M&A vs. Business Culture

Learning gets respect…

Merger & Acquisition (M&A)VS.

Business Culture

Based on web-site reading ( articles/presentations)


Takeover The transfer of control from one ownership group to

another.

Acquisition The purchase of one firm by another

Merger The combination of two firms into a new legal entity A new company is created Both sets of shareholders have to approve the transaction.

Amalgamation A genuine merger in which both sets of shareholders must

approve the transaction Requires a fairness opinion by an independent expert on

the true value of the firm’s shares when a public minority exists

Definitions


The Business Culture comprises of : values, rules & policies, goals and measures , rewards and

recognition, staffing & selection, training & development,

Ceremonies and event, leadership behavior, communication and physical environment.

In short it is “the way the company does business”.

Definitions (Cont.)


Nice /Friendly Acquisition

It is the acquisition of a target company that is willing to be taken over.Usually, the target will accommodate overtures and provide access to confidential information to facilitate the scoping and due diligence processes.


Difficult/Hostile Acquisition

It is a takeover in which the target has no desire to be acquired and actively rebuffs the acquirer and refuses to provide any confidential information, and does not cooperate for a successful takeover.


1. On workers or employees: - layoffs

2. On top level management: - clash of egos - variation in culture

3. On shareholders: a) Of acquiring firm : most affected, they are harmed by the

same degree to which target firm shareholders benefitted b) Of target firm : benefitted the most, acquiring company

usually pays a little excess than what it should

Merger & Acquisition impact


A global A.T.Kearney study suggests that 58 % of all mergers, acquisitions, and other forms of corporate restructuring fail to produce results rather than create value.

Similarly, a KPMG survey found that 83 % of mergers were unsuccessful in producing any business benefits regards shareholder value.

A major McKinsey & Company study found that 61% of acquisition programs were failures because the acquisition strategies did not earn a sufficient return (cost of capital) on the funds invested".

Between 55% and 77% of all mergers fail to deliver on the financial promise announced when the merger was initiated.

Even though most mergers and acquisitions are carefully designed, they still face major challenges. Nearly two-thirds of companies lose market share in the first quarter after a merger; by the third quarter, the figure is 90 %. In the first four to eight months that follow the deal, productivity may be reduced by up to 50 %.

M&A Failures- % .


Top 3 major reasons as seen by CEOs - %

Major reasons for M&A failure

61%

66%

67%

Business Cultural conflicts

Inability to realize synergies

Poor Integration Process


1. The Human Factor ,

2. The Business Cultural “Misfit” &

3. The Process

What/who is really behind it?


Poor integration

process

Inability to realize

synergies

Business Cultural

conflicts

• Plan in place / clear goals / accountability

• Continually enhance process

• Make the “tough” decisions, don’t delay

• Start integration planning early

• Drive towards common processes and platforms

• Strong integration process

• Give authority / expect accountability

• Respect different ideas and new approaches

• Seek to understand and learn how to manage

• No “Us & Them”; only “We”

Issues Mitigation

Issues and Mitigation


The company should

1. Recruit and promote service oriented candidates,2. Train the workforce in techniques of service3. Set goals that are based on service4. Reward an recognize people for higher level of service5. Other actions.

Promote the Business culture


Communication Common Business Culture Training and Development Mutual understanding and respect Individual counseling

Business Culture HR wise


Making the merger / acquisition work successfully is not that easy as here we are not only just putting the two organizations together but also integrating people of two organizations with different cultures, attitudes and mindsets.

While making the merger / acquisition deals, it is necessary not only to make analysis of the financial aspects of the acquiring firm but

also the cultural and people issues of both the concerns for proper post- acquisition integration

Conclusion


Thank you and good luck…

M&A vs. Business Culture

Business

Transcript of M&A vs. Business Culture