Literature Review
With far reaching developments that are being made in the business these days, strategic alliance of mergers and acquisitions have been taken into consideration in this competitive busienss world to compete with the rivals. The merger and acquisitions have been used by big business organization as competitive corporative strategy throughout the time and these have been gaining momentum in ramified economic development. But, apart from the name, nothing is simple about this concept. Wide number of problems and issues come along. All these are discussed in the current report as answers of the specific questions. It is analyzed that everyone in the field of management has somewhere theoretically read or practically experienced the fact that the management theories play a vital role in the management of any organisation and undertaking the merger and amalgamation in organization.
Integration Problems In Mergers And Acquisition And Conflicting Values That Are At Stake In This Case
The case study of merger proposed between DeWaal Pharmaceuticals and BioHealth Labs have put forward certain conflicting issues that are common in various mergers and acquisitions. The fine leadership required for any good management is missing badly as the respective CEO’s of the two merging companies are not geared up to take their authoritative position perfectly in a manner that can add value to the step of merger. As per the perception of Drew, Kortt, & Dollery, 2016) it is reflected that there is no speed in the way things are being managed as focus is all on the regulatory aspects, then on the important issues like retaining of the talented professionals, irrespective of their cultural background and resemblance; formation of a harmony between the two company’s CEO’s to bring the decisions in the line of mutual benefit; generation of faith in the staff to let them stay in the changing and much difficult scenarios, and etc. The strategic alliance helps organization to win over the competitive rivals and strengthen the overall outcomes and efficiency of the busienss. However, the main integration problem which is ideally faced by organization is related to adaption with the advance system and mixed culture. However, while merging with other organization, there may be issue related to culture, social aspects and adaption of business value chain activities.
Integration Problems in Mergers and Acquisition and Conflicting Values
There is a huge communication issue that is lying. Steve is unable to communicate properly with his talented lot of team. This way he is losing the gems of his team whom he require the most at that hour. He is facing employee retention problems, as the employees are afraid of the policies that are governing the selection and retention process. There is no knowledge being forwarded to the team regarding the manner things are done and they are not brought in favour of the same. Moreover, the cultural problems are way too big to deal with. The CEO’s are more willing to choose people they find most resemblance with and less priority are given to merit. These all issues could be managed by organizations by changing business policies, organizational culture and undertaking proper training and development program.
Steve Lindell and Kasper van de Velde being the CEO’s of the two merging companies, BioHealth Labs and DeWaal Pharmaceuticals respectively, seem very lousy at the integration process. None of them has a formal integration plan laid out to be discussed upon. A horse trading is being followed right from the initial phase. Steve fell short of the communication skill to deal with Kasper’s politics of keeping his staff and units ahead of the former. As mentioned earlier, the process being followed is more focused on the regulatory aspects than the preliminary and primary ones. The decisions are being made obnoxiously rather thoughtfully. An informal lunch meeting is conducted to discuss upon the serious matter of hiring of the most important top management. The process starts with the passing resolution by the board of directors of company and implementing the proper development program to encounter all the issues and problems in effective manner. This will not only increase the overall outcomes but also lower down the complexity of the process. However, setting up the special department to mitigate the merger and amalgamation process will be the best possible method.
The time taken to make the decision is too long to be good for success of the merger. As per the perception of Kaul, (2017), it is reflected that there is no particular process that they are going on board with for the merger and amalgamation. A business discussion is made for the Asian part, where Steve’s projection of retaining Bangalore unit of DeWaal rather than the Bombay unit of Bio Health with his man Vijay Naipaul heading the same, and the losing of DeWaal’s Indonesian plant were laid off by Kasper. Kasper with dominance on the view of not closing the Indonesian plant also caves down Steve on the proposition of the person heading the Bangalore plant. The whole thing is done with no deadlines at all. Even Steve is popping with a view to fix positions for the time being without any scientific and professional approach and fix things later when all regulatory work will be done for. As per the views of Khorasani, & Almasifard, (2017), it is revealed that the top team of talented people of these two companies are not being informed about the process that the CEOs are planning to phase out the dilemma of retaining whom and positioning the retained staff where and how. The reasons seem pretty certain that the CEOs themselves have not worked on a process yet and do not know what is to be done to get the best out of the merger that can do a favourable thing for the shareholder’s value. The whole idea is to decide among the better of the two people that are available for every post that’s vacant in the newly merged company. It is analyzed that if company does not follow proper rules and regulatory requirements then it may destruct the transparency of company. The lack of transparency may not only hamper the business process but also increases the possibility of insider trading. The main impact of insider trading is seen on the long term sustainability of Organizaiton which might negatively impact the return on capital employed of organization in long run.
Process to Work Out the Details of the Integration
As stated by Galpin, & Herndon, (2014). It is divulged that the various values that are being conflicted unintentionally in the due course of merger have been discussed above already. There stands a need to resolve those values by every possible means. The various recommendations that can work for the same include:
- As per the views of Steiner, Kaiser, & Eythórsson, (2016) it is reflected that the focus should be placed on the merit that the executives that are proposed to be chosen possess. The cultural difference is bound to happen, but they should be avoided in order to attain a point where the team selected is full of potential to add to the stakeholder’s value as a whole. The required competencies out of the heads of every process or plant need to be defined first and then selection must be made.
- The selection process must be wholly objective, beyond the biasness of prior business relationships. The favour should be done for the executives that carry the required skill set and the way the CEO’s are currently behaving while promoting their old team members should be done away with.
- The standards that are set by other leading companies of the world in the same business regarding the role and skill sets of the executives required to be hired must be used as a reference. Only those executives must be selected whose potential stand up to the mark as per standard. There should be proper transparency and structured regulatory compliance to lower down the complexity of the process.
- Fresh interviews must be arranged. This way the potential executives shall be able to show their abilities and expertise in a much better way. They shall not feel offended for the process that the company’s CEOs are following. They will be taken in confidence and this way they would not think of leaving their employment with the newly merged company. It will provide organization with the talented employees who will strive towards increased business outcomes and aligning the interest of stakeholders with the organizations development.
- Further, after the employees are informed of their new positions, they must be offered good and early benefits apart from the pay, to provide them with an incentive to stay (Bergamin, & Braun, 2018).
As stated by Kaul, (2017), it is reflected that there is a chaos in the whole thing that is done by the two top executives while the integration is managed. A properly placed process needs to be drawn to get the desired results and make the overall process smooth and successful. First and foremost, a requirement chart should be phased, wherein the vacant positions for the top executives are laid. After that the requisite skills that every post demands must be figured out. A checklist is the best option that can be followed.
As per the views of Steigenberger, (2017), it is refelected that for the selection process, a formal method of fresh interviews should be adopted. The CEOs should go on following a tiered process. The top most layer of the management should be first selected by them. When the second layer comes down, the help of the top management must be taken to select the second layer. The whole process must be communicated to the executives who are expecting their positions in the organisations. Even after the selection is done, the selected employees should be personally met to solve any grievances they have. They should be made to understand the benefits that shall follow if they accept the positions offered to them. The short-term and long-term, both kinds of incentives must be laid out. The employees must be made aware of the professional build up, that their profiles shall advent after the positions they are offered on merger. Every possible thing must be done to retain the talented people, as it will eventually build the human resource layer and reduce the training costs.
As everyone in the field of management has somewhere theoretically read or practically experienced the fact that the management theories play a vital role in the management of any organisation. There are a number of theories existent on management that help an organisation to achieve the kind of management and direction needed for the achievement of goals. The various theories include the scientific management theories, bureaucracy theories, and the administrative theories. The scientific management theory has eliminated the rule of thumb, i.e. the old methods are now being eliminated and more practical management techniques are required to be followed. As seen in the case study above, the two top executives were just following the rule of thumb to get the selections done. But they need to get more scientific in order to achieve the proper selections from the whole process. Further, this theory promoted the decentralisation of management, i.e. like the workspace is shared by the management and workforce; similarly the workload should also be shared. CEO needs to understand that there is no accelerating way things that are being managed as focus is all on the regulatory aspects, then on the important issues like retaining of the talented professionals, irrespective of their cultural background and resemblance; formation of a harmony between the two company’s CEO’s to bring the decisions in the line of mutual benefit; generation of faith in the staff to let them stay in the changing and much difficult scenarios with a view to create synergy in the process system of post-merger organization. As per the views of Thompson, (2017), itt is reflected that the bureaucracy theory is kind of traditional approach wherein there lies supervision of the lower positions is done by the higher positions in order to supervise them well. The workforce gets the work as per their areas of specialisation, which helps in getting the work done faster and with ultimate precision. The work done is by specialised employees and hence the chances of bad output are less. The limelight of this theory is a belief that an impersonal relation must exist between the employees and the management. This goes a long way in ensuring that there is no prejudice in the positions offered and work expected. This is the urgent need of the newly merged company, as there is prejudice and pre believes regarding the employees being followed in the selection process.
Recommendations
As per the Shafritz, & Jang, (2015), it is reflected that the administrative theory on the other hand specifies the role that the management has to play in its basic functions being forecasting, planning, organising, commanding, coordinating and controlling. Several principles are laid on how these roles can be done perfectly. The advantage of this theory is that the management can ensure right work is being done by them at the right stages of management of a particular project of the day to day affairs. There is specialisation and division of labour promoted in this theory also which could support the undertaken merger and amalgamation program.
Conclusion
After evaluating all the details and merger and amalgamation cases, it is inferred that two companies amalgamate with a view to strengthen the overall outcomes and efficiency in long run. The main crux of the merger proposed between DeWaal Pharmaceuticals and Bio Health Labs related to that fact that these both companies have put forward certain conflicting issues that are common in various mergers and acquisitions. The main issue which arise was related to setting up the structured program for the employees of two different Organizaiton while operating their business as one. There are several theories such as scientific management theories, bureaucracy theories, and the administrative theories which have also assisted to understand the pre and post-merger concepts and impact on the stakeholders which needs to be considered by the key managerial person in effective manner. It is inferred that if proper policies and regulatory set up program is made in the process system and developed training given to employees then it will assist organization to mitigate the amalgamation and merger issues in effective manner. Therefore, it could be inferred that merger and amalgamation could be negative if it is not undertaken in proper effective manner.
References
Bergamin, S., & Braun, M. (2018). Integration Management in Mergers and Acquisitions: Success Factors and Pitfalls. In Mergers and Acquisitions (pp. 1-31). Springer, Cham.
Boyle, R. (2016). Re-shaping local government–Overview of selected international experience with local government reorganisation, mergers, amalgamation and coordination. Institute for Public Administration, Local Government Research Series, 10.
Bruno, G., Genovese, A., & Piccolo, C. (2017). Territorial amalgamation decisions in local government: Models and a case study from Italy. Socio-Economic Planning Sciences, 57,(1) 61-72.
Drew, J., Kortt, M. A., & Dollery, B. (2016). Did the big stick work? An empirical assessment of scale economies and the Queensland forced amalgamation program. Local Government Studies, 42(1), 1-14.
Galpin, T. J., & Herndon, M. (2014). The complete guide to mergers and acquisitions: Process tools to support M&A integration at every level. John Wiley & Sons.
Kaul, M. (2017). Note Unnote-Recent Developments in Indian Companies Act. Ct. Uncourt, 4(1), 22.
Khorasani, S. T., & Almasifard, M. (2017). Evolution of management theory within 20 century: A systemic overview of paradigm shifts in management. International Review of Management and Marketing, 7(3), 134-137.
Nakazawa, K. (2016). Amalgamation, free-rider behavior, and regulation. International Tax and Public Finance, 23(5), 812-833.
Schaap, L., & Karsten, N. (2016). Evaluating municipal mergers’ effects: A review of amalgamation studies in the Netherlands. 3(5), 82-88.
Shafritz, J. M., Ott, J. S., & Jang, Y. S. (2015). Classics of organization theory. Cengage Learning.
Steigenberger, N. (2017). The challenge of integration: A review of the M&A integration literature. International Journal of Management Reviews, 19(4), 408-431.
Steiner, R., Kaiser, C., & Eythórsson, G. T. (2016). A comparative analysis of amalgamation reforms in selected European countries. In Local Public Sector Reforms in Times of Crisis (pp. 23-42). Palgrave Macmillan, London.
Thompson, J. D. (2017). Organizations in action: Social science bases of administrative theory. Routledge.
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