Mergers and Acquisitions in International Business: HR Challenges and Greenway Hotels Group's Expans

The Importance of Mergers and Acquisitions in International Business

Mergers and acquisitions are common in business, yet in the international context they are the means by which many firms initiate or consolidate their internationalisation strategies. Without mergers and acquisitions many well-known global brands would not be so well-known. While some mergers and acquisitions are successful many more are not, and the process of merging companies is complex, not least when this happens across international boundaries. Marks and Mirvis claim that “three out of four mergers and acquisitions fail to achieve their financial and strategic objectives”.This failure is often attributed to various HR-related factors such as incompatible cultures, different management styles, poor motivation, loss of key talent, lack of communication, diminished trust, and uncertainty of long-term goals. Mergers and acquisitions present significant challenges to HR professionals. The process requires management of both organisations to consider all implications of a proposed merger or acquisition before agreeing to one which necessarily involves consideration of the ‘people issues’. HR professionals are often involved in the process by advising management on human resource matters, including using surveys and other metrics to gather relevant data, identifying potential conflicts or HR challenges between the two companies, integrating HR practices, company cultures after a merger, and managing talent decisions such as redundancies, to name just a few.

  
One famous example concerns the manufacturer of Mercedes-Benz, Daimler Benz, who merged with U.S. car maker Chrysler in 1998 to create Daimler Chrysler, at a cost of $37 billion. The goal was obvious and overwhelmingly attractive - to create a trans-Atlantic, car-making powerhouse that would dominate global markets. But by 2007, Daimler Benz sold Chrysler to the Cerberus Capital Management firm, which specialises in restructuring troubled companies, for a mere $7 billion. What happened is generally seen as an example of ‘corporate culture clash’. Chrysler was nowhere near the league of high-end Daimler Benz in terms of its emphasis on quality, and many felt that Daimler strutted in and tried to control Chrysler, overlooking its own way of doing things. Clashes of this kind tend to undermine many new alliances. Falling sales and a recession creating the perfect conditions for a corporate divorce; another failed merger. Mergers and acquisitions are also common in Europe, with a recent example in late 2016 being the Finnish company Nokia’s takeover of French company Alcatel-Lucent. While this is a relatively recent merger, mergers between global telecommunication giants like these two firms are subject to institutional constraints, namely EU regulations about competition, whereby the European Commission is obliged to assess whether mergers of this scale would create unfair competition in the telecommunications field, e.g. where the merged company could coordinate market prices unfairly.

Greenway Hotels Group, Plc, owns more than 60 hotels throughout the United Kingdom, mostly in the large urban centres of London, Birmingham, Glasgow, Leeds, Bristol and Liverpool. It currently has slightly over 1,000 employees. Greenway’s hotels are considered somewhat budget accommodation. They are functional, clean and reasonably priced. The rooms are generally of a reasonable size, with the usual basic 

Most guests at Greenway stay for one to three nights, and are a combination of business and leisure travellers. The hotels are typically situated in downtown locations that are easily accessible by mass transit. Tourists are attracted to these hotels in popular visitor destinations where the many local attractions mean that they will not be spending much time in their hotel rooms.

The company has recently acquired a small hotel chain headquartered in France called “Ho?tel de Charme”. Greenway’s Chief Executive decided that half of the new hotels in France would be retained and rebranded as part of the “Greenway Hotels Group”; the other half will be sold. This will support Greenway’s strategic objective of growing the organisation slowly to make sure that new ventures are well-supported and opened on time and within budget.

Ho?tel de Charme currently have around 40 hotels and employs around 1,500 people. The company is headquartered in Rheims, in the Champagne region, to the east of Paris. It specialises in boutique-type hotels that are not always situated in city centres but close enough to offer access to these urban centres and the French countryside. Many of its hotels have spa facilities, gardens, and offers a range of activities on the grounds and nearby excursions. The hotels offer traditional-style food with flavours and products of the region (‘du terroir’). Most of its clients come for relaxing weekend retreats and may spend time in their room or the hotel grounds. Although they are not exclusive hotels, they are definitely not budget.

Greenway is unsure whether to post its existing UK managers to France to lead the changeover of the new hotels, and then manage them after they re-open (i.e. an ethnocentric approach using the internal labour market) or to recruit new managers from within France (i.e. polycentric approach), or even take a pan-European or global (i.e. regiocentric) approach, requiring engagement with external labour markets. This is a critical issue for Greenway, and it is important to get it right. If this new venture in France is successful, Greenway may decide to acquire other small hotel groups in other Continental European countries. The organisation would like to own 120 hotels in the next five years, and their 10- year plan is to own 250 hotels across Europe. This is an ambitious target, so it is important that the organisation finds an effective formula to operate successfully in other countries.

The challenge for your team

You are part of a HR consultancy team whose job it is to advise Greenway on the best approach to take that will support both short- and long-term success. In addition to its ambitious plans, the company’s Board of Directors have provided you with the following information during an initial briefing meeting:

• A majority of the existing managers say they would like a chance to work abroad.
• None of their existing managers speak French fluently. Some have families and want to know about what additional support the company will provide to help with personal / social adjustments.
• They only have six weeks to rebrand the hotels. The new hotels must be ready to open after that time.
• They expect to recruit a large number of staff for the new French hotels because more than 50 percent of the employees from the acquired organisation has left.

The organisation has never owned hotels outside the UK before and so its Board and the managers are quite anxious about the implications of internationalisation, not just from a cultural perspective but also in terms of the changing institutional environment in Europe. One of the Board of  Directors has been reading some HRM websites and came across the idea of ‘global mindset’, and has added that in the longer term she would like to  see their managers being flexible and able to move between hotels in different countries if any problems arise, based on their problem-solving skills.