Evaluating Companies Mergers Acquisitions: Challenges And Solutions

Issues faced by DeWaal Pharmaceutical and Bio Health Labs during their merger

Discuss About The Evaluating Companies Mergers Acquisitions.

The issues that are troubling both the pharmaceutical companies are that DeWaal has lost eight efficient employees as they did not want to relocate and apart from that, the management of  Biohealth has lost 5 top level executive officers and three officers are planning to leave the organization as the shares of the company started to fall and due to the merger the employees thought that they should try and join other companies which are not facing any challenges in their respective market of operations (Schmidt, 2015). The main conflict between two organizations was that the CEOs of both the company wanted to put their employees in the top administrative post. Both the companies jointly had 135 executive officers in their disposal but after the merger thre was scope to relocate only 65 officials and that stirred the situation making it more complex. The conflict of cultures between the employees of both the companies is another issue that the CEOs of both the organizations are facing nowadays. Employees who do not have adequate cultural intelligence can get exposed to culture shock and that can potentially affect their productivity. In this regard, it can be said that effective decision making is one of the most important factor which is useful in the mergers of two big companies and both the organizations have lost some of their most efficient employees which aggravated the situation mostly. In this situation the CEOs of both the companies should follow Inefficient management Theory, as both the companies have lost some effective employees and are left with a workforce that can struggle to keep up with the expectation of the management of the business organization. therefore, it can be said that if the managers of both the organizations use this theory to overcome the challenges they are facing, it would be beneficial for the merger between them. This is because, this particular theory represents that is incompetent in the complete sense and that is the case which is dominant in this particular case study. The managerial body of both the organizations can also utilize the Pure Diversification theory as that can provide various benefits to the employees managers and the CEOs of both the company after the merger. It is a matter of fact that diversification by the mergers can be referred to as diversification by improving the effectiveness by internal growth despite having efficient human resources.

Cultural differences in mergers and acquisitions

One of the problems faced due to the merger between DeWaal Pharmaceutical and Bio Health Labs is the differences between the top-level management and the structure of the organisations. Devaue (2016) is of the opinion that culture plays an important in the merger between two companies. This is mainly because the organisational cultures vary and therefore, adjusting to a different culture can be problematic to the employees. However, in this case the merger is between companies that are located in two different countries. As stated by Greve and Man Zhang (2017) culture of countries are different and it is for this reason that the diversity of the world is clearly significant.

Thus, the people belonging to Netherlands and New York may find it challenging to adapt to the changes in culture of both the countries. To understand the concept further it is necessary to analyse the different culture that exists in both countries. The application of Hofstede’s cultural dimension can be used to understand the similarities and dissimilarities that the culture of Netherlands have with that of the United States. Saleem and Larimo (2017) is of the opinion that the cultural dimensions identified in Hofstede’s model can be helpful for understanding the culture of the organisations as well as the countries. The six dimensions can be related with that of the merger that has been mentioned in the case study.

Table: Hofstede’s model

(Source: Created by author)

Figure: Hofstede’s model

(Source: Parola, Ellis & Golden, 2015)

After the analysis of the Hofstede model, it can be said that the conflict between DeWaal Pharmaceutical and Bio Health Labs may result in an unsuccessful merger between the companies. Although in some occasions it has been seen that the margin of differences between the cultures of both the countries are minor, it can still lead to several conflict of  interests in terms of treating the employees, motivating them and ensuring that uncertainty is managed. Therefore, certain recommendations can be made so that the cultural differences between the two companies can be mitigated.

As stated by Wallensteen (2015) conflict resolution can be mitigated by listening to the problems of both the parties involved. It is the duty of the managers to understand the reason for conflict and ensure that a proper solution is developed. For example, in order to mitigate the differences relating to the uncertainty avoidance, the managers of DeWaal Pharmaceutical can motivate the employees. The Hofstede model analysis has shown that the country is more inclined towards the feminist side and thus, the managers can provide ample support for to the employees in order to embrace the change in culture.

Hofstede’s model and its application in mergers and acquisitions

The analysis also shows that differences exist in the power distance between the employees and the employers. In America, despite the high power distance, the individualism among the company is low. On the other hand, with the high individualism involved in DeWaal Pharmaceutical the employees may be willing to work only for the sake of personal success. In this regard, it can be said that the individualism culture of the company can be mitigated by allocating internal teams so that the team spirit can be developed (Singer, 2018). Therefore, this can help DeWaal Pharmaceutical to maintain a collectivism structure within the organisation.

At the same time, in the case of Bio Health Labs, the company can mitigate the conflict of differences by analysing the nature of the head of the departments of its merger company. The fact that Christian is slow at making decisions can be a huge negative factor in the progress of Bio Health Labs in the Netherlands. Therefore, any changes that are required to be made are usually done by following protocols related to the organisational policies. This can be mitigated by analysing the situation of the managers. The analytical nature of Christian can have a positive impact as it is evidenced from the Hofstede Model that the American culture is more analytical in nature.

Therefore, it can be said that the evidences provided from the Hoftstede analysis sheds light on the differences in the cultural background of both the countries. It can be said that in order to mitigate the cultural differences, Bio Health Labs and DeWaal Pharmaceutical need to ensure that conflict resolution techniques such as negotiation techniques can be implemented in the companies. This can help both the companies to progress in the market

The characteristics of integrated management are actually consensus based decision making and it promotes search for optimal efficiency and the coexistence of diversity as well as uniformity. Therefore, it can be said that this sort of management practice is holistic and somewhat cross-disciplinary in its approach to balance the losses and the gains (Schmidt, 2015). Therefore it can be said that integrated management can face the issues of various perspectives on the value to formulate and implement numerous strategies that can transcend than accepting the trade offs. Therefore, it implies that adopting these practices, managements of both the companies can effectively utilize these practices   as it implies coherence between many operations of the business as well as maintains harmony between the different business organizations. in this regard, it is worthwhile to mention that integrated management not only combines the efforts put in in the workplace by the individuals but also the ways that can help to achieve unity and alsi unifies the efforts put in by a diversified workforce (Declerck, 2016).

Solutions for dealing with cultural differences in mergers and acquisitions

The senior executives of both the companies should utilize the integrated management theories in order to stabilize the situation. This is because, the managements can either be individual or a collective activity. It can be seen that integrated management can effectively promote equilibrium between both the parties who are going through a merger as both the companies operate in two other markets which are totally different and therefore cultural diversity is one of the most vital factor which can play a significant role in the merger (Declerck, 2016). It is a matter of fact that the managements of both the business organizations can effectively use this theory as it would enable them to use existing and the latest managerial concepts and tools and also these theories will allow the leaders of both the companies to focus on the systemic processes an d stakeholder culture and along with that it can effectively promote emotional intelligence among the workforce which is vital if two companies hailing from two different countries are merging (Declerck, 2016). This practice in business sector is highly regarded as it is an useful strategy to reconcile complex cross-functional challenges. Integrated practices are actually proven to foster flexibility and open-mindedness among the employees of the organizations at all the levels an can promote fattening if traditional organizational silos when encouraging a situational sensitive approach in order to understand systems individuals and most importantly business organizations (Isaak, 2017).

For this particular situation which is exposing both the business organization to numerous challenges in their operational market due to the merger between both the companies. The main problem is that one organization is located in America and the other one in Europe and therefore the cultural diversity between both the organizations is fierce (Haucap & Stiebale, 2016). Therefore, the managerial body of both the business concern had to utilize several theories like integration management practices, inefficiency management theory and Hofstede model in order to overcome those challenges. Those theories are appropriate for this particular situation as the main problems which were affecting the companies are loss of effective employees, conflicts in interest between both the parties and most importantly the cultural difference between both the business organizations (Ghauri & Hassan, 2014). The CEOs of both the concerns tried to put their executives in the top positions in the newly formed organization after the merger. It is a matter of fact that after a merger between two companies, it is inevitable that the managements would not be able to satisfy all the stakeholders of the organizations and that has impacted on this particular case (Karier, 2016). Many efficient employees left their jobs as they anticipated that the situation for both the organizations can potentially become topsy turvy and therefore effective decision making became the key to deal with the situation. It was also seen that the theories utilized by both the organizations to deal with the situation were appropriate as those models and theories effectively helped to handle the situation in the most adverse condition when both the companies were left with ineffective and inexperienced executives and demotivated workforce. Not only that the cultural differences and the conflict of interests between both the organizations immense problems for the managements of both the business concerns. Therefore it can be said that the managements took the right decisions in the appropriate times that helped both the organization to go through a successful merger that helped both the organization to enhance their productivity along with profitability (Declerck, 2016)

References

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Brueller, N. N., Carmeli, A., & Markman, G. D. (2016). Linking merger and acquisition strategies to postmerger integration. Journal of Management.

Devaue, M. N. (2016). Merger and Acquisition. International Journal For Research In Business, Management And Accounting, 2(2), 51-58.

Greve, H. R., & Man Zhang, C. (2017). Institutional logics and power sources: Merger and acquisition decisions. Academy of Management Journal, 60(2), 671-694.

Karier, T. (2016). Beyond Competition: Economics of Mergers and Monopoly Power: Economics of Mergers and Monopoly Power. Routledge.

Parola, H. R., Ellis, K. M., & Golden, P. (2015). Performance effects of top management team gender diversity during the merger and acquisition process. Management Decision, 53(1), 57-74.

Patel, N. (2017). Merger and Acquisition-The Play of Gain and Loss?. Asian Journal of Research in Business Economics and Management, 7(5), 360-367.

Saleem, S., & Larimo, J. (2017). Hofstede cultural framework and advertising research: An assessment of the literature. In Advances in Advertising Research (Vol. VII) (pp. 247-263). Springer Gabler, Wiesbaden.

Singer, L. (2018). Settling disputes: Conflict resolution in business, families, and the legal system. Routledge.

Wallensteen, P. (2015). Understanding conflict resolution. Sage.

Haucap, J., & Stiebale, J. (2016). How mergers affect innovation: Theory and evidence from the pharmaceutical industry (No. 218). DICE Discussion Paper.

Ghauri, P., & Hassan, I. (2014). Evaluating companies for mergers and acquisitions. Emerald Group Publishing.

Isaak, R. (2017). Green logic: Ecopreneurship, theory and ethics. Routledge.

Declerck, F., 2016. Mergers & Acquisitions in the Food Business: How did the 2002 and 2008/2009 Economic Crises Impact Corporate Valuation?. International Journal on Food System Dynamics, 7(3), pp.183-195.

Schmidt, B. (2015). Costs and benefits of friendly boards during mergers and acquisitions. Journal of Financial Economics, 117(2), 424-447.

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