Challenges Of Mergers And Acquisitions: Resolving Conflicts And Establishing Stability

Challenges in Mergers and Acquisitions

Mergers and acquisitions are one if the ways which is used for the growth of any organisation. Even though there are several challenges that are faced by the organisations during the process, there are many ways through which the conflicts that arise during this process can be solved. One of the main challenges that is faced by organisation during mergers and acquisitions is integration. This report will analyse the case study “who goes, who stays” Hbr.org. (2018). The report will take the help of relevant theories and concepts of management to explain the several conflicting values which are at stake in the abovementioned case study. The different culture and people issues which is present in the merger integration and the different ways to resolve the conflicting values. Furthermore, the report will recommend the process for the details of integration and evaluate the organisational and management theories.        

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.
Get My Paper

Conflicting values

According to Trautwein (2013) mergers and acquisitions have several reasons which leads to their failures and success. In the integration stage, people issues occur at several stages and hence are a major challenge of this process. The people issues are communications, retention of key talents, integration of corporate cultures and retention of key managers. Apart from these issues there are also several other issues such as the decision on who stays in the new organisation and who has to leave depending on the requirement of workforce for the new organisation. This occurs as there are several changes in policies and practices which occur in both the companies, hence the retention of the workforce of both companies is not always possible. This is where the conflict occurs as people would lose their jobs and the different sections and departments of the new organisation has to find employees who are fit for the position and they align with the goals of the company. Bower (2013) states that it may occur that there are many employees who have been in the organisation for a long time and they have to be fired by the organisation. This becomes an issue for both the employee and the actual employer of the organisation.

As stated by Bena and Li (2014) the new employer may be conflicted with many decisions that arise during the merger and acquisition activity. The communication issue that is present in the people issues of the merger and acquisition activity is the main cause for conflicts in the new organisation. The lack of communication that occurs in these situations can be a major cause for conflicts in the organisation and a reason for distrust for among the employees and the organisation. An effective communication is needed for the proper implementation of the merger process and for solving the conflicts that arise during the process Retention of managers and key talents is also another major issue which means that it might become hard for the new management of the merged organisation to retain the old employees and major talents of the organisation and this might be a huge loss for the employer who used to know them earlier (Levi, Li & Zang, 2014). The changes that come with the activity can cause unrest, anxiety and stress among the employees and therefore they might feel as if the treatment is not being proper by the management. The pressure that is put by the merger on the management and employees is the main reason for the different conflicts in the values of the people that occurs among all levels of the management.        

Resolving Conflicts in Mergers and Acquisitions

People and culture issues in merger integration

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.
Get My Paper

As proposed by Schmidt (2015) organisations in current times are combining with each other at a very fast rate. Mergers and acquisitions are pursued by executives as a way of growth and creation of value for their organisation. There are many benefits of the mergers and acquisitions, however, there are also many challenges that come with this process. It has been seen that most of the merger integrations fails due to cultural and people problems. Every organisation has their own culture which can become a reason for failure as it becomes difficult to integrate the culture and make decisions quickly and hence clashes arise after the merger process. Hence, effectively managing the organisation might become a huge issue for the management. According to Stahl et al. (2013), culture is the values and beliefs that influences the goals and the attitude the organisation. When two organisations merge with each other, there comes a clash between two completely different culture and values that is the basis of the foundation of these two organisation. Hence, the decision making process slows down with these challenges and the implementation process of the decisions also slows down. The change in culture is a very slow process as the risk taking for the change is a huge problem for the organisation who have been following their culture a long time. The shift in the leadership creates an unrest between the companies and can be an issues when people of both the organisations have to work together. As argued by Ahern, Daminelli and Fracassi (2015) culture can also create a rift between the people of the organisations due to their incompatibility.

Other than culture issues there are people issues as well which is a challenge for the merger activities. In the case study it can be clearly seen that Steve is facing a huge issue with the retention of his previous employees after the merger process and several of the employees have been leaving the company due to the uncertainty that have been surrounding the organisation after the merger (Hajro, 2015). Moreover, he also has to make certain decisions which concerns the employees of his organisation and whether they would be continuing after the merger as well. Therefore, people issues is a huge problem in the after-effect of the merger process. Moreover, the people-related issue is present in all the other levels of the merger and acquisition process. The proper management of the issues and the people of the organisation is very important during the merger and acquisition process for concrete stability.          

Recommendations for Effective Mergers and Acquisitions

Resolution of conflicting values

Mergers and requisitions gives rise to several conflicts as identified in the above sections of the report. To establish a smooth and proper functioning environment in the organisation after the merger process there has to be certain ways which could resolve the conflicts that emerges in the organisation. Mentioned below are certain recommendations which will help in resolving the conflict process. Firstly, proper communication channels should be established within the organisation after the merger process. Communication would help the employees in the organisation understanding about the different organisational changes that would occur after the process (Min, 2017). The employees have to be clearly explained about the changes that would be a major part of the merger process as the collaboration of two organisations is bound to bring about changes which could cause a major problem in the organisation. Secondly, there would be many cultural issues which would be another major problem in the organisation after the merger process. The cultural issues have to be solved with proper steps as they can cause huge conflicts within the organisation. The difference in the culture of the two organisations have to be slowly accepted by the employees of the new organisation. This is possible of the management themselves change the culture and adjust to the new changes that occur within the organisation since they have to make sure that the employees are able to adjust to the new environment of the merged organisation. To do this a new culture have to be established within the organisation which would be acceptable to the employees and management of both the organisations.

As stated by Oduro and Agyei (2013) thirdly, the retention of the right people is very necessary for the success of the organisation. In the process of mergers, not all employees can be retained by the organisation. Some employees have to be fired and some employees leave on their own due to the structural changes of the organisation. The right people who will be able to fulfil the goals of the organisation should be retained by the management after the merger process. This is because the right employees will be able to contribute to the change and the success of the organisation so that the merger does not seem as a failure on the part of the organisation. For this the management of both the organisation should look after the employees who they should try and retain. Moreover, they should also keep in mind that the unrest and the sudden changes that occur in the organisation does not lead to the leaving of their important and talented employees which would be a major loss for them. Lastly, the management should establish a proper decision-making process which would be easier for the members of the organisation to cope up with (Lamb, Becker & Nunes, 2017). This is because the operations in the organisation have to be strong enough to withstand the sudden changes that would occur in the organisation and also to ensure that the process of decisions is not slow. These recommendations can help the organisation to resolve the values conflicts that arises after the mergers and acquisitions process.              

Conclusion

Process for merger integration

Merger integration is a major issue for the top management which is the responsibility of the managers to assure that the process occurs smoothly without any issues on part of the management. There are many theories which determine the work of the managers into helping the merger of the organisation. These theories are known as value creation theories which help the managers into creating value for the organisation and create synergy for both the organisations. This is with the expectation that both the organisations will be able to give positive returns and the merger would be a success. Dutordoir, Roosenboom & Vasconcelos (2014) states that the low synergy of mergers will not be able to create value for the merged organisation. The top management would have to ensure that the employees are able to adjust to the merger. The two senior executives and the HR if the organisation are the most important people in terms of establishing the process of merger integration within the organisation. The executives would have to make behavioral changes on the part of the employees so that they do not face any issue once the merger occurs. The changes within the organisation would be in alignment to the needs of the employees which would help them to participate well in the organisation. The job of the HR is to help the employees in adjusting to the changes in the organisation and the job of the two senior executives is to make changes in the organisation which would help in fulfilling the objectives and goals of the organisation and make changes for the benefit of the employees.

The senior executives will make the most important changes within the organisation such as establishing new policies and regulations which is done for the benefit of the organisation as well as the people of the organisation. They have to ensure that the policies are adjacent to the objectives as well as the functional area of the merged organisation. The main objective of the executives would be to make changes which will help in creating value for the organisation. They also have to ensure that the merger does not fail drastically due to the clashes between the two different cultures of the organisation (Kansal & Chandani, 2014). The HR of the organisation has the job of ensuring that the employees of the organisation are able to align themselves with the changes that has been initiated by the executives. It is important that the employees understands the changes and are able to work according to the requirements of the organisation and for the fulfilment of the objectives of the organisation. The HR works the most in retaining the talented employees of the organisation and looks after the existing ones to make sure that they do not face any issues that would hinder the merger process and the work process of the employees. If these recommendations are followed then the top management of the organisation will be able to make the changes of the merger in the proper way so that no external issues at a later time which might disrupt the merger and acquisition activities.                  

Evaluation of management and organisational theories

Theories and practices are a very important part of mergers and acquisitions. The theories of mergers and acquisitions are often based on the reasons that have resulted in the merger, the impact that the merger have created on the organisational value and the process of the merger. These reasons contribute a lot to the formation of theories for the activities of mergers and acquisitions. The creation is value for the organisation is another important reason for the formation of merger and acquisition theories since the main objective of the firm is to create value for the firm. The value has to be created so that the competitors of the organisation are not able to target the newly merged organisation. The deal that is made between the two organisations is of major importance for the management of the organisation. The theories aids the organisation into following the right path after the merger activity so that they have a fixed way of moving forward and are clear about their objective which would help them in not failing.

There are two kinds of reasons due to which mergers and acquisition occur which are non-value maximization and value maximization. The explanations that occur due to non-value maximization are free cash flow within the organisation, diversification and increasing the power of the organisation which would not in actual create value for the organisation but would help them to grow in the market. The non-value maximization theories helps in understanding the concepts through which the organisation can merge to increase their own presence in the market (Philips & Zhdanov, 2013). On the other hand, the explanation that occur due to the value maximization is increasing the value of the firm and stop it from becoming obsolete in the market. The theories are of great importance in the market since they help in getting a deeper understanding of the actions that are being taken by the management into maintaining the position of the organisation for proper functioning and operations in the market. There are pre-merger and post-merger theories as well which help in deciding the framework that would be useful during the merger process and to help the people into accepting the change after the merger process. These theories are a great help to the whole complex and sensitive change structure of mergers and acquisitions of any organisation.     

Conclusion

Hence, it can be concluded that mergers and acquisitions are a very important part of creating value for an organisation which would help the firm to stay functional in the market. The management have to take the help of various theories which would be helpful in the merger process so that they are able to determine the best possible way for the betterment of the organisation and its people.   

References

Ahern, K. R., Daminelli, D., & Fracassi, C. (2015). Lost in translation? The effect of cultural values on mergers around the world. Journal of Financial Economics, 117(1), 165-189. DOI: https://dx.doi.org/10.1016/j.jfineco.2012.08.006

Bena, J., & Li, K. (2014). Corporate innovations and mergers and acquisitions. The Journal of Finance, 69(5), 1923-1960. DOI: 10.1111/jofi.12059

Bower, J. L. (2013). Not all M&As are alike: And that matters. In Mergers & Acquisitions (pp. 27-36). Routledge.

Dutordoir, M., Roosenboom, P., & Vasconcelos, M. (2014). Synergy disclosures in mergers and acquisitions. International Review of Financial Analysis, 31, 88-100. DOI:  10.1.1.375.6569

Hajro, A. (2015). Cultural influences and the mediating role of socio-cultural integration processes on the performance of cross-border mergers and acquisitions. The International Journal of Human Resource Management, 26(2), 192-215.

Hbr.org. (2018). Who Goes, Who Stays?. Retrieved from https://hbr.org/2001/01/who-goes-who-stays

Kansal, S., & Chandani, A. (2014). Effective management of change during merger and acquisition. Procedia Economics and Finance, 11, 208-217. DOI: 10.1016/S2212-5671(14)00189-0

Lamb, L., Becker, G. V., & Nunes, M. P. (2017). The strategic decision-making process in mergers and acquisitions: the perspective of acquired companies from the south of brazil. BASE-Revista de Administração e Contabilidade da Unisinos, 14(2), 75-91. DOI: 10.4013/base.2017.142.01

Levi, M., Li, K., & Zhang, F. (2014). Director gender and mergers and acquisitions. Journal of Corporate Finance, 28, 185-200. DOI: https://dx.doi.org/10.1016/j.jcorpfin.2013.11.005

Min, J. (2017). Mergers in Higher Education: A Case Study of Organizational Culture, Communication, and Conflict Management Strategies in the University System of Georgia. DOI: https://digitalcommons.kennesaw.edu/cgi/viewcontent.cgi?article=1011&context=incmdoc_etd

Oduro, I. M., & Agyei, S. K. (2013). Mergers & acquisition and firm performance: Evidence from the Ghana Stock Exchange. Research Journal of Finance and Accounting, 4(7), 99-107. DOI: 10.1.1.908.3804

Phillips, G. M., & Zhdanov, A. (2013). R&D and the Incentives from Merger and Acquisition Activity. The Review of Financial Studies, 26(1), 34-78. DOI: 10.1093/rfs/hhs109

Schmidt, B. (2015). Costs and benefits of friendly boards during mergers and acquisitions. Journal of Financial Economics, 117(2), 424-447. DOI: 10.1.1.217.6123

Stahl, G. K., Angwin, D. N., Very, P., Gomes, E., Weber, Y., Tarba, S. Y., … & Durand, M. (2013). Sociocultural integration in mergers and acquisitions: Unresolved paradoxes and directions for future research. Thunderbird International Business Review, 55(4), 333-356. DOI: https://onlinelibrary.wiley.com/doi/10.1002/tie.21549/abstract.

Trautwein, F. (2013). Merger motives and merger prescriptions. In Mergers & Acquisitions (pp. 14-26). Routledge. DOI: https://www.jstor.org/stable/2486680.