Why Acquisitions and Mergers Fail - Essay Example

Human Resources (HR) Human Resources (HR) Mergers and acquisitions The current global economy characterized by stiff competition, commodity saturation, increased customer demands, high labour costs, and inadequate managerial skills promotes cross border strategic alliances. Therefore, Gaughan (2011 p. 15) identifies chief aims that push corporates into mergers and acquisitions as the desire to increase efficiency, market share, and profitability of firms. Most common business procedures include mergers, acquisition, and international joint ventures. The work presents a detailed analysis of mergers, acquisitions, and subsequently, reasons for failure. Besides, the work addresses the role of International Human Resource Managers (HRM) towards advancement of success of the coalitions. A merger refers to unification of corporations of similar size and involves exchange of shares between the companies and among members. Depamphilis (2011) explains that merged partners conjointly share management responsibilities. On the contrary, acquisition is the submission of control by a smaller company to a bigger one. Frankel (2013) expounds that acquisition involves buying shares in a target company (small company) after the approval of controllers or all its members. Thus, the obtaining business keeps its identity and integrates the new company to conform to its own operations or cultures. Why acquisitions and mergers fail Evidently, past cross border acquisition and mergers have failed to generate good returns for the parent or partners companies despite of the anticipated business opportunities. Mafihlo (2006) is of the opinion that such catastrophes result from wrong implementation of the tactics in manners that assume the sensitivity of company cultures. Imaginably, these factors are either internal or beyond the control of an individual firm. Mergers and acquisitions bring together various cultural aspects. Accordingly, Ulijin &Meijer (2010 p.2) identifies and analyze social dissimilarities including the human aspect of mergers and acquisitions significance towards the success of a business, yet HRM give little considerations compared to emphasis on strategic and financial aspects. Ideally, there may be acute contrasts between the attitudes and values of the two companies, workforce’s reasons, or habitually several concurrently. Straub (2007) mentions issues like improbable expectations about business mergers, hurriedly fabricated business strategies accompanied with poor planning and unskilled implementation ideas. Furthermore, Ritcher & Pahl (2009) gives the opinion about major characteristics of cross border strategies. The authors offer insights that participating enterprises sometimes assume to establish unifying factor behind a macro message. The loss of managerial talents, politics, and power struggles regularly become the driving forces instead of productive business objectives. In other instances, merger and acquisition failures result from interplay of other factors within the organization. For instance, intolerable degree of cooperation between employees and managers, unchecked philosophy clashes between different entities and staffs, improper merger transition of management approaches, and underestimation of changeover costs. Other worthy issues of considerations which, contribute to wide spread failures comprise of transition botches, underestimation of transition expenses, and fiscal drain, defensive motivation and finally, distraction of focus of business executives. In the context of workforce issues, mergers and acquisitions are hectic progressions that require establishment of vibrant organizational structures. Beerel (2009) mentions that hastily developed policies deprive managers’ preferment opportunities and authority over business operations. In turn, the executives become acrimonious and sabotage productive business activities. Hence, majority of administrators’ in acquired firms express frustrations and pursue alternative jobs within short period of joint operations. In addition, explicit personality clashes between executives in the merged companies derail or hinder business success. For example, managerial differences between Granada’s chairman Michael Green and Carlton’s chief executive Charles Allen. Equally, organizations cultural differences promote either success or failure of the mergers and acquisition. Stahl, Mendenhall (2005) elucidates that an organizational culture stipulates frameworks of shared values and beliefs that guide behaviours and offer meaning for employees. Cultural variations affect cooperation, performance, decision-making, communication, control, commitment, justification of behavior, and perception of events. Noticeably, country of origin’ affects how firms handle the new workforces. A United Kingdom research demonstrates different multinational corporations’ cultural practices. American firms tend to present regular and formal appraisals in the attempts to transform culture of acquired company. Japanese firms favour seniority for promotion and usually maintain managerial tasks as a measured approach to change. On the contrary, German enterprises stress on technical expertise in employee selection and decentralized approach to HRM instead of placing emphasis on integration. For example, Cisco Systems is a successful company because it considers culture when acquiring smaller firms. The strategy guides the firm determining compatibility. HRM roles Dowling, Festing & Engle (2008) highlights that prosperity of Mergers and acquisitions entirely depend on the ability of the human resource executives to successfully integrate or harmonize workforce and cultural differences. Therefore, Human Resource Managers have the progressive role of conducting pre and post-acquisition cultural amalgamation process. However, the principal responsibilities cover operational activities as discussed. The human resource concerns in the cross border mergers and acquisitions (M&A) entails two stages namely pre-merger phase and Post- merger phase. Therefore, HRM should strive to address pre acquisition or merger challenges like assessment of the cultural and organizational differences. Besides, Sherman (2011) accentuates that HRM should reflect role of leaders in the organization, management styles, and life cycle of the organization. Maximizing the potential of and acquisition requires HRM active involvement throughout all the stages of the Merger and Acquisition process. Mergers and acquisitions generally imply extensive organizational change for the acquiring and the acquired firm. Thus, HRM have the responsibility to deliberate on divergent human resource issues, financial issues, and corporate cultures. After which, the departments should collaborate to formulate strategic checks that guide smooth business operations. Weber, Tarba & Öberg (2014) informs that HRM task requires careful proactive planning by HRM to minimize the emotional consequence during transition phase. In addition, appropriate planning by HRM diminishes possibility of risks to the merger. Furthermore, Weiss (2013) stipulates effective HRM roles to include assigning clear roles for different shareholders in decision-making. The charge helps unions to agree on specific durations for completion of tasks. Definite roles allocation decreases cross-cultural misunderstandings and distractions associated with mergers and acquisitions. Peaceful work condition motivates employees and managers of both organizations to appreciate their differences and provide quality services. In addition, HRM have the significant part of supervising soft due diligence activities of the unions. The accountability entails complete understanding of the composition and enthusiasm of the merged workforces. Besides, Burek (2010 p.29) clarifies that excellent post-merger and other partnership, screening of organizational structures enhances productivity of the bigger firm. Consequently, Tsui & Lai (2009) demonstrate that successful mergers entail an adept HRM structure to efficiently manage accrued benefits, existing compensation policies and labour contracts to simplify relationships between the organizations. Afterwards, the HRM has the mission to provide relevant contributions to the management process through employee remuneration and promotions. HRM have the mandate to develop and administer efficient communications plan for the organization. Hence, the system developed should correspond to new organizations vision through timely information gathering and delivery. Most importantly, Kuttstascher & Cooper (2005 p. 33) propose opinions that human resource structures should be flexible to assist employees handle adjustments. Additionally, HRM should adjust embrace management skills, which align the right stakeholders with the suitable skills to achieve shared enterprise goals. Occasionally, Merger and acquisitions create discomfort among employees. Hence, a section of workers opts to abandon their jobs and seek for new opportunities elsewhere. Depamphilis (2010) provides the opinion that appropriate HRM should identify main possessions and effectively plan to retain everyone. Furthermore, HRM has the assignment to develop employees through departmental rotations and plan for their exit. Rothwell (2010) offers management solution through a softer approach to maximize and boost employee morale in periods of transition and downsizing. Therefore, Cooper & Finkelestein (2010 p. 58) gives the opinion that smooth transition requires total honesty, proactive management communication, good listening skills, and sensitivity to employee needs. The merger between Daimler-Benz and Chrysler in 1998 is a popular international coalition that failed to yield fortunes because of cultural differences. The German firm Daimler exhibited efficiency, conservative and safe culture whereas Chrysler shown a diverse, daring and explorative culture (Appelbaum, Roberts and Shapiro, 2009:44). Hence, the two firms found it impossible to work together. Moreover, the firms contrasted in treasured in terms of their customers. Daimler prized consistency and maximum quality. On the contrary, Chrysler emphasized on attractive designs and providing their wagons for modest amounts. At the end, the aforementioned factors caused conflicting goals and orders. Thus, the merger terribly failed. Conclusion HRM support to mergers and acquisitions should enhance business performance. Ehnert, Harry & Zink (2014) emphasize that efficiency of mergers entails elaborate corporate and HR strategy, corporate social responsibility and overall organization development. Firms should conduct pre-merger preparations to facilitate proper planning. Finally, comprehensible leadership is mandatory for success of the coalitions. References Beerel, A. C. 2009. Leadership and change management. Los Angeles, SAGE. http://site.ebrary.com/id/10546181. Burek, C. 2010. Post-merger intercultural communication in multinational companies: a linguistic analysis. Frankfurt am Main, Peter Lang. Cooper, C. L., & Finkelstein, S. 2010. Advances in mergers and acquisitions. Bingley, Emerald. http://www.myilibrary.com?id=298693. Depamphilis, D. M. 2011. Mergers and acquisitions basics all you need to know. Burlington, MA, Academic Press. http://public.eblib.com/choice/publicfullrecord.aspx?p=648807. Depamphilis, D. M. 2010. Mergers, acquisitions, and other restructuring activities an integrated approach to process, tools, cases, and solutions. London, Academic. http://www.sciencedirect.com/science/book/9780123748782. Dowling, P., Festing, M., & Engle, A. D. 2008. International human resource management: managing people in a multinational context. London, Thomson Learning. Ehnert, I., Harry, W., & Zink, K. J. 2014. Sustainability and human resource management: developing sustainable business organizations. http://dx.doi.org/10.1007/978-3-642-37524-8. Frankel, M. E. S. 2013. Mergers and acquisitions basics the key steps of acquisitions, divestitures, and investments. Hoboken, N.J., Wiley. http://rbdigital.oneclickdigital.com. Gaughan, P. A. (2011). Mergers, acquisitions, and corporate restructurings. Hoboken, NJ: Wiley. Kuttstascher, V., & Cooper, C. L. 2005. Managing Emotions in Mergers and Acquisitions. Cheltenham: Edward Elgar Pub. Mafihlo, N. 2006. Reasons for failure in mergers and acquisitions. Thesis (MBA)-University of KwaZulu-Natal, 2006 Richter, A., & Pahl, N. 2009. International Strategic Alliances and Cross-Border Mergers & Acquisitions. München: GRIN Verlag GmbH. Rothwell, W. J. (2010). Effective Succession Planning Ensuring Leadership Continuity and Building Talent from Within. New York, AMACOM. http://public.eblib.com/choice/publicfullrecord.aspx?p=533010. Sherman, A. J., 2011. Mergers & acquisitions from A to Z. New York, American Management Association. Stahl, G. K., & Mendenhall, M. E. 2005. Mergers and acquisitions: managing culture and human resources. Stanford, Calif, Stanford Business Books. Straub, T. 2007. Reasons for frequent failure in mergers and acquisitions: a comprehensive analysis. Wiesbaden, Deutscher Universitäts-Verlag. Tsui, A. P. Y., & Lai, K. T. 2009. Professional practices of human resource management in Hong Kong: Linking HRM to organizational success. Aberdeen, Hong Kong: Hong Kong University Press. Ulijn, J., Duysters, G., & Meijer, E. (2010). Strategic Alliances, Mergers and Acquisitions: The Influence of Culture on Successful Cooperation. Cheltenham: Edward Elgar Pub Weber, Y., Tarba, S. Y., & Öberg, C. 2014. A comprehensive guide to mergers & acquisitions: managing the critical success factors across every stage of the M&A process. Upper Saddle River, N.J., Financial Times/Prentice Hall. Weiss, D. S. 2013. Leadership-driven HR transforming HR to deliver value for business. Toronto, Josey-Bass. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=517885. Read More