PGB Group 1 - Stress Post Merger and Acquisition

8/7/2019 PGB Group 1 - Stress Post Merger and Acquisition

1/21


2/21

Stress Post Merger

and AcquisitionA Project Report

Submitted By:

Group

1

PGDM - B

SIESCOMS, Navi Mumbai

Group 1

2


3/21

Acknowledgements

These days most newspapers carry details of Merger and Acquisition deals. In

most of the cases, the Merger or Acquisition is a strategic move to improve the

companies financial standing. When a change of this magnitude occurs, the

people in the organizations also undergo change. The Merger and Acquisition

phenomenon simply cant be neglected any more.

But are employees really happy with these changes and how does it affect them.

It is in this milieu, that we attempt to study through our research the stress

experienced by employees in the post Merger & Acquisition.

It has been a great pleasure in preparing this project report on Stress Post

Merger and Acquisitions. The whole experience was a rewarding one,

especially in terms of knowledge and information.

We are highly indebted to a multitude of people. This project would not have

materialized without the help and guidance of several people. Firstly we would

like to thank Prof. Nitin Vazirani for giving us this opportunity to work on this

project.

Further, we extend our gratitude to the employees of the organizations who

responded to our survey inspite of their busy schedules without which this reportwould not have materialized

A note of thanks to all the students of PGDM who helped us out whether it was

with the surveys, the analysis or waiting with us. Thank you.

3

Rashmi Singh 65 Jaae Powle 66

Vijesh Nair 67 Razin Naik 68

Melvin Mathew 99 Catherine Paul 105

Neha Singh 114 Vivek Singh 130


4/21

Table of Contents

Introduction 4

Merger and Acquisition and Stress 5

Research Methodology and Objectives 8

Survey Analysis 9

Conclusion 17

References 18

Annexure

Survey Questionnaire 19

4


5/21

Introduction

Mergers and acquisitions (M&A) and corporate restructuring are a big partof the corporate finance world. Every day, Wall Street investment bankersarrange M&A transactions, which bring separate companies together toform larger ones. When they're not creating big companies from smallerones, corporate finance deals do the reverse and break up companiesthrough spinoffs, carve-outs or tracking stocks.

Not surprisingly, these actions often make the news. Deals can be worth

hundreds of millions, or even billions, of dollars. They can dictate the

fortunes of the companies involved for years to come. For a CEO, leadingan M&A can represent the highlight of a whole career. And it is no wonder

we hear about so many of these transactions; they happen all the time.

Next time you flip open the newspapers business section, odds are good

that at least one headline will announce some kind of M&A transaction.

But what happens to the employees of the two companies? How will theyadjust to the new corporate environment? Will some choose to leave?

When a merger is announced, company employees become concernedabout job security and rumors start flying creating an atmosphere of

confusion, and uncertainty about change.

As a result, increased stress is experienced by the employees of therespective companies. It thus becomes imperative to understand how thisstress is manifested in employees. What are the most likely causes of thestress? And how does it manifest itself in the professional life of theemployee?

Only if sufficient information is available can necessary steps be taken tomanage stress experienced by employees in the Post Merger andAcquisition scenario.

5
http://www.investopedia.com/terms/s/spinoff.asphttp://www.investopedia.com/terms/t/trackingstocks.asphttp://www.investopedia.com/terms/c/ceo.asphttp://www.investopedia.com/terms/t/trackingstocks.asphttp://www.investopedia.com/terms/c/ceo.asphttp://www.investopedia.com/terms/s/spinoff.asp


6/21

Mergers and Acquisitions andStress

Although mergers and acquisitions (M&As) form an integral part of today's

corporate landscape they are highly susceptible to failure. Cartwright and Cooper

(1996) present research evidence suggesting no more than 50 per cent of M&As

achieve standards of success initially anticipated. People issues are largely

dismissed when negotiating M&As at the expense of financial aspects and this

has been identified as an important factor in merger failure (Holbeche, 1998).

Strategic Drivers of M&AMarket Dominance

Companies merge in order to gain economies of scale and control over

distribution channel.

Geographical Expansion

Companies use acquisitions to extend geographical reach and global market

share through new market entry.

Leveraging Competence

Companies merge to leverage their competence in NPD, credit risk and debt

management, etc.

Resource & Capability Acquisition

Companies also merge to gain resource and capability acquisition, which they

may lack, and would otherwise be difficult for them to build on their own.

Adjusting to Competition

Companies are sometimes forced into acquisitions by the acquisition strategy of

their principal competitors.

HR has a three phase/stage model during M&A. First phase is the Pre-Merger

which includes the planning of the M&A and here we need to first identify the

need for M&A. This period involves an assessment of the cultural and

organizational differences, including the identification of the organizational

cultures, role of the leaders in the organizations, management styles etc. Second

stage is where the above mentioned activity from phase one come to life, and

finally the third stage is the solidification or Post-Merger of the new entity.

During the third phase the HR issues like staffing, assessing the new strategies,

structure and new culture are some of the main issues faced by an HR.

From the people perspective, M&As have been conceptualised as stressful life

events; in terms of the social readjustment rating scale (Holmes and Rahe, 1967)

6


7/21

they have been equated with the stress from gaining a new family member or

becoming bankrupt. (Panchal,S,Cartwright,S (2001))

The exposure to a new culture during the M&A leads to a psychological state

called culture shock. The employees not only need to abandon their own culture,values and belief but also have to accept an entirely different culture. This

exposure challenges the old organizational value system and practices leading to

stress among the employees.( Pande,A.,Krishnan, S.K.)

StressThe word stress is derived from the Latin word "stringi", which means, "to be

drawn tight". Most people think of stress as a mental state but it is in fact, very

largely, a physical condition

It can be defined as a dynamic condition in which an individual is confronted with

an opportunity, constraint, or demand related to what he or she desires and for

which the outcome is perceived to be both uncertain and important.

Sources of stress or stressors

1. Environmental Stressors Economic uncertainties of the business cycle: When the economy is

contracting for example the recent Recession leading to job layoffs andstock market crash.

Political uncertainties of political systems: Unstable government and ever

changing policies. Terrorism in threats to physical safety and security: Constant attacks and

threat to life. Civic amenities: Lack of infrastructure and various other amenities. Caste and religion conflicts: Continuous religious conflicts based on

differences. Technological uncertainties of technical innovations: New technology and

innovations leads to constant change in working pattern and requires newskills.

1. Organizational Stressors Role Conflict or Role Ambiguity Organizational structure Work Load and Rotating shifts Participation & Control Organizational Leadership Poor performance of the Organization Organizational Changes Inter Personal Relationship & Inter Group Conflicts Lack of Social Support & Group Cohesiveness

1. Individual Stressors Personality

Family and personal relationships Economic problems from exceeding earning capacity

7


8/21

Career Changes Frustration

Major stress on the accompany merger or acquisition activity are: -* Power status and prestige changes

* Loss of identity

* Uncertainty

Unequal compensation may become issue of contention among new co-workers.

Consequences of Stress

Stress shows itself in a number of waysphysiological, psychological, and

behavioral symptoms.

1. Physiological symptoms:

Most of the early concern with stress was directed at physiological symptoms

due to the fact that specialists in the health and medical sciences researched the

topic.

2. Psychological symptoms:

Job-related stress can cause job-related dissatisfaction.

Job dissatisfaction is the simplest and most obvious psychological effect of

stress. Multiple and conflicting demandslack of clarity as to the incumbents

duties, authority, and responsibilitiesincrease stress and dissatisfaction.

The less control people have over the pace of their work, the greater the stress

and dissatisfaction.

3. Behavioral symptoms:

Behaviorally related stress symptoms include changes in productivity, absence,and turnover, as well as changes in eating habits, increased smoking or

consumption of alcohol, rapid speech, fidgeting, and sleep disorders.

Managing Stress

Stress can be and should be managed to enable survival. Post M&A scenario may

create tremendous personal and occupational pressures, which need immediate

management and successful resolution. Stress management techniques are

many and all of them try to control this fight-flight response. Stress has to be

8


9/21

managed with rational, calm, controlled and socially sensitive approach.

Stress prevention and management should be addressed in two critical contexts:

the organization and the individual. Adopting a preventive perspective allows

both workers and organizations to anticipate stressors and shape responses,rather than simply reacting to a crisis when it occurs.

Research Methodology andObjectives

The survey was conducted to understand to what extent employees experience

stress at the work place post M&A. The various stressors were identified through

literature review. The survey tries to address the extent to which each of thestressors contribute to the overall stress experienced by individuals. The related

the effects of the stress are also identified. Qualitative data was collected to

identify the measures taken by Human Resources professionals of the respective

companies to address these issues.

To ensure that the study was a true reflection of actual sentiments shared by

employees, both male and female employees were surveyed. Also, an attempt

was made to collect data from both experienced as well as less experienced

employees.

The survey was conducted across four organisations which have undergone M&Ain the past two years.

Objectives

The project objectives were as follows:

To understand how stress experienced by individuals is manifested

To identify the causes of stress post M&A

To identify the effects of stress experienced by employees post M&A

To gather information about any initiatives taken by Human Resources

professionals of the respective companies for employees post M&A

9


10/21

Research Instrument

The research instrument used was a questionnaire. Since detailed information

was required from the survey, the questionnaire was prone to becoming very

lengthy. So it was decided to make a mix of close-ended and open-endedquestionnaire, using objective multiple-choice questions.

Sampling Plan

The sample size was 120 employees across four organizations which have

undergone M&A in the past two years.

Survey Analysis

Participant Profile

Participants were surveyed across the food industry, housing finance industry

and information technology industry.

The following table shows the participant profile.

MaleFemale Total

less than 6months 5 1 6

6-24 months 11 12 23

2-4 years 12 15 27More than 4years 26 9 35

Total 54 37 91

10


11/21

A graphical representation of the same is as follows:

Causes of Stress: Analysis

Stressors were identified through literature review. A list was drawn up and

respondents were asked to rank them. The most significant cause of stress post

M&A was identified across males and females and across employees with varying

experience.

The survey research showed that among the female employees in the sample,

the importance of job security as a reason for stress was the least. Inability to

voice opinion was considered as the most prominent cause of stress post M&A

closely followed by adapting to change in work culture. Little or no

appreciation of work and work load also had relatively high rating wherein

workload was rated lower than the former .

Among male employees surveyed, it was seen that inability to voice opinions

was rated the highest reason for stress post M&A, closely followed by little/No

appreciation of work. Work load, adapting to change in work culture and job

security were rated almost at par.

The employees in the sample having less work experience (less than 6 months

and 6-12 months) rated inability to voice opinions the highest closely followed

by change in work culture. No/ little appreciation for work, work load were

rated almost at par and job security was rated the least.

11


12/21

The employees in the sample having more work experience (2-4 years and more

than 4 years) rated inability to voice opinions the highest closely followed by

little/no appreciation of work. This was followed by work load and job security

which were rated at par. In this case it was found that employees who have more

experience find it comparatively easier to adapt to change in work culture henceit has been rated the least among the five.

Effects of Stress: AnalysisA section of the questionnaire surveyed respondents for the implications ofstress experienced by employees of an acquired company post M&A.

The following are the responses for the survey.

1. I have been away from work more often post M&A

52% of the respondents did not believe that the Merger or Acquisition was a

reason for them to be absent from work. Most of them believed that they still

continued to work in the same way as before.

2. I work less in the office post M&A

12


13/21


reason for them to work less in office. Most of them believed that they still

continued to work in the same way as before.

3. I have been making frequent mistakes in the jobs assigned to mepost M&A


reason for them to make mistakes in the assigned jobs. Most of them believed

that they still continued to work in the same way as before.

4. I find it difficult to trust my new colleagues

36% of the respondents believe that the Merger or Acquisition was a reason for

them to find it difficult to trust their new colleagues while 28% believe that M&A

was not the reason. Therefore M&A has been a major factor affecting the

perceived credibility of Co-workers.

5. I do not feel motivated in my job post M&A

44% of the respondents believe that the Merger or Acquisition was a reason for

them to feel less motivated in their job while 24% believe that M&A was not the

reason. Therefore M&A has been a major factor affecting the motivation of

employees.

6. I feel that my colleagues dislike me

13


14/21

51% of the respondents believe that the Merger or Acquisition was not a reason

for them to feel that their colleagues dislike them while 20% believe that M&A

was a reason to dislike colleagues. As a result, M&A is not a major factoraffecting the work relationship among employees.

7. I feel the stress post M&A has caused many of my close friends toquit the job

The analysis shows that, 35% feel that M&A resulted in their friends quitting

the job, whereas 32% do not feel M&A is the reason.

Qualitative Analysis

We had asked an open ended question to get a better insight into how the HR

department of various acquired companies helps its employees cope with the

changing environment. There were many interesting answers coupled with a few,

which indicated that no significant measures were adopted by the Human

Resources department. The answers varied from meetings to Best Team Policy

across organizations.

Employees from one of the companies surveyed said that they had something

called Townhalls. On a little research we found that it was a general meeting

with the Senior Management, Human Resources department and the employees.

Employees from another company reported of Best Team Policy. It is practised

so that relations between new employees are forged and the working

environment is more amiable. Also, a few employees mentioned blogs as beingtools to foster communication.

Thus is can be seen from the analysis that the HR departments in most

companies actively took initiatives to make sure that their employees transition

could be as smooth as possible.

14


15/21

Conclusion

The survey was conducted among the employees from different sectors like IT,

Food and housing and development. This was done with a view to make the data

collection more reliable across different sectors. From the study it was concluded

that the employees of acquired companies undergo stress post M&A. The major

causes of stress and their subsequent effects were identified.

The survey research for the causes of stress post M&A shows that across

genders and work experience, inability to voice opinions was considered as the

major cause of stress post M&A. Whereas adapting to change in work culture and

job security were rated the least.

The survey research for the effects of stress shows that post M&A the following

effects of stress were observed among the employees-

Difficulty in trusting new colleagues

Lack of motivation at work place

High turnover

15


16/21

The survey also indicated that organisations do take measures to help

employees overcome stress post M&A. However, more research needs to be

done to come up with concrete measures to tackle the situation.

These measures will go a long way in deciding the success of a Merger or anAcquisition.

References

Robbins, Stephen P., Organizational Behaviour

http://www.imaainstitute.org/docs/m&a/towersperrin_04_why%20hr%20can%20make%20or%20break%20your%20M&A.pdf

www.citehr.com/215270-mergers-acquisitions.html

Alaranta, M.,(2004) Turku Centre for Computer Science and Turku School ofEconomics and Business Administration, Turku, Finland. Retrieved from:http://is.lse.ac.uk/asp/aspecis/20040003.pdf

Mann, Sally E.( Nov 25, 1996). Employee stress an important cost in mergers

Business Insurance. Chicago

16
http://tmp/svf6d.tmp/javascript:void(0);http://tmp/svf6d.tmp/javascript:void(0);


17/21

Cartwright,S.,Cooper,C..(1997). Managing merger, acquisition and strategic

alliances: Integrating people and cultures(pp33-46). Calafornia

Pande,A.,Krishnan, S.K. IIM, Ahmadabad. Retrieved from:

http://stdwww.iimahd.ernet.in/~sandeepk/merger.pdf

http://www.cdc.gov/niosh/topics/workorg/tools/pdfs/Rationale-For-NIOSH-Generic-Job-Stress-Questionaire.pdf

Annexure

Survey Questionnaire

Questionnaire on Stress Post Merger And

Acquisition

General Information

O Female O Male

1. Age

17


18/21

O 20-29 years O 30-39 years O 40-49 years O 50 or more years

2. How long have you worked in your present job for your previous employer?

O Less than 6 months O 6-12 months O Enter years

3. Merger/acquisition has increased the Workplace stress

O Strongly agree O Agree ONeither agree nor disagree

O Disagree O Strongly Disagree

Measuring Stress

During the past year/month/week how often did you experience the following :

1. I was disturbed by the changes at the work place post the M&A

O Rarely O Occasionally O Sometimes O Fairly Often O Very Often

2. My eating habits have altered.


3. I felt that I was not given importance or credit for my work post M&A


4. I wasnt able to concentrate on my work


5. I was thinking about work even in the company of family members.


6. My sleep pattern was affected post M&A


7. I was not comfortable interacting with the new employees

O Rarely O Occasionally O Sometimes O Fairly Often O Very Often8. Post M&A, I felt

Rarely Occasionally Sometimes Fairly Often Very often

Sad

Lonely

18


19/21

Insecure

Low

Reasons for stress:

Job Security Rarely Occasionally Sometimes Fairly Often Very Often

Adapting to

change in

work culture

New

responsibilities

Work load

Little / No

appreciation of

work

Inability to

voice opinions

Opening up to

new co-

workers

Grapevine at

work

Effects of Stress:

1. I have been away from work more often post M&A.

O Strongly agree O Agree O Neither agree nor disagree


2. I work less in the office post M&A



3. I have been making frequent mistakes in the jobs assigned to me post M&A

19


20/21



4. I find it difficult to trust my new colleagues.



5. I do not feel motivated in my job post M&A



6. I feel that my colleagues dislike me.



7. I do not spend enough time with my family members post M&A



8. I feel the stress post M&A has caused many of my close friends to quit the job.



Steps taken by Organisation:

1. HR communicated the changes post M&A to all employees adequately



2. A competent transition team was formed to ensure smooth transition into new roles



3. There were sufficient training sessions to acquaint employees with new processes

20


21/21



4. Regular staff meetings are held to help employees discuss issues arising post M&A



5. Focus groups were formed to discuss specific issues plaguing employees post M&A



6. HR conducted counselling sessions for employees who were troubled about changespost M&A



7. Family assistance was provided to employees whose families were affected post

M&A



8. Innovative practices like internal blogging were encouraged to help employees cope

with the new environment



9. Mention any other initiative taken by the organisation to help employees deal with the

M&A

21

PGB Group 1 - Stress Post Merger and Acquisition

Documents

Transcript of PGB Group 1 - Stress Post Merger and Acquisition