint venture

A

2 companies partnering to create a third entity outside of the two organizations.

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3
Q

Describe horizontal merger

A

Business consolidation, same industry (often competitors), coming together to gain market share.

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4
Q

Describe Vertical Merger

A

Companies coming together that produce separate products that compliment, gain more value and reduce costs.

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5
Q

Define synergy

A

The potential ability of two organizations to be more successful when merger than when apart.

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6
Q

What are 4 questions MAs should ask before the proposal?

A
  1. Will our commercial union overcome our cultural differences?
  2. What is the price I am willing to pay?
  3. Do I have the financing?
  4. Do we complement each other?
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7
Q

Name 5 main reasons for M&A

A
  1. Growth
  2. Synergy
  3. Diversification
  4. Integration
  5. Defensive Measures
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8
Q

What are the five phases described in the Schuster & Hunter article (2016)?

A 
Phase 1: Discovery 
Phase 2: Due Diligence
Phase 3: Agreement & Announcement (I.M. Integration Planning)
Phase 4: Integration 
Phase 5: Sustainable Performance
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9
Q

What are the four topics for evaluating a company from a business perspective?

A
  • People Perspective
  • Economic Perspective
  • Risk Perspective
  • Operations Perspective
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10
Q

Define the term Discovery

A

The phase in which a company begins to consider the possibility of a merger, acquisition or joint venture.

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11
Q

Describe some HR Do’s and Dont’s during a M&A

A

Do’s:

  • Do get involved early
  • Do spend more time than you think is needed on soft aspects

Don’ts:

  • Don’t proclaim your HR strategy as the only way forward.
  • Don’t give into the pull to assimilate the other.
  • Don’t tell the acquires that it will be “business as usual”
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12
Q

Describe some reasons why culture clashes occur:

A
  • awareness of us vs. them
  • hold on to what you know
  • subcultures; departments
  • nationality
  • implicit but unstated norms
  • executive understanding (or lack thereof)
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13
Q

Describe 4 ways how cultures clash

A
  • perceive differences
  • magnify differences
  • stereotypes
  • put-down
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14
Q

Describe 6 ways to manage culture clashes

A
  1. Assess culture fit during due diligence
  2. Clarify the cultural end state
  3. Educate people on culture clash.
  4. Engage in deep cultural learning.
  5. End the old culture to get to new one.
  6. Align the perspective with the desired new culture
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15
Q

Describe the iceberg metaphor, specifically what is above the surface and what is beneath?

A

“Behaviors” are above the surface while “attitudes” and “values” are beneath.

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16
Q

What is the difference between universalism and particularism?

A

Universalism places a high emphasis on laws, and that ideas and practices can be applied everything, without modification.
Particularism has a strong belief in circumstances and that it dictates how ideas and practices should be applied.

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17
Q

Describe the 7 Dimensions of Culture

A
  1. Universalism vs. Particularism
  2. Individualism vs. Communitarianism
  3. Specific vs. Diffuse
  4. Neutral vs. Emotional
  5. Achievement vs. Ascription
  6. Sequential vs. Synchronous time
  7. Internal vs. outer direction
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18
Q

What are the main strength in core vs. flex values?

A

Core Values: Solidity

Flex Values: Fluidity

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19
Q

If the cultural aspects are not well address, describe 5 potential risks:

A
  1. Acquiring company may destroy the attributes that caused it to want to buy the company in the first place
  2. Employee of the acquired co are confused when behavior once rewarded is no longer reward and sometimes disapproved (i.e. compliance topics)
  3. If employees resist culture assimilation, the acquiring org can find itself imposing its values and practices, w/ out employees feeling committed to them.
  4. Cultural gaps can lead to internal competition, post merger conflicts and hostile us vs. them attitudes
  5. The longer it takes to address the cultural aspects, more people might become disengaged/leave.
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20
Q

What are some steps to create cultural competence?

A

I. Awareness
II. Understanding the reason for the differences
III. What do I do about it?

Global Strategy - Local Implementation

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21
Q

What did Peter Drucker famously say about Culture? (Hint: involves mealtime)

A

“Culture Eats Strategy for Breakfast”

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22
Q

Define org culture?

A

set of values and behaviors that contribute to the unique social and psychological environment of the org. Based on shared attitudes, beliefs, customs, and written/unwritten rules that have developed over time. Org culture affects the way people and groups interact w/ each other, with clients, and w/ stakeholders

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23
Q

Describe Culture Clash.

A

A conflict arising from the interaction w/ people w/ different cultural values

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24
Q

Define Gap Analysis.

A

The comparison of ACTUAL performance w/ potential or DESIRED performance.

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25
Q

Define Culture Gap Analysis

A

The assessment of the difference between CURRENT culture and DESIRED culture. In M&A - this assessment of the gap between the culture of the companies involved.

26
Q

What two strategies is change management associated with?

A

Communication Strategy and Retention Strategy

27
Q

Describe the four stages of the Change Curve by Elisabeth Kubler Ross

A

Stage 1: Information / Denial
Stage 2: Support / Anger
Stage 3: Direction / Exploring
Stage 4: Encouragement / Acceptance

28
Q

Describe the three main stages of Kotter’s Leading Change

A

Creating a Climate for Change
Engaging and enabling the whole org
Implementing and sustaining change

29
Q

What are the ways to manage change successfully following an M&A?

A

Communicate the reasons for change and the threats if its not implemented.
Create a sense of urgency (Kotter)
Celebrate successes along the way
Minimize uncertainty: be as transparent as possible
Answer the “what’s in it for me question”
Involve the management of the acquired company in the decision making - turn them into change agent

30
Q

How to turn company leadership into change agents?

A
  • Arrange a workshop for both management and team to discuss their vision of the merged company. It is important to make sure that gaps in goals and plans are openly shared and discussed.
  • the joint vision will be the basis of the integration plan
  • the leadership of the acquired company has to be seen as a partner, treated w/ transparency and collaboration through the integration process
  • Creating this relationship will provide the org context and game plan going forward
31
Q

Describe 7 steps to help employees deal with change. (Patti Hanson/ The M&A Transition Guide)

A
  1. Discuss what continues/ remains the same
  2. Recognize the loss
  3. Acknowledge grieving
  4. Inform employees of what will change
  5. Build the case for change while honoring the past
  6. Respect the past but embrace the future
  7. Build excitement and affinity to the new org going forward

*Acknowledging and dealing w these issues are the first steps in embracing the new future

32
Q

Who said “it is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change”?

A

Charles Darwin

33
Q

Define Change Management

A

The discipline which guides how to prepare, equip and support individuals to successfully adopt change in order to drive org success and outcomes. It provides a structured approach for supporting individuals in an org in moving from their current state to their future state.

34
Q

Define the Change Curve

A

A model used to illustrate the stages of personal and org change and predict how people will react to change and what kind of support they would need at each stage.

35
Q

Describe Change Agents

A

People from inside or outside the org who help the org transform itself by focusing on such matters as org effectiveness, improvement and development.

36
Q

Describe Kotter’s 8 Steps of Change

A
  1. Create urgency
  2. Form a powerful coalition
  3. Create a vision for change
  4. Communicate the vision
  5. Empower action
  6. Create quick wins
  7. Build on the change
  8. Make it stick
37
Q

Why is employee retention so important?

A
  • Retention of Talent is fundamental objective in acquiring new orgs
  • The requirement to keep employees through a transaction
  • Nothing is more critical to the success of an integration than the retention of business leaders, technologists, experts and support team, whether they are executives and managers or employees with informal leadership opportunities
  • key individuals need to be identified early in the process
  • high engagement results in higher productivity and lower attrition.
38
Q

Engagement vs. Retention - describe how employee engagement affects five key performance outcomes

A 
37% lower absenteeism 
65% lower turnover
10% higher customer metrics
21% higher productivity 
22% higher profitability
39
Q

What causes loss of key people in M&A?

A
  • M&As bring turbulence and change - causing people to reassess career aspirations and employment situation.
  • In case employees are requested to sign a new employment agreement (country dependent) - opens up for re-assessment of the new package.
  • Many companies wait too long to put new org structures, so critical talent may leave
  • companies fail to address “soft” issues that often play a huge part in how people feel about the environment
  • employees may feel overwhelmed by new set-up, even in cases when their own job content hasn’t changed.
40
Q

Describe the two types of retention factors

A

Monetary Compensation:
Direct Payments i.e. salary, wages, bonuses. Indirect payments to cover benefits and services.

Non-monetary Compensation:
Forms of social and psychological rewards: recognition and respect from others, enjoyment from doing the job itself; opportunities for self-development.

41
Q

How is pay related to retention?

A

Pay Fairness (what people believe they deserve to be paid in relation to what others are paid)

Pay satisfaction (the amount of positive and negative feelings employees have towards their pay)

42
Q

How to measure employee retention?

A

Retention rates, attrition rates, retention of all employees vs key people

43
Q

Define Acqui-hire

A

An act or instance of buying out a company primarily for the skills and expertise of its staff, rather than for the products or services its supplies. They value autonomy and freedom that the startup environment provides them and often become resentful to existent hierarchies and HR policies.

44
Q

Define Employee Retention

A

The ability of an org to keeps its employees

45
Q

Define Employee Engagement

A

The extent to which employees feel passionate about their jobs, are committed to the org and put discretionary effort into their work.

46
Q

Define Employee Engagement

A

The extent to which employees feel passionate about their jobs, are committed to the org and put discretionary effort into their work.

47
Q

Three important concepts to keep in mind when hiring strategically

A

1) no one person is more important than the whole
2) every potential hire can be seen in two scales: skill & will
3) Look for people who like start-ups (want to do something special)

48
Q

What are four goals of employee communication in M&A?

A
  • Provide info
  • Stop rumors and increase productivity
  • Lead the employees through Change Management Process
  • Increase Employee Engagement
49
Q

Why is employee communication considered important?

A

Communication is viewed as the backbone of M&A success and one of the prime reasons for its failure
More communication results in better M&A results in all parameters
Effective communication is key to managing uncertainty in change situation
One of the most important employee communication objectives is to ensure engagement and commitment.

50
Q

Describe 6 steps of employee communication plan

A
  1. Email at the acquisition announcement day (employees of both companies)
  2. An org-wide business mtg at the acquisition announcement day (led by top mgmt of both companies, delivering a welcome message to new team, providing rationale for the merger and discussing future)
  3. A Welcome Package (welcome letter from CEO, press release, presentation w/ purpose and vision of merger, fact sheet about acquiring co. HR FAQ doc)
  4. HR Meetings (2-3 mtgs: Welcome Mtg, Orientation Mtg, and Learning and Training)
  5. Periodic Newsletters
  6. Pulse Checks/Round Tables
51
Q

What types of questions should the HR FAQ document include?

A
  • How long will the integration take?
  • What is the HR integration Org concept?
  • How will talent acquisition take place now? Who will approve hiring requisitions? Will the process change”?
  • Will the org structure change?
  • Will our company name change?
  • When will the IT systems be merged? Will we have a new email address?
  • Are there any training activities I will have to go through upon joining…
52
Q

In terms of HR meetings, what is included in the Welcome Meeting?

A

HR Rep meet w/ employees of the acquired company to present:

  • integrated vision and plan
  • global HR practices
  • Address concerns and answer questions
53
Q

In terms of HR meetings, what is included in the orientation meeting?

A

Takes place per country to present the country integration and benefit alignment plan, including benefits enrollments, policies and pay processes.

54
Q

In terms of HR meetings, what is included in the Learning and Training Session?

A

Takes place in each country in order to introduce the new tools and procedures. Training is led by the local HR team.

55
Q

What two aspects does the Angwin et al. (2016) model measure?

A

Richness and timing.

56
Q

Describe the four aspects of the Angwin Model (2016):

A

Rich and intermittent Communication “Feast or Famine”
Lean and intermittent Communication “Perfunctory”
Rich and Continuous Communication “Immersive”
Lean and Continuous Communication “Drip-Feeding”

57
Q

What should HR related statements include in “Day 1”

A

Your past service will be recognized
No immediate change in roles or responsibilities. Future changes will be communicated in advance.
No immediate change in employment conditions or any benefit
Any future change to employment conditions will be in line w local laws.
Vacation balance will be paid or transferred
Pay cycles will/will not change
Insurance providers may change but employees will be notified in advance

58
Q

What are key points to remember in HR communication ?

A

It is okay to say “We don’t know yet”
Take notes of Qs you don’t have have the answers to and follow up w a response ASAP
Listen to employee concerns
Do not make promises which you may not be able to fulfill
Employees prefer honesty over silence
Communication is on-going

59
Q

According to Ulrich’s 1997 Model, what HR roles/titles do they receive?

A

Strategic Partner: Management of Strategic HR
Admin Expert: Management of Firm Infrastructure
Employee Champion: Management of Employee Contribution
Change Agent: Management of Transformation and Change

60
Q

What does the Antila article show in terms of Strategic Partners?

A

In all three cases indicated that HR managers involvement in the acquisition strategy formulation and selection of a target co was diverse, but not absent. Important to be around for due diligence (early pre-combo) or in during the initial discussions. All agree that if the HR comes when a deal has already been announced, very difficult.

Mergers and acquisitons (1 decks)

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