Week 3 - HRM in cross-border mergers, acquisitions & alliances

Question 1

What are M&As used for?

Answer 1

• strategy for achieving corporate growth & diversification
• not all cross-border, can be in the boundary of the state
• cross-border M&As allow access to new markets and specialised resources

Question 2

What are M&A failures usually a result of?

Answer 2

• often due to problems of socio-cultural integration: political, cultural and people-related issues

Question 3

Outline the features of the DaimlerCrysler M&A

Answer 3

Look at notes

Question 4

What does the traditional view of M&A integration state?

Answer 4

corporate and/or national cultures of merging firms should be similar (all aspects of strategy, operations, culture, etc, matter)

Question 5

What does recent evidence regarding international M&As state?

Answer 5

• international M&As are not less successful than domestic ones: different cultures even within domestic companies
• cultural differences can be an asset rather than a liability (much to learn and a lot to gain)

Question 6

What are the 5 different M&A strategies?

Answer 6

preservation acquisition
absorption acquisition
reverse merger
best of both
transformation merger

Question 7

What is a preservation acquisition?

Answer 7

acquiring a company more powerful

- respect each other’s culture and maintain autonomy

Question 8

What is an absorption acquisition?

Answer 8

acquirer dictates the culture

Question 9

What is a reverse merger?

Answer 9

acquired company dictates the culture (occurs less often)

Question 10

What is a ‘best of both’ merger?

Answer 10

cultural integration (rare)
- true merger

Question 11

What is a transformation merger?

Answer 11

cultural transformation in both companies (results in unique culture in both)

Question 12

Draw a diagram showing the strategies for post-merger outcomes

Answer 12

Look at notes

Question 13

What are the 6 HRM implications to consider for M&As?

Answer 13

1) assessing culture
2) selecting the management team
3) effective communication
4) retaining talent
5) creating the new culture
6) managing the transition

Question 14

What must HRM managers think about when assessing culture?

Answer 14

• to evaluate the factors that may influence the organisational fit & the future cultural dynamics as the two organisations merge

Questions to ask:

What are their core beliefs on what it takes to win?

What drives their business strategy? Tradition or innovation?

Does the company have a short-term or a long term outlook?

How much risk is the company used to accepting?

Is the company results-oriented or process-oriented?

How is power distributed throughout the company?

is decision-making based on consultation, consensus or authority?

How is information managed & shared?

Question 15

What must HRM managers think about when selecting the management team?

Answer 15

• ensuring that the target company has the talent necessary to execute the acquisition

Questions to ask:

What kind of employees create value to the organisation?

What unique skills do employees have?

What is the background of the management team?

What will happen if some of the management team leave?

What is the compensation philosophy?

How much pay is at risk at various levels of the firm?

Question 16

How can effective communication be used in M&As?

Answer 16

Vital in cross-border M&As when cultural differences can create tension, stemming from misunderstandings and distance

As a way to:

• alleviate anxiety and stress of employees especially in the acquired firm
• Provide feedback to top management about the progress of integration
• Involve people at all levels from both companies

Question 17

Why is retaining talent important for firms in M&As?

Answer 17

It is particularly important for firms where the value of the deal lies in the acquisition of intangible assets, i.e. Knowledge & skills.

• losing key employees is a major contributing factor to the failure of acquisitions
• effective and open communication is the foundation for retaining talent, financial incentives are also important

Question 18

How do HRM managers create a new culture?

Answer 18

In the process of culture building or culture assimilation, values & norms have to be translated into behaviours

Four step process:
1) Establishing new roles & responsibilities (ensuring that skilled champions of the desired culture are in place to drive the culture change process

2) Coaching & training (helping people to develop the desired desired competences and behaviours)
3) Recruitment, succession planning & rewards (those who respond well to coaching may be given broader responsibilities)
4) Formalisation of the new system into a consistent coherent and transparent whole

Question 19

How can HRM managers manage the transition?

Answer 19

Integration manager and transition teams

• guide the transition process
• ensure timeline of events are kept to
• act as a ‘gateway’ between the two sides
• act as an example of the desired behaviours

Moving with speed

• creeping changes and uncertainty can drain value from an M&A
• also important to give people time to adjust

Question 20

What are the key messages surrounding M&As?

Answer 20

Social & cultural implications do not receive sufficient attention in M&As

Cultural differences can be an asset as well as a liability

Planning & managing the integration of the HR systems is key to the success of the M&As, though not the only factor…