Chapter 12 Flashcards
(124 cards)
1
Q
Why should HR professionals add the ability to manage a merger as part of their skill set?
A
> M&As play a critical part in a corporation’s survival, growth, and profit strategies.
2
Q
How many employees will experience a merger or acquisition during the course of their working lives and how many Canadian CEOs’ plan mergers of acquisitions?
A
> One in three employees will experience a merger or acquisition during the course of their working lives and about one-quarter of Canadian chief executive officers (CEOs) are planning a merger or acquisition
3
Q
Worldwide, M&A activity is equivalent to what in amount of dollars? Do companies spend more money on it?
A
> Worldwide, M&A activity is nearly five trillion dollars, equivalent to the world’s fourth-largest economy.
> Companies spend twice as much on acquisitions as they do on research
4
Q
Do Canadian companies participate in mergers and acquisitions?
A
> The number of M&As in Canada appears to be growing (Pletcher 2022).
> About one-half are typically domestic deals—Canadian companies buying Canadian companies.
> But in the world of M&As, Canadian companies are more often the prey, not the hunters.
> Foreign ownership of Canadian companies has been increasing over the years. Canada sets the deal-making pace with a record 102-billion-dollar haul
5
Q
What is a merger?
A
> A merger is a consolidation of two organizations into a single organization
6
Q
Within mergers, there are three categories:
A
1) horizontal mergers,
2) vertical mergers, and
3) conglomerate mergers
7
Q
What are horizontal mergers?
A
> the merging of two competitors
These mergers typically are subject to review by regulators who fear monopoly power in the marketplace.
8
Q
What are vertical mergers?
A
> the merger of a buyer and a seller and a supplier
> A vertical merger occurs when a buyer and a seller (or supplier) merge to achieve the synergies of controlling all factors affecting a company’s success, from the production of raw goods to manufacturing to distribution and retail sales. A real estate agency might merge with a real estate developer, for example.
9
Q
What is a conglomerate merger?
A
> A conglomerate merger occurs when one company merges with another but the two companies have no competitive or buyer–seller relationship.
> In other words, they are in different businesses competing in different markets. Although Tata, the largest, most successful conglomerate (primarily a motor company) in India, achieved most growth organically, the company did buy VSNL (an international telecommunications company) to enter the telecommunications business.
10
Q
What is an acquisition? What is a public example of this?
A
> An acquisition is the purchase of an entire company or a controlling interest in it.
11
Q
What is a consolidation?
A
> A consolidation occurs when two or more companies join together and form an entirely new company
> The assets and liabilities of both companies are taken on by the third company, usually after the original ones are dissolved.
Burroughs and Sperry, two computer manufacturers, formed UNISYS.
12
Q
What is a takeover?
A
> a takeover occurs when one company seeks to acquire another company.
> Usually, this term denotes a hostile transaction, but it can mean a friendly merger as well.
> A hostile takeover involves the acquisition of a company against the wishes of its management.
13
Q
How many Canadian companies have a foreign owner?
A
> One in five Canadian companies has a foreign owner.
14
Q
Critics of foreign ownership argue what about Canadian companies and CEOS?
A
> Critics of foreign ownership argue that CEOs based in Canada will make decisions that help the Canadian economy, such as keeping research and development (R&D) in Canada, as well as other specialists in HR, marketing, law, etc.
> Profits will remain in Canada. Canadian companies will use Canadian suppliers, while foreign-owned ones will trust the relationships they have with suppliers in their home country.
15
Q
When is it rare for two companies to merge?
A
> it is extremely rare for two companies of the same size to merge; most transactions are acquisitions
16
Q
Companies merge for three reasons:
A
> strategic benefits, financial benefits, and/or the needs of the CEO or managing team.
17
Q
Companies that have growth as a strategic objective can expand in many ways:
A
> Slower methods: leveraging current customers, opening new markets internationally, corporate venturing,
> Quicker: M&As
> Another strategic rationale that can be achieved through M&As is the strengthening of competitive position.
18
Q
Companies may acquire or merge with other companies to achieve what?
A
> to achieve complementarities.
19
Q
What is a synergy?
A
> Synergy, a term taken from the physical sciences, refers to the type of reactions that occur when two substances or factors combine to produce a greater effect together than would result from the sum of the two operating independently.
20
Q
What is operating synergy?
A
> Operating synergy, which usually is referred to as economies of scale (decreases in per-unit costs), is the cost reduction produced by a corporate combination.
21
Q
Closely related to the economies-of-scale benefit is what advantage?
A
> Closely related to the economies-of-scale benefit is the economy-of-scope advantage: the ability of a firm to use one set of inputs to produce a wider range of products and services
> Another type of synergy may occur when the acquiring firm believes that it can manage the target firm better and could increase its value.
22
Q
Is diversification a strategic motive of mergers/acquisitions?
A
> Diversification may be another strategic motive. A company may wish to reduce its dependency on a market that is cyclical in nature to capitalize on excess plant or employee capacity.
23
Q
Can acquisitions allows organizations to redefine their businesses or adapt to changing environments?
A
> they can redefine their businesses through acquisitions.
> In addition, there is evidence that regular acquisition activity can help a business to adapt to changing environments, add variety to its business models, and increase the probability of surviva
24
Q
What is vertical integration and what does it ensure?
A
> Vertical integration refers to the mergers or acquisitions of companies that have a buyer–seller relationship.
> Such a move may ensure either a dependable source of supply, or control over quality of the service or product.
25
What is horizontal integration?
> Horizontal integration refers to the increase in market share and market power that results from M&As of rivals. Western Canada’s BC Telecom and TELUS merged to become a stronger regional telephone company that was better able to compete against Bell Canada’s launch of a new national company.
26
Organizations look to M&As to achieve some financial advantages. What is the main reason and what is the overriding goal?
> The main reason is to reduce expenses by reducing headcount, factories, and/or branches.
> The overriding goal is to increase the shareholders’ wealth.
27
What are the financial benefits of M&As?
> Organizations expect to reduce the variability of the cash flow of their own business.
> An organization lowers its risk by putting its “eggs in different baskets.
> Organizations expect to use funds generated by their own mature (or cash cow) businesses to fund growing businesses.
> There may be tax advantages to the takeover, which vary by country.
> It is expensive to enter new markets and to develop new products. Acquisitions result in more rapid market entries than internal innovation and product development do
> Astute corporations may analyze the financial statements of a company and decide that the company is undervalued. By acquiring the company, and sometimes by merging it with the administration already in place, a company can achieve financial gains.
28
Some argue that corporate life is a game, and managers love to play it. What is the theory here and what does it help to explain in M&As?
> The theory here is that managers seek to acquire firms for their own personal motives, and economic gains are not the primary consideration
> This hypothesis might help explain why some firms pay questionably high premiums for their takeover targets.
29
One theory examines the “incentives” or payoffs to the CEOs if they engage in acquisition behaviour. What are some of the incentives?
> Managers may pursue their personal interests at the expense of stockholders.
30
Another perspective examines the unconscious motives of CEOs. What does this consider?
> Most of the work in this area analyzes the role that a manager’s unconscious desires or neuroses play in formulating corporate strategy or decision making
> Some research is based on the intensive analyses used by therapists to explore motives.
> A few studies attempt to link personality characteristics, such as the need for power, with growth strategies
31
What are good reasons that small business owners should consider before merging or making an acquisition?
> “I want to be in a new niche.” Acquiring another firm would enable you to obtain the skills and clients in new markets.
> “I need a succession plan.” Acquiring another firm with new employees might be the answer.
> “I need a survival and growth plan.” It might be the only way to survive an attack by a more innovative competitor. Or you could acquire the competitor.
32
What are bad reasons that small business owners should consider before merging or making an acquisition?
> “I can't find good staff.” There is a reason why your firm can't find or retain staff. Perhaps a toxic work culture or poor management or low pay. Buying new employees won't change this.
> "I can't attract new clients.” What is the reason? A bad reputation or weak marketing?
> “I need to be larger to compete." Perhaps instead of buying new employees or clients, you can compete using technology or joining a professional association, with access to tools and services to help you compete.
> “A new (geographic) location will help me grow my business.” As the pandemic taught us, you don't need a physical office to locate employees and clients.
> “I need to bring my firm into the twenty-first century.” Acquiring another firm may not be the answer, if the firm's current culture has not supported the adaptation (and wide availability) of technology.
33
How do companies merge in a friendly environment?
> How do companies merge? The process, in a friendly environment, is relatively simple.
> The management of one company contacts the management of the target company.
> Sometimes an intermediary is used, such as an investment banker or, in smaller firms, a colleague who makes an introduction.
34
Do friendly mergers become hostile quickly? or not?
> Friendly deals can be completed quickly. Hostile takeovers become dramatic, with management pushing for poison pills and seeking white knights to protect themselves.
35
What is the term poison pills?
> The term poison pills refers to the right of key players to purchase shares in the company at a discount—around 50 percent—making the takeover extremely expensive.
36
What are white knights?
> “White knights” are buyers who will be more acceptable to the targeted company.
37
What is a "Pac-Man" defensive manoeuvre?
> There is even a “Pac-Man” defensive manoeuvre, by which the targeted company makes a counteroffer for the bidding firm.
38
What percentages of M&As' fail and what achieve the goals they envision?
> About 40 to 60 percent of mergers fail
> Many studies have established that only about 15 percent of mergers achieve the financial goals that were envisioned
39
How do we define merger success in publicly and privately owned companies?
> In publicly owned companies, the goal would be to increase shareholder value.
> In private companies, the goal would be to increase ROI (return on invested capital).
40
What acquisitions fare better?
> Acquisitions of related businesses fare better than acquisitions of businesses unrelated to the parent business
41
What firms are at risks during mergers?
> Not only is the merged firm at risk of failure, but also the subsidiaries. There is some indication that a merger occupies so much management time, attention, and other resources that the original businesses are neglected.
42
There are enormous challenges in joining two companies. The problems include:
> include integrating computer systems, eliminating duplication, re-evaluating supplier relationships, reassuring clients, advising employees, and reconfiguring work routines.
43
Can the success rate of M&As' also vary by sector and by size?
> The manufacturing sector, for example, differs from the service sector. In the manufacturing sector, much more is fixed, with capital investments already made, with technology controlling processes, and with lower job skills.
> The service sector, in contrast, relies on social-control mechanisms, which are highly subject to culture management. As such, the risk of failure is greater with acquisitions in the service sector.
44
What factor influences the success rates of mergers?
> Size appears to influence success rates. A large firm can absorb a small firm in a relatively inconsequential fashion. The merger of two large firms generates more problems.
45
Are financial returns of mergers often known?
> For many reasons, the financial returns are rarely those that are envisioned.
46
Are costs recovered in M&As?
> Overall, studies by consulting company McKinsey & Company report that only 23 percent of mergers end up recovering the costs incurred in the deal, and about half of those analyzed by the American Management Association resulted in profit reductions
> Four out of five failed to produce any shareholder value, and over half destroyed value
47
Many mergers fail because of the buyer doing what?
> Many mergers fail because the buyer overextends itself financially
48
What are some failures of M&As'?
> overestimated Synergies: Cost and value synergies (e.g., economies of scale) do not materialize or integration and coordination costs are very high (e.g., AOL-Time Warner merger).
> Strategic Failure: The strategic logic failed.
> Pricing Failure
> Marketing Failure
> Transaction Financing
> Cultural Integration: If management cultures do not align, the post-merger integration fails and leads to the failure of the joined corporation.
49
One of the few studies to examine the mergers of Canadian companies shows a different trend. From an analysis of all mergers between 1994 and 2000, two Canadian academics concluded what positive and significant effects?
> two Canadian academics concluded that there are positive and significant returns to shareholders, in contrast to what studies have shown about mergers of American companies, which is negative or insignificant returns. Why? One explanation is that Canadian capital markets, industries, and companies are much smaller
50
Of the Goals of Mergers and Achievement Rates?
> Which had the highest rationale for deal - access to new markets
> What had the highest rate of achievement - access to new brands
51
The key is for the company that is buying another company to bring something to the deal that will make the acquisition more competitive, such as:
> Being a smarter provider of growth capital.
> Providing better managerial oversight.
> Transferring valuable skills
> Sharing valuable capabilities
52
Another study showed that nearly half of the senior executives in large acquisitions do that within the first year?
> Another study showed that nearly half of the senior executives in large acquisitions leave within a year of the takeover, and 75 percent leave within three years
53
The real costs of a merger may be hidden - what does this mean?
> The real costs of a merger may be hidden—that is, not evident when analyzing financial records.
> M&As cause increases in insecurity among employees, lower levels of satisfaction at work, less effective commitment, and a loss of trust in the firm and its top managers. This is particularly true in hostile acquisitions
54
Most mergers and acquisitions can take a long period of time from inception through consummation; how long is the period specifically?
> a period of 4 to 6 months is not uncommon
55
Do mergers have a discernible positive effect on productivity and efficiency?
> mergers do not have a discernible positive effect on productivity and efficiency
56
Employee morale and productivity may decline for several reasons, name some:
> Employees go underground, afraid to make themselves visible or do anything that may put their jobs at risk.
> Overt sabotage occurs when employees deeply resent the turmoil the merger is causing in their lives.
> Self-interested survival tactics emerge, including hiding information from team members to accumulate a degree of power (the employee feels that they are “the only one who really knows how things work around here”).
> A resigned attitude appears, stemming from the belief that no amount of work will prevent one from being fired
57
Most experts agree that the most important step after the announcement of the merger or acquisition is to do what?
> Most experts agree that the most important step after the announcement of the merger or acquisition is to develop a communication strategy.
58
The goals of a good communication strategy are to:
> The goals of a good communication strategy are to provide information through multiple channels (structural) and to allay the anxiety faced by employees during the transition period (psychological).
59
What are the structural mechanics and psychological impact of M&As'
Communication (roadshows, etc.)
> What's happening? Will there be layoffs?
Business strategy
> Why is it happening? Does it make sense? What will change? When?
Organizational stucture
> Where will I be in six months? Who will be my boss?
Appointments and exits
> Will I have a job?
Terms and conditions
> Will my compensation and benefits change?
Managing performance
> What is expected of me? Will there be new performance appraisals?
Training and development
> Is there a future for me? Will there be opportunities to learn?
60
Experts estimate that employee issues are responsible for the failure of how many mergers?
> for the failure of one-third to one-half of mergers
> These issues include the difficulty in blending cultures, reduction in service levels, poor motivation, loss of key people and clients, and loss of focus on longer-term objectives
61
What is culture?
> Culture is the set of important beliefs that members of an organization share.
> These beliefs are often unspoken and are shaped by a group’s shared history and experience.
> Culture can be thought of as the “social glue” that binds individuals together and creates organizational cohesiveness
> Cultures, growing slowly over time, are not easy to describe, and employees are often aware of their corporate culture only when they try to integrate with people from another organization with a different one
62
According to Marks and Mirvis (2011a, 859–877), four options are open to those involved in M&As:
1) Cultural pluralism—the partners co-exist
2) Cultural integration—the partner organizations blend current cultures together
3) Cultural assimilation—one company (usually the acquirer) absorbs the other
4) Cultural transformation—the partner companies abandon key elements of their current cultures and adopt new norms
63
The level of difficulty in merging two cultures is increased when:
> The level of difficulty in merging two cultures is increased when the merger is one between companies from two different countries; that is, an international M&A.
64
Organizations that can manage international acquisitions need to possess what?
> Organizations that can manage international acquisitions need to possess "cultural intelligence"—the capability to function and manage in culturally diverse settings.
65
The blending of cultures can take years. As in all organizational change programs, a process must be undertaken. Describe that briefly:
1) The first step is to identify the differences, to ensure that employees are aware of the differences and can verbalize or label them.
2) do a culture assessment
3) Other companies use a cultural clarification activity in which each partner group responds to these three questions:
> How do we view our organization’s culture?
> How do we view the other side’s culture?
> How do we think the other side views our culture?
66
What recommendation is made for companies in respect to cultures?
> The authors’ recommendation is to appoint a sprinter to deal with urgent matters. Likewise, we suggest that a team of “long-distance runners” be appointed to address broad issues of mission statements, the creation of culture to achieve the strategic goals, and similar matters.
67
In M&As, what is an addition approach to blending cultures?
> Another approach to blending cultures is to “seed” the company with experienced managers who “walk the talk” and can facilitate the adoption of the new culture.
68
“Living together” before the marriage may also help ease merger shock. What does this mean?
> Japanese companies usually will have worked on a joint venture or a collaborative project, designed to assess cultural fit, before acquiring another company.
69
When are turf battles a problem in M&As?
> Turf battles are a problem unless companies establish the new structure, including the reporting relationships, early in the merger process.
70
Consultants specializing in post-merger integration practices at PwC believe what about M&As' cultures? What is recommended as a result?
> Consultants specializing in post-merger integration practices at PwC believe that two cultures cannot be merged by just waving the common-vision banner above the employees.
> Frers and Chada (2000, 16) suggest these specific steps be undertaken:
> Deploy role models:
- Those in highly visible positions of authority should exemplify the new and desired behaviours.
> Provide meaningful incentives:
- Shower the role models and employees who replicate the desired behaviours with quick and visible rewards.
71
What are radical measures with respect to the new. culture after a M&A? What does that kind of measure result in?
> More radical measures may be necessary.
> Some companies force employees who are opposed to the merger or who cannot adapt to the new culture into early retirement or some other exit option.
> However, this will result in knowledge loss for the organization.
72
What is a difficult part of the merger with respect to employee KSAs?
> Researchers are recognizing that employees’ knowledge and abilities—the organization’s set of capabilities—might not appear on the balance sheet but are crucial to the success of an organization. The difficult part of the merger is to merge these intangible assets of two organizations
73
How do acquiring firms see themselves?
> Often, the acquiring firm managers see themselves as conquering heroes, feeling that they have won and that the acquired managers are losers.
74
What attitude do North American firms adopt?
> North American firms are the most likely to adopt a centralized, micromanagerial attitude to an acquisition, rather than adopting the best practices of both companies
75
An acquisition could be seen as a what for HR practices?
> An acquisition could be seen as a stimulus to review all HR practices, and to learn about both organizations.
76
Research tells us that those companies that actively manage their cultures attain what?
> attain higher revenues and profits than those that do not.
77
A checklist ensures that all relevant merger information is gathered. What is on that checklist?
1) Conduct a cultural audit of each organization, through qualitative research (e.g., interviews, focus groups) or through quantitative surveys.
2) Identify similarities and differences, and discuss these. Create a new employee value proposition from the strengths of each culture.
3) Use acculturation strategies such as cross-functional seminars and graduation ceremonies (to let go of the “old”), and provide cultural mentors to strengthen integration.
4) To overcome cultural challenges, celebrate small wins, acknowledge value in past practices, and measure progress at regular intervals.
78
When is a merger more likely to be successful?
> when HR is involved early in the process, the merger is more likely to be successful (
79
In a merger, planning moves beyond what HR concepts?
> In a merger, planning moves beyond the traditional concepts of HR planning for several reasons.
> HR planning in an M&A situation has several dimensions that are not part of the normal planning process.
80
When preparing a contingency plan for a merger, what should HR professionals do?
> identify the contact person and the merger coordinator
> outline the chain of command, methods for communicating, procedures to follow during a takeover, and negotiation skills training and media response training for the senior team
> identify a transition team
81
When preparing a due diligence review for a merger, what should HR professionals do?
> potential acquirer evaluates a target firm for acquisition
> hundreds of questions are asked (tax implications, culture, etc.)
> conduct a comprehensive review of all contracts, plans, policies, complaints, etc.
> investigate cultural differences
82
When appointing a transition team for a merger, what should HR professionals do?
> most important determinant of merger success
> urgent staffing decisions and job analyses must be conducted (terminating, hiring, evaluating, and training) immediately to identify duplicate positions and new work processes
> address issue of employee stress
> adjust plans to meet merged needs
83
What are critical components to a contingency plan and why is one created?
> Strategic planners must be aware of the board of directors’ interest in M&As. Based on this expressed interest, a contingency plan that can be implemented when a deal is in play should be prepared.
> The contact person and the merger coordinator should receive training in effective merger management.
> The contact person should develop a plan, one similar to emergency plans developed for fires or gas leaks. A transition team is critical.
> even having a dedicated HR specialist.
84
What is due diligence?
> due diligence is a process through which a potential acquirer evaluates a target firm for acquisition
85
From an HR perspective, the due diligence would include a review of the following:
> Collective agreements
> Employment contracts
> Executive compensation contracts (particularly “golden parachutes”: lump-sum payments made to executives who lose their jobs as a result of an M&A)
> Benefit plans and policies
> Incentive, commission, and bonus plans
> Pension plans and retirement policies
> Workers’ Safety and Insurance Board (WSIB) statements, claims, assessments, and experience-rating data
> Employment policies
> Complaints about employment equity, health and safety, wrongful dismissal, unfair labour practices, and applications for certification and grievances
86
When are cultural differences dismissed in mergers?
> Researchers have found that there is a tendency for hard criteria to drive out soft criteria: in other words, if the numbers look good (reduced head count, more customers, etc.), any issues about culture differences tend to be dismissed
87
When should cultural differences be investigated?
> when the organization conducts a due diligence review
88
International acquisitions pose different kinds of risks, which must be assessed as part of due diligence. What are some examples?
> Common hazards in some areas of Latin America, the Middle East, and Africa, for instance, include terrorism, corruption, political instability, and kidnapping for ransom
89
In mergers, what factor is often the deal breaker?
> pension plans are often the deal-breaker.
> Pension plan liabilities (e.g., defined benefits) can impact profit estimates.
. Changes to the pension plan may affect employee morale and productivity
90
There are several ways to assess employee capabilities - what are two main ways?
> Reviewing all employee documentation (CVs, performance appraisal reports, etc.) and then conducting interviews with the managers at a minimum of four levels (Kummer 2008).
> Determining contractual obligations with regard to early retirements, terminations, promised new jobs, and pre-merger levels of turnover (Tanuer and Gonzalez-Duarte 2007, 369–383).
91
What is a share purchase?
> The purchaser acquires the shares of a company. The corporate entity continues to exist, and employees are retained.
92
What is an asset purchase?
> The purchaser acquires all or some of the company’s shares, but there is a different corporate entity that continues the management of the business.
> Employees of the company are transferred to the purchaser (i.e., no longer work for the seller), and a new employment relationship must be worked out with the purchaser.
> In general, the purchaser has no legal obligation to hire all or some of the employees or provide them with the same working conditions and terms.
> But in practice, most purchasers do so in order to carry on with business and to limit liability for terminations.
93
A third element of HR planning is the need to appoint a transition team - why are these necessary?
This is necessary because of the urgency of the M&A situation and the information gaps and employee stress that characterize it.
94
How does urgency affect a transition team?
> Planners don’t have the luxury of planning in three-year periods, during which orderly succession proceeds as predicted.
> Soon after the merger is announced, decisions about the retention of employees and the reassignment of others have to be made and executed humanely.
> At the same time, marketable employees are finding jobs elsewhere and customers are re-examining their business relationships. The uncertainty impedes productivity and new business development.
95
How are information gaps caused in mergers?
> While both companies might have excellent plans for employees and reams of documentation, these plans have to be adjusted to the merged needs.
> The loss of capable employees, those who are marketable and can easily find other jobs, also results in the need to update plans continuously during a merger.
96
How does stress arise in a merger?
> The moment that the companies go “into play,” employees are stressed because they are aware of the traditional fate of employees in merged companies.
> Most employees realize that most positions are duplicated
97
Is a transition team critical to the success of a merger?
> The transition team may be the most important determinant of merger success.
98
The goals of the transition team are to:
> The goals of the transition team are to retain talent, maintain the productivity (both quantity and quality) of employee performance, select individuals for the new organization, integrate HR programs (e.g., benefits, incentive plans), and take the first steps toward the integration of cultures.
99
What is the 100-day strategy that is adopted by transition teams?
> Some have adopted a 100-day strategy.
> The anxiety felt by employees and other relevant participants is lessened when the merger team announces that within 100 days of closing, all job decisions will have been made.
> deal with employee stress before the stress renders employees incapable of working.
100
In communication efforts of M&As, what is the focus for communication efforts?
> Communication is critical, and employees should be the central focus of communication efforts.
101
What are some elements of a good merger management process:
1) A formal announcement
2) Merger hotline
3) Managerial toolkit
4) newsletter / webpage
102
In a CEOs' announcement of a merger, what should be announced?
> The rationale for the merger—that is, its intended benefits. "This 'why' thing is important to explain to the employees. They should know why we are saying what, they should see the rationale behind our decisions" (Bansal 2022, 1886–1915).
> General information about both companies.
> Information about changes in the corporate name and structure, particularly changes in key management positions.
> Plans for employee reductions.
> Plans for recognizing and working with the union.
> Plans for changes in products or services.
> Detailed information about changes in benefits, or the date for decisions about such changes.
103
The concept of core competencies suggests what about firms differentiating themselves?
> The concept of core competencies suggests that firms can differentiate themselves from their competition by developing an integrated set of unique and valuable capabilities that are difficult for other firms to imitate.
104
A core competence that meets the criteria of the VRIO (valuable, rare, inimitable, organized) framework provides four key advantages for firms - what are they?
> Establishing an M&A process within a firm makes the practice repeatable.
> Management can identify and build M&A talent strength across each process stage.
> A set of M&A tools and templates can be applied during each stage.
> Once a high level of integrated M&A competence is established in the firm, other firms will find it difficult to match the same combination of M&A talent, tools, and execution.
105
There is evidence that firms that have successfully managed a merger do better with what experience?
> There is evidence that firms that have successfully managed a merger do better with subsequent mergers.
106
As the transition team is handling the urgent matters, the HR planners can undertake what during a merger?
> can undertake the revisions necessary to prepare HR plans
> employee skills inventories must be updated and succession plans revised.
> If the business enters new sectors and requires new labour pools, these labour pools have to be identified and the need for them assessed.
> Employment equity data have to be revised and, perhaps, resubmitted to the relevant agencies.
> On the basis of the revised strategic plans, the HR department must revise and align its plans and produce a new forecast for HR requirements.
107
A review of the HR policies will likely reveal three types of situations in a merger:
1) Complementary: One company might focus on career development, while the other focuses on benefits.
2) Duplicated: Both companies have identical human resources information systems (HRIS).
3) Contradictory: One organization uses the performance management system for career development while the other uses its system to support incentive pay programs, by measuring employee productivity to determine bonuses or merit pay
108
What is the typical selection scenario in a merger?
> The typical scenario is that over two-thirds of executives are replaced or leave within three years
> Duplicate positions and redundant employees must be terminated, and highly qualified employees in critical positions must be motivated to stay.
109
How do HR planners create benchmark data for selection after mergers?
With respect to benchmarking statistics - increasingly, HR professionals are developing benchmark data by sector.
110
Those who stay with the newly acquired or merged company face several fates: what are 3?
> Demotion: Under the new organizational structure, some employees are given less responsibility, less territory, or fewer lines due to amalgamation (Figure 12.17).
> Competition for the same job: Some companies force employees to compete for their old jobs by having to apply as new candidates for a position.
> Termination: If not successful in the competition, employees are then let go. Sometimes, the acquiring firm waits until it can obtain its own appraisal of employee capabilities and has a chance to determine fit.
111
What do survivors of a merger experience?
> the survivors of a merger are dealing with their loss of identity as the company changes, a lack of information and the resultant anxiety, a lack of protection from adverse effects over which they have no control, the loss of colleagues, and a change in their jobs
112
In considering which employees to keep in a merger, some organizations will use the following classifications: transition employees, integration keys, keepers, and long-term starts. define each:
> Transition: employees not needed in the new enterprise and requiring a plan to assist them in phasing out
> Integration keys: employees who possess critical skills for the transition period, but not for the future of the company
> Keeper: high performers in needed roles
> Long-term stars: key talent needed for the business
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Two companies with two different compensation systems have to do what?
> Two companies with two different compensation systems have to merge their systems, adopt one, or create a new one.
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In a merger, a major issue for the HR department is what integration?
> In a merger, a major issue for the HR department is the integration of benefit plans.
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if employees are subjected to materially different compensation packages, what could happen?
> they could sue for constructive dismissal.
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What is the best solution for the benefits problem in a merger?
> The best resolution of this problem would be to conduct a cost–benefit analysis of the benefits, package by package.
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What is a humane way to soften the adverse effects of a merger?
> For employees who are being terminated, retaining certain benefits during the months or years after the merger may be a humane way to soften the adverse effects of the merger. C
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During a merger, employees undergo stress, and productivity can be expected to drop. Focusing on what kind of goals can help?
> Focusing on long-term goals may be difficult and so short-term goals should be substituted.
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One model describes employee behaviour during a merger as falling into one of three categories:
1) not knowing (remedied by more communication),
2) not able (the solution is training),
3) or not willing (a strong case for performance management through feedback and incentives)
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Stress levels may necessitate what during a merger with respect to performance management?
Stress levels may necessitate a relaxation of the rules and more counselling and coaching. Personal problems (such as financial or marital difficulties), rather than performance problems, may surface as the stress begins to affect employees.
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Unionized employees are covered by a collective agreement, which is a legally binding document. In an asset purchase, the agreement will require what?
> will require the purchaser to continue the employment of all unionized employees with identical conditions of employment.
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At a minimum what needs to be considered under a collective agreement when a company has gone through an acquisition?
> At a minimum, the collective agreements must be read to determine what provisions exist for job security and what the notification periods are for layoffs and terminations.
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Should unions be involved in mergers? If so, when?
> Merger experts say that unions should be informed and involved from the outset of the merger so that they can make valuable contributions.
> Unions are perceived as independent from management and can help to obtain the trust and confidence of the workforce to participate in a change program.
> Those companies that involved unions had reduced labour disruptions and grievances
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