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Mergers And Acquisition: Pharmaceutical & Diagnostic Innovation Add in library

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Question:

• Identify all of the information you would need to effectively manage the three goals above.?

• Identify the challenges and potential issues related to implementing the three goals above.?

• Develop recommendations for strategies to address these challenges and help the newly formed company meet its goals. ?

 

Answer:

Introduction:

Company A found in 1956 in Mobile, Alabama was recently acquired by Company B headquartered in San Francisco, California. These two companies have been rivals in the market for many years. The acquisition of Company A has impacted their employees to a large extent. The employees of Company A resented the collaboration with their former rivals ('Corporate Activity — Mergers and Acquisition', 2005).

Goals and objectives: Company B has formulated some goals that it wants to achieve as part of the acquisition program. As part of the Communication and Sharing of Information, it has adopted the following objectives-

The employees should be adequately informed regarding the impact of the acquisition of Company A.

Company B wants to be sure of the fact that the communication timings match the change in the implementation of new policies.

Permanent or temporary suspension of employees is the evident consequence of the acquisition. Company B wants to ensure that employees of both companies are not affected by the decision of the management.

Another objective the company has thought of is sharing the maximum possible information with their employees but to a limited extent.

To manage the harassment caused to the employees due to re location as a result of an acquisition.

To take the correct decision regarding layoffs. Avoid discrimination in fields of age and gender (DePamphilis, 2008).

Information needed to manage the goals:

For the attainment of the above mentioned goals, it is important for Mergers & Acquisitions to research the market reaction and future growth thoroughly. The reaction of acquisition may be favorable or unfavorable among the employees, shareholders, clients, owners, managers, etc. The case study conducted reveals that the perception of the participants of the market is important in a case of M&A transaction. The employees should be informed of the benefit of the deal prior to which Company A should research the benefits itself before surrendering to Company B.

Both companies should judge whether the acquisition will help the target company sees a rise in the company’s shares or not. Company B should offer a price for the shares of Company A that is higher than the rivals (Maizi, 2014).

 Thorough research should be conducted regarding the stock price both present and previous. The acquisition means a change in the policies of the company. The impact information should well-evaluated among all the hierarchal levels in the organization.

The communication strategies newly adopted should be convenient enough for both the employees of A and B. The case study focuses on the impact the new management has on every employee. Some employees have reacted favorably while others have rejected it. For those who have rejected the new policies, negotiations and compensations are to be offered ('Mergers & Acquisitions Review 2005', 2006).

A statistical report is to be obtained regarding the age, gender, willingness to relocate, personal details like members of a family, annual income, etc. to take correct decisions regarding layoffs, relocation. The average age of the employees of Company A is 57. This means the employees lie in the elderly group so they cannot be asked to relocate. Likewise Company B comprises of employees of the age group 35 that means they can be easily shifted. Women constitute 50% of Company B, and their needs are to be kept in mind while fulfilling the goals of the company ('Mergers & Acquisitions Review 2014', 2015).

The case study proves that unlawful discrimination should be avoided and prevents layoffs as much as possible. Acquisition leads to evident termination of the employment of the workers, and Company B should not discriminate between aged and young employees. Only the work capability and the usefulness of the particular employee to the company must be considered while taking decisions regarding layoffs. Women who are less in number in Company A should not be made a victim of layoffs. The company, to avoid a disparate impact, should terminate people those who are not productive any longer.

Challenges of Acquisition:

Company B and Company A may face the following potential threats in the acquisition and merging process as found in the case study.

Working in a global environment- As both the companies have their headquarters in two different countries this may cause a communication barrier in the discharge of managerial decisions. This complicates the process of transferring the best practices of communication. The case study suggests that the managers of both companies should not assume that their knowledge base is applicable universally. The fact must be given due importance that the diverse culture in the companies has the possibility of varying performance.

But in the case of Company A and Company B were 40% and 45%peopleare Caucasians, employees would likely find a similar culture but at the same time many people are also from different backgrounds and the senior management team should handle them with care.

Language Barriers- The case study also suggests that the both companies must be ready to counter the language problems that it might face due to a mixture in the employees. A communication problem might arise so information that is concerned with employees must be translated into both or all the languages that the employees understand so that their questions can be answered timely. Employees belonging to both cultures must be educated in the language that they do not know so that effective communication can take place, and maximum productivity can be reached (Nilsen & Olsen, 2005).

Strategic Planning- Human resource team does not usually gain sufficient knowledge regarding the target companies before signing off the deal. Thus, case study states that before becoming a part of the M&A strategy, companies should Screen talent and culture very early, or they would have to fix the problem later which might be time-consuming.

Communication & Training- The case study portrays that even the most successful companies are not experts in the different levels of merger and acquisition process. Due to the ongoing business activity that the company has to engage in it cannot devote unlimited time to the acquisition activity. Company B should take the help of an expert to face these issues. Since there is a shift in the employee base, their performance needs to be closely monitored. The customer feedback should be given importance to analyze the employee performance. Planning and the integration process may pose a problem so Company B should start the process early.

The company should focus on checking the progress of the employees frequently. Once the integration process is started, it may be difficult to redirect the activity. But if required it should be endured to obtain the desired results (Sandøy, Aven & Ford, 2005).

Sharing of Information- The case study reveals that since employees of Company A have been merged with those of Company B they might feel a left out which hinders the progress of the employees’ performance. New employees might be resistant towards the policies of Company B.

Staffing- The companies may face the problem of fall in the employee productivity. As staffing decisions are to be made on a huge scale, there may be some errors in the creativity or efficiency of the performance of the new employees. Seeing them the morale of the existing employees also gets affected.

Attraction and Retention- Employees of Company A may lose their compensation and benefits programs that they previously used to get in their company. The strategy planning HR should work in close coordination with the other departments to provide the same benefits to the new employees (Savovic, 2012).

 

Recommendations:

The case study provides the following recommendations that the managers can take up to ensure enhanced productivity of both the companies-

Risk management should be properly conducted to avoid any chaos in the workplace. Coverage must be reviewed thoroughly.

The products involved must be identified, and old products and services must be updated.

It is important for the company to check the own liquidity and financial health. The company must assess whether it can process their transactions successfully. The company must focus on having enough liquidity. It should also have the ability to sustain investment. The structure of the capital must be structured so that it can bear the added strain (Vachon, 2007).

The HR manager must have the ability to forecast and solve the challenges both financial and organizational. Bringing in executives who are specialized in this field may help to break the communication barriers. The target benefits and transactions must be clearly conveyed to the employees.

If the existing management has to stay then, adequate provisions have to be taken to bear the compensations. Both the company employees must be equally informed about the policies.

If layoffs have to take place then, a one-to-one meeting is very essential so as not to earn any hard feelings.

The goals and strategies that are now revised must be clearly defined.The case study suggests that both competitive and future positions should be well analyzed. The Strategy planner should consider factors like will the set goals increase the company’s market share or not.

The company must also decide whether it wants to enter market contiguous or remain in the existing ones (Zheng & Ho, n.d.).

Acquisition of new products, capital and techniques are to be given utmost importance.

 

References:

Corporate Activity — Mergers and Acquisition. (2005). Pharmaceutical & Diagnostic Innovation,3(10), 18-21. doi:10.1007/bf03257006

DePamphilis, D. (2008). Mergers, acquisitions, and other restructuring activities. Amsterdam: Elservier/Academic Press.

Hansson, S. (2005). Seven Myths of Risk. Risk Management, 7(2), 7-17. doi:10.1057/palgrave.rm.8240209

Maizi, S. (2014). Controlling von Mergers & Acquisitions. CON, 26(12), 717-719. doi:10.15358/0935-0381_2014_12_717

Mergers & Acquisitions Review 2005. (2006). Pump Industry Analyst, 2006(1), 9-11. doi:10.1016/s1359-6128(06)71221-6

Mergers & Acquisitions Review 2014. (2015). Filtration Industry Analyst, 2015(1), 5-6. doi:10.1016/s1365-6937(15)30014-9

Nilsen, A., & Olsen, O. (2005). Different Strategies—Equal Practice? Risk Assessment and Management in Municipalities. Risk Management, 7(2), 37-47. doi:10.1057/palgrave.rm.8240211

Raz, T., & Hillson, D. (2005). A Comparative Review of Risk Management Standards. Risk Management, 7(4), 53-66. doi:10.1057/palgrave.rm.8240227

Sandøy, M., Aven, T., & Ford, D. (2005). On Integrating Risk Perspectives in Project Management.Risk Management, 7(4), 7-21. doi:10.1057/palgrave.rm.8240224

Savovic, S. (2012). The importance of post-acquisition integration for value creation and success of mergers and acquisitions. Ekon Horizonti, 14(3), 193-205. doi:10.5937/ekonhor1203193s

Vachon, D. (2007). Mergers & acquisitions. New York: Riverhead Books.

Zheng, L., & Ho, K. Short Sales, Payment Methods, and Mergers and Acquisition Announcements.SSRN Electronic Journal. doi:10.2139/ssrn.1663640

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