Chapter 12 Mergers and Aquisitions Flashcards Preview

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Flashcards in Chapter 12 Mergers and Aquisitions Deck (33)
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1

What are the 3 reasons that people merge?

1. Strategic benefits
2. Financial benefits
3. Needs of the CEO or managing team (EGO)

2

What are 3 strategic benefits to mergers and acquisitions:

1. Operating synergy
2. Vertical integration
3. Horizontal integration

3

What is Operating synergy?

The cost reduction achieved by economies of scale produced by a merger or acquisition

4

What is Vertical integration?

The merger or acquisition of two organizations that gave a buyer-seller relationship (upstream or downstream)

5

What is Horizontal integration?

The merger or acquisition of rivals

6

The winner's curse

The winner is the highest bid, but the curse is that they are paying too much.
*informational asymmetry: not everyone receives the same information so it affects the bids

7

Merger definition

The consolidation of two organizations into a single organization

8

Horizontal merger definition

The merging of two competitors

9

Vertical merger definition

The merger of a buyer and seller or supplier

10

Conglomerate merger

popular in the 70's
-the merger of two organizations competing in different markets

11

Acquisition definition

the purchase of an entire company or a controlling interest in a company

12

consolidation

two or more organizations join and form a new organization

13

takeover

one company acquiring another company

14

Compaq and HP had what advantage when they merged?

Economies of scale - operating synergy

15

What is the poison pill method?

Refers to the right of key players to purchase shares in the company at a discount making the takeover extremely expensive - response to avoid hostile takeover

16

What is the white nights method?

They are buyers who will be more acceptable to a targeted company * swoops in at the last minute with a better offer

17

Pac man

Is a defensive maneuver where the targeted company makes a counteroffer for the bidding

18

What is the success rate for mergers?

20% are successful, 60% are disappointments, 20% are complete failures
-best successes are with similar businesses
-best when a large firm absorbs a small firm
-mergers less successful in service industries compared to manufacturing, due to greater risk

19

What is culture?

The set of important beliefs that members of an organization share

20

Assimilation

Occurs when one organization willingly gives up its culture and is absorbed by the culture of the acquirer or the dominant partner

21

Integration

Refers to the fusion of two cultures, resulting in an evolving new culture representing the best of both cultures
*this form rarely occurs because the marriage is rarely two equals, and one partner usually dominates

22

Deculturation

sometimes the acquired organization does not value the culture of the dominant partner and is left in a confused, alienated, marginalized state known as deculturation.
*this is a temporary state, existing until some integration or separation occurs.

23

separation

in some instances, the two cultures resist merging, and either the merged company operates as two separate companies or a divorce occurs.

24

What is the contingency plan?

The what is plan!!
-plan should identify the contact person and tje merger coordinator
-contact person should develop a plan
-plan should outline the chain of demand, communication methods, procedures, and negotiation skills training.

25

Due diligence

It is the process through which a potential acquirer evaluates a target firm for acquisition including the review of:
collective agreements, employment contracts, policies etc

26

What is the transition team?

Who is going to do what, when, where?
Deals with:
1. urgency
2.information gaps
3.stress

27

Mergers affect the following functions (5):

1.Selection
2.compensation
3.perf appraisal
4.T & D
5.LR

28

What happens with selections with mergers?

*the 2 most critical issues for HR are related to:
1.retention
2.reduction
-HR managers must terminate duplicate positions and redundant employees
-Lean and mean cuts to the workforce results in greater work overload and stress

29

Post-Merger changes in status

1. demotion
2. competition for the same job
3. termination

30

Post-merger changes in compensation - what happens?

1.Merge compensation systems?
2.Adopt one compensation system?
4.create a new one?