Merger and Acquisitions Theories in Management

Merger and Acquisitions Theories in ManagementManagement trunk and practiceMergers and learnings are a primary(prenominal) means by which single and individuals are able to raise and then enter the new markets. After this happens, the competitive structure of the whole industries whitethorn alter radic e real last(predicate)y in a span of a short time. Mergers are the unifications of two or blush more(prenominal) firms into forming a new one w here(predicate)as encyclopaedisms are the comp some(prenominal)s purchases of the major(ip)ity of the shares from an opposite. Mergers and attainments croup overly represent a major mechanism by means of which the firms that are internal are able to become multinational firms. The cost and derive analysis of the unifications and encyclopaedisms affect the last by the managers and the shareholders of whether to take up a specific amalgamation and acquisition. The decision by the employees as well as layabout draw to the acc eptance or refusal of the unification and acquisition (capital of Minnesota Simon 2).In this paper, I am going to inquiry on why the employee- re late(a)d to issues prevent the succeeding of a fusion or acquisition. The modern strain environment is characterized by change that is continuous in nature. E very brass is considered as a system where dress, process, system, tribe are all aligned in order to ensure that the building block of the individual, individual and overall systems are well fit to deliver the strategies of the giving medication. The objective of the integrative process is to comprise people, processes, technologies and strategy without interrupting service, quality or product and not only to combine financial standing of any two companies.Employees issues in relation to the integrating phase always relate to the human capital related desegregation issues such as integration of the culture of the organization, leadership, organization structure and desig n, processes and systems and retention of the depict talent. The different important issues are effective planning for the purpose of integration, employee dialogues, and the selection of good leaders to manage the business combination and the creation of practices and policies for knowledge sharing and learning and overly the transfer. The failure to address the issues that concern union and acquisition impacts the new and current organization very negatively at the stage of post-merger in two levels.One of these two levels is the individual level and the reactions of the individual employees are in security measures, powerlessness, alienation, a drop in productivity, waiver of energy and the rise in absenteeism which increases turnover and profits. Other stress factors include the performance evaluation criteria, the sack of control over the life of the professional and also the alterations in the pieceing relationships which would also impact the merger or the acquisition adversely or negatively. on that point are also many other mental impacts which result from the merger activity. These are lifestyle instability, loss of confidence, depression, anxiety among others and these symptoms may lead to large-scale industrial strikes at times (Nilanjan and Bhattacharya 143). From this we basin find that ascribable to these impacts, the employees can resist the mergers and or acquisition in their companies.The other level is the corporate level and at this level the impacts are long-term in the ethnical integration, organization structure and design, processes and systems. The failure to tackle these issues in the phase of planning of the merger process can lead to outcomes such as benefits integration, high financial costs, incompatible HR plans and policies, inadequate communication to the employees, inadequate provisions and reserves for risks that had not been discovered and/or improperly evaluated, inefficient financial accounting for the integra tion costs, the loss of loyalty of the employees leading to the high turnover rates, the dilemma of the workforce reduction, reduced productivity and eventually leads to lowered employee morale (Nilanjan and Bhattacharya 144). These issues are the ones that drive the employees to be against and protect the mergers and acquisitions.The strategic combinations of the mergers and acquisitions study a dramatically greater chance of success in terms of providing the added value to all employees, and shareholders. The success could also be experienced in justifying of the acquisition premium when they are led, designed and implemented with these four instalments. The first element is the integrative perspective in which the mergers need to be seen as combinations that try to balance the interplay of the organizational architecture and organizational strategy with the guiding principles of the concern of the change.The second element is the designed integration which is the scope, inte nsity and pointedness of the integration and should be driven by elementary business case for the merger or acquisition which defines integration process. The third is the differential leadership because leadership is very vital and different leaders stool different roles. The leadership roles should be considered and assigned at the initial stages because this could bring confusion at the late stages. Lastly, the expanded due diligence factor is considered where the organizational issues are discussed. In this case, the organizational diligence is do a crucial part of the merger and the acquisition chain of events as is the due financial and licit diligence.An example of the crease losses ca apply by mergers and acquisitions and also the reduction of salaries of the members of banks is the atomic number 63an banking empyrean. Since the start of 1990s, the European banking sector has witnessed massive job losses and the decrease of the salaries of the employees who were left. The impact of these job losses has been greater in the northerly Europe rather than in the southern Europe. The employment in the sector of insurance has also been modify as a result of mergers and acquisition. The nature and quality of the employment has greatly changed from the form 2000 in Europe (Paul and Simon 2002 45). The reductions of employment have affected the branch administrative and networks functions. The older workers with the conventional banking skills who do not dispose and consequently not transferable easily to the new developed and centralized functions, for example those that work in the call centers, are affected adversely. These are the people who may rise against any mergers and/or acquisitions and also the banks may consider these people and reach a decision not to accept any mergers and acquisitions.Mergers and acquisitions have been known to accelerate corporate practices because the enterprises tend to review the whole cost structure entailing the m ergers and acquisitions with the aim of identifying the very maximum nest egg that are possible. The job losses have increase greatly from 17.5% to 24% due to many mergers and acquisitions.A merger and/or acquisition also referred to as a takeover invalidates in many ways the employment contract. The employee works for someone else without having taken the required steps to change his or her employers. This brings into clear view in an emphatic manner the one-sidedness of the employment relationship and also the idea that the employees do not have any control over the decision of who their employers are. The mergers and/or acquisitions are described as the legitimate means for breaking the implicit contracts in the view of restructuring (Paul and Simon 2002 183). The mergers are seen as avenues to disrupt job security that the employees have held for long periods and therefore are bound to disrupt the process of mergers and/or acquisitions.These mergers and acquisitions expect to the employees as deliberate strategies to violate the internal norms and also as a hard, brute exercise of powers and therefore they can prevent the succeeding of the mergers and acquisitions. The integrating of the different confederacy procedures and systems requires the harmonization of the different aspects of terms and conditions that take hold to the employment signings. These include job titles, pay scales, job descriptions, entitlements and benefits, supervisory and reporting lines are all subjected to change in order to ensure that there is viridity practice in the new mergers and acquisitions. These changes may launch the employees to reject any mergers and acquisitions.The mergers and the acquisitions upset the links between explicit and implicit contracts in accompany that was in the prehistorical based on trust between workers and managers, they are presently founded on assumptions and beliefs regarding mutual responsibility between employees and employers. The in tegration, merger and acquisition also requires the harmonization of the different aspects of conditions and terms of the employment to ensure that common practice in the combined organization which may alter the existing practices of the human resource and management of either or even both of the organizations.Workers or employees have also considered the lack of incentives due to mergers and acquisitions. There is no transparency in the reward systems and the mergers also lead to contradiction between performance assessments that localize on individualized contri providedion and the objectives that require team-based work. The employees therefore call for better balanced team-based and individual rewards. This is back up by trade unions where they argue that the alterations to the psychological contract which include erosion in the job security are not well reflected in the enterprise reward systems after the mergers and acquisitions. This decreased job security, increased work loads, stress and anxiety are other significant consequences of the heightened merger and acquisitions activity. These factors coupled with lowered morale and also a deterioration of the organization performance has led the employees to be against the implementation of mergers, takeovers and acquisition.This human side of the acquisitions and mergers is all to the highest degree the overall impact that mergers and/or acquisitions have on the employees in a certain company. These impacts on the psychological difficulties that the employees experience, the culture clashes which may emerge in companies during the post-merger integration period. Finally the ways in which these outcomes pellucid themselves that include communication breakdowns, there is also the we-they mentality that occurs between the inclusive organizations in the merger and acquisitions, lessen commitment, reductions in productivity, organizational struggles for power and also office politicking and at last the lo ss of the key and main organizational members. All these factors combined include the employee issues that affect the realization of mergers and acquisitions (Anthony and James 3).Through research through face to face interviews, a writer concluded that the employees were an important asset to the companies and that they should be considered when the management decides on mergers and acquisitions. Through an interview with an employee of a company that had undergone acquisition, Hayes was told that the employees would not make any move because they were told that their methods were over-the-hill and that they would have to readjust to the new companys way of conducting their activities. He indicated that when he tried to complain to the corporate about the situation, he was warned that if he squawked too loud, his position would be in jeopardy. This resulted to the destruction of the company morale and with time, the main people started leaving and it did not take much time before he also resigned (Hayes 1981 131). If the company had taken into consideration all complains of their employers, they would have retained their experienced workers and this would increase the productivity levels.Acquisition and mergers can adequately transform the organizational processes, systems, structures and also cultures of one or both of the companies involved that the employees will oft feel confused, frustrated, frightened, stressed or even frustrated and therefore whenever the employees of a particular company here of any merger and/or acquisition they are ready to prevent the realization of the same. On the personal level, these feelings often lead to psychosomatic difficulties, sense of loss, marital discord and at the extreme level, they can lead to suicide. On the level of organization, these feelings are manifested in lowered productivity and commitment, increased disloyalty and dissatisfaction, increased turnover among the key managers, power and leadership struggle s especially among the managers who remain in the organization and finally an increase in the impaired work-related behaviors at all the levels of the hierarchy. These impacts on the employee and by the employee are issues that negatively affect the mergers and acquisitions.It is reported that in the 3000 and above mergers that occurred in the year 1985, so many employees estimated to be more than ten thousand lost their jobs and others were obligate to accept early retirement (Kanter and Segger-man 1986 17). It was also estimated that by the year 1990, there will be 2500 savings and loans and 5400 banks that would be involved in mergers and these would affect more than 900, 000 people in the United States. In the year 2009, it was noted that there were decreasing mergers and acquisition activities and that also the credits were tightening. One of the reasons of a successful merger and transaction activity is the compensation which is never done and if it is done it is only given to the administrators.The compensation can be a powerful tool to motivate the management and its team to influence positive outcomes in the activity involving mergers and acquisition. This has not been the case in the recent past and the employees are laid off without being paid well leading to the negative feelings that they experience shortly afterwards. This can explain the reduction of the merger and acquisition activity because the employees through their managers are able to prevent the realization or completion of a merger and/or acquisition owing to the fact that they are not compensated. In the recent past there was the acquisition of Merrill Lynch by the deposit of America, there was a problem in the executive pay and compensation and this led to a very expensive roadblock to the desired transaction.A report by the PricewaterhouseCooper indicates that the merger and acquisition activity has decreased 86 percent from the year 2008, the previous year. In addition to thes e statistics, when the High Court approves the schemes of arrangement of a merger, it takes into account the workers interests. The scheme of arrangement must contribute for adequate protection for the employees service benefits and conditions. If the scheme shows otherwise, the High court does not agree to the terms and conditions of the merger and therefore we find that the issues of the employee are considered.The organizational behavior is always reflected by acquisition behavior, the relative size and the cultural compatibility. Global mergers and acquisitions are the main corporate strategies which the multinational corporations use to diversify, expand or even consolidate their businesses. In the year 2006, there was a recorded world(a) annual value of the acquisition transactions exceeded US $ 4 trillion (Larsen 2007 23). This trend was also recorded in the year 2007 where the worldwide transaction value of the acquisitions in only the first 3 months ranged at US $ 1.13tr illion which was the highest busiest recorded buns ever in history (Saigol and Politi 2007 145). However, almost 83%of these transactions were unsuccessful (KPMG, 1999 Sirower 1997).A considerable amounts of research developed that the failures were caused by the absence of a national cultural fit which is the cultural distance of the workers and employees (Rottig and Reus 2006 340). This may lead to cultural problems and clashes among the involved workforces. This in return lowers the employee cooperation and commitment, cause voluntary turnover of the acquired top managers and could also complicate the process of post-acquisition integration (Very and Schweiger 200122). The cultural distance might have some positive results but it is among the high points that lead to the failure of the mergers and acquisitions and it is an employee-related issue.The organizational culture which is defined as the interdependent and interrelated system of practices, beliefs, norms and assumptions that the members of the organization bear collectively should be put into consideration before a merger and/or acquisition because when they are altered extensively after the merger, the employees will tend to work against them and this will not promote success of the merger and/or acquisition. The assumptions, norms and practices could be unconscious which are learnt through the socialization of the organization and often reflect the shared perceptions of the daily practices and also determine the things that are carried out within an organization (Gertsen, et al. 1998 123).An example is the acquisition of the Tokyo Bank by the Mitsubishi Bank in the year 2003. These two organizations had very dissimilar organization cultures. The employees of the Mitsubishi Bank shared a common cultural norm of being to work on time, wearing only white shirts while at work and also thanking their department supervisors and managers in person for any monthly pay checks. But in contrast, the employe es of Tokyo Bank were not used to strict dress code and being reprimanded for getting to work late and they also had no craft to carry out a thanksgiving ceremony as they collected their monthly salaries. After the acquisition activity, a huge number of the employees of the Tokyo Bank were alienated by the strict culture of the Mitsubishi Bank and they left the combined company voluntarily. This was in the United States. This is an example of how the employee-related issues could lead to unsuccessful mergers and acquisitions.Poor communication between the employees of the same company after a merger or an acquisition could lead to problems of integration in both the domestic and the international mergers and/or acquisitions. This may cause unsuccessful mergers and acquisitions and it is an employee-related issue. On the other hand, the international acquisitions are characterized by ethnocentrism nationalistic attitudes xenophobia and language barriers (Vaara 2003 864) and these co uld lead to the failure of the mergers and acquisitions.Work citedNilanjan Sengupta and Bhattacharya Mousumi. Managing change in organizations.PHI Learning Pvt. Ltd.Anthony Buono and James Bowditch. 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