Issues And Recommendations For Merging Companies

In the contemporary management environment, mergers and acquisitions are hot topics; particularly as mergers and acquisitions are among the most commonly used strategies for growth. The pitfalls of mergers are well known and well-studied in the management literature.Yet, there are some fundamental challenges that organisations keep stumbling over. One of them is integration. Preoccupation with due diligence and political factors surrounding merger negotiations too often leaves a crucial piece in the merger puzzle left till it is too late – integration of cultures and structures and people. It is well known today that poor results from mergers can so often be put down to people issues.

Using the knowledge that you have gained from the subject up to, and including, Topic 9, Managing people, answer the following questions.What conflicting values are at stake in the case Identify and explain, using relevant management theory and concepts. Contextualise your answer with reference to literature on integration problems in mergers and acquisitions, with specific reference to people issues. 

Critique the process that is being applied to work out the details of the integration, particularly with regard to structure and top management staffing using relevant management theory and concepts. Ground your answer in evidence regarding people and culture issues in merger integration studies. How would you recommend the conflicting values be resolved What process would you recommend that the two senior executives and their HR people follow to work out the details of integration in regard to the top structure.

Evaluate the usefulness of the management and organisational theories and practices from the subject that you have applied in analysing the case Beyond the resources provided in the topics, you will need to source and use additional literature to support your argument. At least 10 academic and professional references must be used. At least five of these sources must be from academic studies.

Merging Concept for Businesses

Merging has become an essential concept for businesses wishing to expand and dominate global markets. Companies that have similar activities have a more straightforward integration process compared to those that have different activities (Light, 2001). However, the process of merging is not without a fault as issues are ranging from cultural disparities to prioritizing on what projects are viable for mergers.

De Waal, a pharmaceutical company from Netherlands and BioHealth a pharmaceutical giant that has its headquarters in New York are considering merging so that they can enjoy substantial economies of scale associated with increased business operations. Such merging will also ensure that both companies utilize and benefit from the services of talented individuals from both sides. The news has the pictures of Steve the CEO of BioHealth and Kaspar, the chairman of DeWaal smiling at each other as they shake hands signaling a good relationship in the days to come for the new company under their leadership.

However, there are emerging issues that suffice as demonstrated by Alison, a director of sales and marketing. Alison expresses her fears of how some employees are considering job offers from other companies out of fear that they may not be offered the positions they held before the firms decided to merge. Alison was also frustrated that they had lost five of their good employees leave the company due to lack of proper communication by management. Alison urges Steve Lindell to take charge and talk to the employees regarding their fate before it was too late.

Conflicting issues at stake

Steve seems to have forgotten the basics of reassuring people who are considered as assets to the company, people like Alison who are essential and needed by the new company. The management through the selection team should have approached such people and explain their projections in maybe one to five years. They should assure people of future opportunities in the company if they decide to stick around and wait for the perfect moment. Steve ought to have approached Sandy Allen and use every possible wit available to make her remain. He should have assured Sandy that the company depends and needs her services and that one day she will succeed him as the next CEO. Such comfort would have given her morale to remain and work for the merged firms.

Considering the unfolding of events, it is evident that Steve is using a softball in a game requiring hardball. Steve seems to underestimate the fact that the prosperity of mergers begins with an understanding of power dimensions that is who has such power and how that power is being used. (Gatti & Chiarella, 2013) It is the responsibility of Steve to push Kaspar to speed up the integration process. Steve has been with Kaspar long enough to understand that DeWaal leader’s behavior during the lunch meeting was his character. Trying to fathom Kaspar’s behavior would only make BioHealth’s CEO more tentative. He has to bring an end to the noodling by his counterpart and inform him that it is time to make decisions. Making decisions even the ones that make one regret is recommended than doing nothing.

Emerging Issues with Merging

When merging companies, speed is critical in such a process. It is important for Steve to assemble all the top people that they have selected and made them the core of the selection team. Involving Christian and Bruce in the process appears risky as they have significant limitations. For instance, Christian is not independent and authentic when it comes to making decisions. He depends on a computer to do the task for him (Light, 2001). On the other hand, Bruce though he seems to have good instincts and not being afraid to speak his mind to Steve, behaves like a clown.

Thus, before the meeting of the selection team, it would be wise for both Steve and Kaspar to call Christian and inform him that being a decision-making day, there was no time for testing and examining feelings and should Christian follow that path then he will not be allowed to attend the meeting. On the other hand, if Steve aspires to have Bruce participate in the meeting, he should advance the same conversation and tell Bruce to stop acting like a clown.

It is at these strategic meeting that Steve should outline the selection criteria to assist in driving in success for the new company, decision making, and skills necessary for communication and relationship building for the merged companies (Faulkner, Teerikangas, & Joseph, 2012). When merging process is taking place, it is not the time to select people who take a week to get things done or who prefer having their lunches sipped under the office door for them. This should be the perfect moment for the team to debate the selection criteria to be used and select a pool of many individuals as possible (Nogeste, 2010).

An order should be given that no one leaves the room until a decision is reached. This should encompass having a backup plan for individuals who turn down job offers extended to them. Also, there should be alternative job opportunities for those who have to be excluded from the 65 percentiles yet needed by the company. A notification should follow, and people should be given an ultimatum of a day to decide and consider their choices.

Recommendation for both Steve and Kaspar

Steve with his counterpart believes that they are choosing key people and that their strategy is the best. However, they are wrong in three different ways. On first account, the two executives have different views about the urgency in selecting the company’s top management team. Kaspar is unconcerned about moving things fast, and Steve on the other seems right to be worried about the slow pace.

Conflicting Issues at Stake

The stability of the senior team is necessary as one of the short-term tasks that need to be accomplished quickly. However, it is not right to have things solved in the short term with the anticipation that they will be fixed in the long-term (Andriuškevi?ius, 2015). It is the senior executives chosen that will lead to the success or failure of the merged companies. Any poor decisions made end up generating long-term adverse effects. Both Kaspar and Steve have a responsibility of making the objectives of the merger as explicit as possible. For instance, it is vital for them to highlight whether employees are to be selected by their performance only or there are other factors to be put into consideration.

Also, it should be clear on whether there is a particular line of thought that informs why more leaders from one company are placed in regions of specific geographical or functional abilities (Dlabay & Scott, 2011). Also, the goal of the merger should be explicit as possible defining whether the objective of the alliance is to achieve an equal split regarding available positions. Issues such as why one company has a large number of executives and whether it is due to its big size or its profound experience in a particular line of products should be expounded. Lastly, whenever there is a tie between two employees, there should be a procedure that should be used in breaking such a tie.

Irrespective of the objectives of the merger, the selection process should be done in levels. The first level should be used to help establish the foundation to be used for developing the second level (Czinkota, Ronkainen, & Moffet, 2011). The process should be demanding but not dull. A company would be expected to interview a good number of candidates for every available senior management slot, assess reviews of the past performance of the candidates and go a notch higher in considering solicitations from third parties (Srdan, Abdullah, & Dev, 2011). However, it is discouraging to find that some of the talented candidates may not be a match to fill the immediate positions and as such there should be reservations to have such people maintained systematically.

Critique

It is not even transparent whether Kaspar and Steve are basing their decisions using facts and data to back their arguments and justifications. It seems awkward to plan on how to develop a plant network during the lunch meeting when other variables should be taken into consideration such as using detailed cost analysis, quality checks and the services offered in making such critical objective decisions (C, C, & Udayasankar, 2016). Instead, they should be using data to derive the best answers and simultaneously send positive signals to the employees that the decisions being made are not made arbitrary.

Recommendation for both Steve and Kaspar

Lastly, it is discouraging to find that none of the two leaders is ready to work beyond cultural differences (Stunda, 2014). For instance, Steve asserts that his people seem to get work done as expected while Kaspar on the hand Kaspar is overprotective over his Indonesian employees in the Indonesian plant. It is thus clear that when managers look at their future employees through the cultural lens, then it is no wonder that there will be selection challenges. The negative attitude and perception that they are not like them and thus unfit haunts most of these mergers. It is therefore crucial for Kaspar and Steve to learn to disintegrate a candidate’s style that mostly demonstrates corporate structure from their perceived performance in their place of work.

The fact that Steve is a CEO of a big company yet he does everything by himself taints his image as a top executive. At first, he makes a mistake of concentrating on obtaining regulatory approval and let everything else wait for two months. Steve, did not have to go all that hustle. Instead, he would have sought the services of a pool of lawyers who would deal with that matter amicably by giving the necessary direction to be followed.

Steve seems to suffer from communication problems as he fails to communicate with his employees and to establish an executive team (Steigenberger, 2016). This is revealed through his conversation with Alison. Steve needs to act quickly if he is determined to save his company from talent deficiency in the future (Steigenberger, 2016). If there are few employees that he needs to keep, then Steve should approach them and talk them out before they leave the company. He should be clear about the situation and inform them that though he cannot guarantee them anything he needs them in the new organization. However, if there are too many people that should be talked to, then Steve should appoint someone to speak to them on his behalf.

Recommendations

It is also equally important for Steve to take the initiative of enhancing a relationship with Kaspar. Though this may not be an easy assignment more so for Steve, these two have to solve their cultural and organizational disparities and come to their senses for the sake of their company. The continued competition for power in the early stages of the merger may make the rest of the organization follow which may impact the company negatively.

Critique

Based on the prevailing problems facing the company, Christian is sensible enough to be worried about fairness though his approach towards the matter sounds like a combination of the newest HR fads than a procedure informed by a comprehending business wants that face the merged companies. It is true that fairness is attained through having a planned communication channel. It is thus the responsibility of senior management to communicate transparently and regularly give the details of the entire process entailing the timing and selection procedure. It is when people lack such vital information that their minds tend to be dominated by the worst imagination as demonstrated by Alison’s conversation.

The management can also find another way of retaining managers considered to be a plus for the company by giving them what is referred to as stay pay, and it is a bonus given to employees who choose to stay till the merger gets approved and the integration process incomplete.

Steve also needs to have his executive team in place and ensure that they work in harmony as fast as possible. The process should have begun with Steve meeting each of the three individuals that had been chosen from his team and Kaspar should also have done the same by meeting the three too. As soon as both Kaspar and Steve work on the reports, Steve should ensure that his team works on yielding primary outcomes of the merger. The primary priority by Steve should ensure that he delivers the advantages of the merger promised to both the shareholders and the general public.

Usefulness of management theories and practices

The management theories and practices have made it possible to understand how to deal with cultural disparities more so in the case of mergers. The different management theories that talk about organizational culture play a vital role in defining and providing direction for mergers more so the cross-border mergers. For instance, as evidenced in other case studies, it is the cultural differences that were responsible for the fall of Chrysler and Daimler.

Thus, the application of management theories helps to solve management issues such as those involving mergers having different culture through the integration of a human resource system that ensures fairness. Theories and practices act as a framework through which theory can be actualized in the real world making it possible to test the practicality of theories and their relevance. Thus, some of the theories have provided direction for further research on the topic of mergers making it possible to understand some of the challenges facing mergers and how such hurdles can be handled.

Conclusion

It is apparent from the above case study that mergers are complex business entities that require due diligence in managing them. Thus, managers should be careful when handling cultural disparity issues, equality, and fairness in available opportunities and urgency in implementing the goals and objectives of the merged companies.

References

Andriuškevi?ius, K. (2015). Opportunities and Challenges of Value Creation through Merger and Acquisitions in Cyclical Economies. Procedia - Social and Behavioral Sciences, 213(1), 764-769.

C, H., C, W., & Udayasankar, K. (2016). International business. Singapore: McGraw Hill Education Asia.

Czinkota, M., Ronkainen, I., & Moffet, M. (2011). International business. Hobonken(N.J): Wiley.

Dlabay, L., & Scott, J. (2011). International business. Mason,OH: South-Western Cengage.

Faulkner, D., Teerikangas, S., & Joseph, R. J. (2012). The Handbook of Mergers and Acquisitions. Oxford: Oxford University Press.

Gatti, S., & Chiarella, C. (2013). M&A in Uncertain Times:Is There Still Value in Growing?*. Retrieved from goldmansachs: https://www.sciencedirect.com/science/article/pii/S1877042815058267#!

Grave, K., D, V., & B, Y. (2012). The Global Financial Crisis and M&A. International Journal of Business and Management, 7(11), 234-236.

Impraise. (n.d.). The Challenges With Mergers & Acquisitions. Retrieved from Impraise: https://blog.impraise.com/360-feedback/mergers-and-acquisition-challenges

Light, D. A. (2001). Who Goes,Who Stays? Harvard Business Review, 35-44.

Nogeste, K. (2010). Understanding mergers and acquisitions (M&As) from a program management perspective. International Journal of Managing Projects in Business, 3(1), 111-138.

Srdan, K., Abdullah, M., & Dev, M. (2011). Business cycle and aggregate industry mergers. Journal of Economics and Finance, 35(2), 239-259.

Steigenberger, N. (2016). The Challenge of Integration: A Review of the M&A Integration Literature. International Journal of Management Reviews, 19(4), 408-431.

Stunda, R. (2014). The market impact of mergers and acquisitions on acquiring firms in the U.S. Journal of Accounting and Taxation, 6(2), 30-37.