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Post Merger Issues
Chapter 7
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Integration in Mergers
• Is all about “make him like me”
• Is one of the most complex tasks in the process
• Dealing with acquisitions of resources and liabilities and
integration of various processes is critical for the survival of the
new organization
• Has the potential to enhance shareholder’s value by creating cost
advantages, increase in revenue, increase in market power and/or
intangible synergies, etc.2© Oxford University Press 2011. All rights reserved.
3
• Managing of multiple cultures
• Innovating
• Building new teams and
• Managing a complex change process.
Integration in Mergers
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• Demonstrating a committed and open-minded leadership
• Building teams and work units
• Focusing on financial and strategic objectives
• Remaining flexible
• Providing for capable and motivated teams
• Assimilating new people and achieving cultural integration
Activities common to M & A
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• Getting employees to embrace change
• Sharing information and effecting corporate understanding
• Effecting and cooperation
• Setting priorities
• Combining corporate functions and internal processes and
• Measuring results
Challenges faced in Integration Process
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• Failure to align leadership, management, and supervisory practices with the new combination's core values
• Absence or lack of guidance about managing the "people factor" in order to maintain productivity and job satisfaction
• Failure to facilitate multi-directional knowledge transfer and organizational learning within the new combination
• Failure to redesign core work processes in a way that involves the employees
• Failure in the selection of appropriate personnel for cross-border and cross-unit assignments
6
Issues faced in Integration
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Issues faced in Integration
• Lack of global competencies in key managers and supervisors
• Failure to re-conceptualize performance management and
career
planning
• Failure to align differing benefits and compensation packages
• Failure to facilitate the productivity of geographically dispersed
"virtual" teams
• Slow decision making process
• Failure to provide coaching or mentoring to their subordinates© Oxford University Press 2011. All rights reserved.
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• Communication of the new strategic objectives and the new vision of the merged organization.
• Implementation of a new shared corporate culture and management culture
• Development of a new management structure for the new, larger organization especially overcoming of leadership problems in very large units
• Bringing together formerly separate units from both former organizations
• Harmonization of management compensation and management incentive systems
Tools of Integration
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• Overcoming of language barriers and country specific cultural differences
• Overcoming of staff’s suspiciousness of the other organization - ‘Us vs. Them’ syndrome
• Filling of management positions
• Allocation of responsibilities
• Knowledge transfer among units that are to be integrated
• Maintenance of customer relationships during integration phase.
Tools of Integration
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• Mission and vision
• Ensured communication
• Selecting the right leader
• Welcoming new culture
• Teambuilding
• Capturing value from different sources
Factors facilitating Integration
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Growth-oriented sources of value:
• New products, service offerings, markets, customer segments, and distribution channels
• Enhanced market presence and market capture
• Enhanced product development efficiency, i.e., leveraged R & D, internal best practices
• Combined technologies or capabilities
• Leveraged sales force
• Increased capture of the value chain
Identifying Sources of Value
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Efficiency-oriented sources of value:
• Integrated supply chain
• Leverage procurement volume (product and non-product)
• Production footprint optimization
• Facility optimization
• Vertical integration, de-integration
• Distribution channel optimization
• Sales force optimization
• Headquarters consolidation
• Support function consolidation like human resources, finance, IT, etc.
Identifying Sources of Value
Other sources of value:
• Financial value such as balance sheet items, taxes, etc.
• Optimized programs and policies e.g. benefits programs
• Rationalization and/or elimination of special programs, projects, etc.
• Additional alliances or relationships
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Identifying Sources of Value
• Provide visible leadership from top management
• Ensure that the transition follows a structured and phased approach
• Ensure that goals are clearly defined and progress is tracked
• Manage change from the outset
• Use best practices to drive the creation of the new organization and its business processes
• Use cross-functional teams to drive merger
• Ensure that communication is well planned and coordinated
• Recognize that a merger is fraught with risk - avoid taking too much for granted
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Strategies for Post merger Integration
• Focus on adding value to the enterprise, while avoiding those actions that can destroy it
• Avoid the compromises that result from playing to politics
• Concentrate on key employee retention
• Identify the leadership who will make the merger work
• Do not leave culture clashes left unchecked
• The "cultural migration" to the desired organizational behaviour is best achieved by visible example along with continuous reinforcement
• IT systems are frequently incompatible
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Strategies for Post merger Integration
• Recognize the importance of the company's customers and its own people
• Focus on the 80/20 rule
• Avoid over-analysis
• Excessive focus on perfection is generally ineffective
• Do not miss revenue enhancement opportunities that come through cross-selling and the development of new products and services for the expanded customer base.
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Strategies for Post merger Integration
• Effective human resource strategies
• Social and cultural integration
• Reliable environment for employees and customers
• Well informed stakeholders
• Manage expectations
• Change agent
• Effective schedule
• Detailed market research
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Factors influencing Post Merger Growth Strategies
Thank you!
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