UNIT 1_Roles of HR Manager in merger & acquisition (1).pptx

Roles of HR manager in merger & Acquisition

1. Role of HR in Merger and Acquisitions , UNIT 1

2. The Human Resource department acts as a trusted adviser to the employees of an organization along with the management who intend to enter to an M&A deal . A merger i s when two or more entities come together under one management style, combining forces for whatever reason. A merger is generally defined as the joining of two or more different organizations under one common owner and management structure Acquisition, which is when a company buys another company and absorbs them under their management style. This is in the news a lot with tech companies because larger companies want to absorb the technology created by a smaller team and bring those coders and engineers onto their roster instead of competing with them. An acquisition is the process of one corporate entity acquiring control of another corporate entity by purchase, stock swap or some other method.”

3. Results of Mergers and Acquisitions According to SHRM, 70 to 90 percent of all mergers and acquisitions fail in a financial sense with most companies missing their objectives. They say that this is largely due to HR related activities, such as: Incompatible Cultures Management Styles Poor Motivation Loss of Key Talent Poor Communication Loss of Trust Uncertainty In other words, “ people issues” are largely to blame when it comes to the failure rate of mergers and acquisitions.

4. To ensure a successful M&A, it is important to involve HR . Its Role is . Culture New policies Compensation Benefits Retention and Downsizing Boosting the Morale of Anxious Employees

5. Culture Cultural fit is a major part of M&As. Ensuring both company cultures come together and do not clash is one of HR’s biggest roles in the entire process. If the cultures do not fit, the merger or acquisition very often fails.  M&A deals are made to create growth and open up a multitude of opportunities for the buying company. However, if there is friction between the two companies, it can be detrimental to the success of the merged business. To ensure this does not happen, HR needs to assess the selling company’s culture and identify any areas that may be an issue. Finding these problems before the transaction occurs is essential to the success of the M&A. 

6. New Policies In merger or acquisition, new policies will need to be created in order to ensure a smooth transition. This includes ,, new policies for benefits, vacation allowances and notice periods. There is a wide range of areas these policies will have to cover and once the transaction is over, employees will have lots of questions, such as what will happen to their healthcare and if they need to take any actions to ensure they are covered by the new policies. Lots of these policies may not change because they contain best practices that are used by many organizations. However, it’s also a good opportunity to update any outdated policies and ensure they’re in-line with the latest research and trends. 

7. Compensation and Benefits Similar to creating new policies, HR also needs to work with managers to make new benefits and compensation plans for both workforces. Employees at the buying and selling company will want to know if their bonuses and raises will be impacted, how they can book time off or if they are still entitled to the same (or better) healthcare.  If these issues are not addressed quickly, employees may decide to leave the company due to uncertainty and lack of communication. This is why it is HR’s role to convey any changes to all staff, providing updated information regularly. Often, a training session is held by HR to ensure these changes are understood by the workforce. 

8. Retention and Downsizing M&A bring together whole companies, meaning there may be a lot of roles at the new company that are no longer needed. This depends on the M&A, as not all decide to combine the two companies into one, single unit.  An example : when eBay bought PayPal in 2002. eBay chose to keep the PayPal brand and did not combine the two into one company. PayPal became a subordinate under eBay, so it is technically the same business but maintains its own corporate culture and departments .  As a whole, redundancies tend to happen after M&A . For example, it is likely that both companies will have a marketing department, so the buying company will need to consider if two marketing teams are necessary or just one? It is possible to combine the two teams but that may not be the best way forward.

9. Another thing to consider is if the selling company is in another country. The employment law will be different meaning you may not be able to lay off employees of the selling company and if you do, you may have to pay severance. Deciding whom to retain and whose contract to terminate is an important decision and it’s equally crucial to ensure the processes are managed effectively. Ideally, HR and management teams will work together to assess the skills, capabilities and potential of key employees at the new company.  Historically, there have been a lot of mergers and acquisitions that have failed for reasons that could have been avoided.

10. Boosting the Morale of Anxious Employees During the process of M&A, some employees may be reluctant to adapt to the new work culture thus, creating a serious culture clash. It is a common human tendency to resist change and since M&As bring in an element of apprehensions and change for the employees of both merging companies, Human Resources in both the organizations should act as a comforting factor and take measures for sorting out the transition process for employees by— Boosting the confidence of employees Offering adequate training to managers so that they can acclimatize themselves to the nature of change and new organizational culture Brushing away the fears and doubts of employees, so as to retain productivity Ensuring job security Explaining news roles to each employee Expounding the hierarchy structure of the organization post merger

11. Elucidating how the joint venture will affect each employee in person Upholding efficiency by identifying leaders from both organizations Enhancing innovation by placing the right employee at the right position Complying with labour laws Supervising personal records Keeping the communication channel open through constant communication with the employees and conveying their concerns to the management. Providing timely input throughout the M&A process Conducting orientation programs on welfare schemes, compensations, benefits, and company policies

12. A few recent mergers and acquisitions in India are provided below. Tata Group acquired Air India : Tata Group acquired Air India, the nationalised airline, in 2022. Tata announced the merger of Air India with Vistara , a joint venture between Singapore Airlines and Tata Sons. Air India had been struggling in business, and the travel restriction during the COVID-19 pandemic added more struggles. However, Tata is trying to restore Air India to its former glory. PVR merger with INOX : India’s two leading cinema franchises, INOX and PVR, merged in 2022 to establish the largest multiplex chain with over 1500 screens nationwide. The COVID-19 pandemic was tough on the film industry and theatres. The INOX and PVR merger will result in reduced rental costs, advertising revenues and convenience fees for the merged entity, called PVR-INOX. Zomato acquired Blinkit : Indian food aggregator platform, Zomato acquired Blinkit , the quick commerce company, for Rs.4,447 crore . Zomato operates in the food delivery and restaurant hosting businesses, but with the acquisition of Blinkit , it will also be able to enter the quick commerce field.

13. Cross-border Mergers and Acquisitions A cross-border merger means a merger of two companies located in different countries resulting in a new company. An Indian company merges with a foreign company or vice versa in such a merger.  Foreign investors are involved in cross-border mergers and acquisitions. The assets and liabilities of the two companies from different countries are combined into a new legal company. There will be a transfer of assets and liabilities of a local company to a foreign company (foreign investor), and the local company will be affiliated with the foreign company or vice versa.

14. HR Plays a Substantial Role in Merger & Acquisitions The HR leadership of both companies should be capable of promptly developing a strategy to help out the companies in accomplishing the synergies they are looking for. Before the merger or acquisition takes place, the HR managers of both the firms should advise the management to map out a roadmap in advance so that the merging companies can stick to it as soon as the M&A procedure gets going. The strategy should stress on the organizational communication structure, layoffs (if any), and amalgamation of corporate cultures. This initiative by HR leaders helps the management to conform to a specific set of objectives, thus driving away all misunderstandings and differences that may come up in future. The HR of any organization, by extending their intervention, can facilitate a successful M&A. Since Human Resource entails employees of an organization and deals with significant issues pertaining to employees, involvement of HR professionals is indispensable for successful mergers and acquisitions. Thus, during an M&A deal, an HR plays the role of a catalyst as well as a coach to enable employees of merging companies to work collectively and constructively.

15. Phase of M&A Integration Role of HR Tasks Evaluation Stage Setter Help set the stage and evaluate potential business ventures and partners based on company compatibility; Develop criteria to assess the strengths and weaknesses of both the organization and people; Create HR-specific guidelines specifically for M&A; Educate the deal team on critical people and change issues. Due Diligence Deal Enabler Estimate ongoing people and integration cost issues (e.g., pension liabilities, severance, retention bonuses) as well as costs saved due to workforce reductions and plan consolidations; Work with senior management to develop a clear vision for the transaction and how to communicate it to employees.

16. Phase of M&A Integration Role of HR Tasks Integration Change Agent Help to define the blueprint for all aspects of the combined organization including rewards, change management, labor relations and talent retention; Launch employee communications plan and assess employee attitudes and engagement levels Implementation Momentum builder Act as an advisor to leadership on various transition issues involving culture, productivity, working environment and communications; Align HR policies, programs and practices using selected HR systems; Maintain ongoing change management and employee communications throughout the implementation.