While there are many definitions for merger, acquisition and de-merger, let me put it in a simple manner. Merger and acquisitions are often made as part of a company’s growth strategy.
Merger: Merger refers to combining of two companies where one new company will continue to exist. Merger is combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock. It can also be defined as an arrangement whereby the assets of two or more companies become vested in or under the control of one company.
Acquisition: Acquisition refers to buying of assets of one company from another company. A action in which a company buys most, if not all, of the target company’s ownership stakes in order to assume control of the target firm. Acquisition is purchase by one company of controlling interest in the share capital of an existing company.
Reasons for Mergers & Acquisition: Every merger and acquisition has its own unique reasons based on the organization goals. Here is a few of them:
- Acquisition of technology, assets or talent
- Increasing capabilities & sharing expertise
- Increased market share
- Diversification of products and services
Stages of Merger & Acquisition:
1.Pre-merger & acquisition: Based on growth strategy, the acquirer searches for an appropriate partner to assess potential targets and develops a plan for execution.
2.Due diligence: Due diligence refers to the investigation made by a buyer to gather all relevant facts and information that can influence decision to enter into a transaction or not. The acquirer does thorough research of the credentials of the company, its market valuation, status of accounts receivables & payables etc.
3.Integration: The acquirer creates a comprehensive plan for integrating the two companies. This happens either at the time of or completion of due diligence.
4.Post-merger & acquisition: This is the final stage and most crucial part of a merger & acquisition. It can take months or sometimes even years based on the organization size, geographical locations and the complexity in the agreement.
HR Role in Merger & Acquisition: Success of merger and acquisitions depends on the people who drive the business, their ability to drive, lead, and formulate strategy, execution and implementation. It is very important to involve HR professionals in merger & acquisition as it involves people and has an impact on key people issues. HR professionals play an active role in the change process by offering their interventions to help ensure a successful merger and acquisition.
HR plays a vital role in
- Employees coping up with change and culture
- Organizational hierarchy structure,
- Maintaining the productivity by placing of right people at right place
- Alignment of compensation, benefits and welfare schemes
- Job security
- Compliance of local labour laws
- Employee communication
- Taking care of personal records
Best practices to be followed by HR during and after merger & acquisition:
- Identify leaders from both the companies for effective implementation, transition and communication of the same to employees.
- Train managers on the nature of change
- Explain new roles to the people
- Orientation programs on policies and procedures
- Orientation programs on performance management, compensation, benefits and welfare schemes
- Identify the skills of people and mapping them appropriately
- Town halls & Team building activities