THE PRINCIPAL COMPONENTS OF THE M&A PROCESS

 

The fundamental reasons for companies entering into an M&A transaction remain the same: companies looking to acquire want to achieve profitable growth and economies of scale regarding expenses, as well as enhance their distribution capabilities. Companies looking to divest want to shed noncore or underperforming business and improve their financial position¹. Leadership development and talent management are two examples of the popular organization development programs. M&A Integration: this is a newly integrated organization on transforming the two existing cultures into a powerful new one more focused on creating bottom line improvements. Results included a new and targeted appraisal; compensation and benefits system that helped employees re-orient their time and energy improving bottom line performance.

Effective organization development (OD) work must maintain a balance of targeted interventions and a holistic, systemic approach to your organization. Every top manager should understand and adapt to continuing changes and challenges in his organization’s environment and align his people with each other and with his internal culture, systems and processes to match these challenges and changes. To achieve the best results, OD must simultaneously include and align four spheres of engagement as structural alignment, values alignment, personal alignment, results alignment.

According to Minzberg organizations in general contain up to five distinct parts²:

The operating core (the people who do the work)

1.                 The strategic apex ( the top management)

2.                 The middle line ( the hierarchy between)

The technostructure (people in staff roles supplying services)

¹ Towers Perrin, (2009). “Mergers and Acquisitions, and capital rising”. Life insurance CFO survey, 22, p. 1

² Hofstede G. (2005), Cultures and organizations. Software of the mind, London: McGraw-Hill, - pp.78-82

Organizations in general use one or more of five mechanisms for coordinating activities:

1.                 Mutual adjustment ( of people through informal communication)

2.                 Direct supervision ( by a hierarchical supervisor)

3.                 Standardization of the outputs ( specifying the desired results)

4.   Standardization of skills (specifying the training required to perform the work).

Most organizations show one of five typical configurations:

1.                 The direct structure. Key part: the strategic apex. Coordinating mechanism: direct supervision.

2.                 The machine bureaucracy. Key part: the technostructure. Coordinating mechanism: standardization of work processes.

3.                 The professional bureaucracy. Key part: the operating core. Coordinating mechanism: standardization of skills.

4.                 The divisionalized form. Key part: the middle line. Coordinating mechanism: standardization of outputs.

5.                 The adhocracy. Key part: the supporting staff, sometimes with the operating core. Coordinating mechanism: mutual adjustment.

Human integration is concerned primarily with generating satisfaction, and ultimately a shared identity among the members from both companies. Human integration is needed for both organizations to function as one identity. Often in the post-acquisition phase employees of both organizations see themselves still as separate identities.  Developing a shared identity is therefore crucial for successful task integration. However human integration and task integration go hand in hand. If the integration process characterized with high level of human integration but a low level of task integration, the employees are satisfied, but no operational synergies are achieved¹.

¹ Birkinshaw, J. Bresman, H., and Hakanson, L. (2000), " Managing the post-acquisition integration process: How the human integration and task integration process interact to foster value creation”, Journal of Management Studies, 37, 3, pp. 395-425 

Managing the human integration process is difficult, while it has proven to be slow and difficult to manage effectively. Social integration mechanism, like personnel rotation, short term visits, participation in joint training programmes and meetings, cross-unit teams, and joint celebrations, have a positive effect on human integration¹.

Merges and acquisition (M&A) are increasingly widespread, strong and dangerous corporate events. The resistance or support of people in the integration of two previously separate organizations plays a key role for their success or failure. As ' merged ' corporations unite earlier separate organizations, they can often decompose individual careers with lay-offs, reduced advancement possibilities, frustrated or changed career plans, and other resistance-making changes. These are the poorest means of mobilizing motivation, experience, obligation and competence, all of which are usually noticed as critical justifications for M&A in first place. Organizations face possibility to choose new combinations and unite work in ways that individual careers can be integrated into M&A purpose and participants’ motivations mentioned by it, by recognizing and effectively supporting various motivational and competence profiles.

People show some characteristic behavior samples in groups. People involved in managing groups and group participants can benefit by performance of practical exercises which help them to understand better people's behaviour in group dynamics and groups. When group samples are united with research of individual development then group dynamics can also be applied to education and therapy.

To many in the finance industry and general population, merges and acquisitions work can seem very charming and high profile. The group of merges and acquisitions (known as M&A) provides advice to the companies that buy other company or are themselves being acquired.

 

¹ Bj?rkman, I., Stahl, G.K. and Vaara, E. (2007), " Cultural differ3encies and capability transfer in cross-border acquisitions: the mediating roles of capability complementarity, absorptive capacity, and social integration", Journal of International Business Studies, 38, pp. 658-672

Often, the mergers and acquisitions team will also work with a Corporate Finance industry group to arrange the appropriate financing for the transaction (usually done through a debt or equity offering).

In many cases all this can happen in a very intense schedule and under extreme secret and pressure. Merges and acquisition is frequent a subgroup within corporate finance; but in some firms, it is an independent department. Merges and acquisition can be one of the most demanding groups to work for¹.

Group dynamics - group is two or more individuals who are connected to each other by social relationships². Because they interact and influence each other, groups develop a number of dynamic processes that separate them from a random collection of individuals. These processes include norms, roles, relations, development, need to belong, social influence, and effects on behavior.

Group dynamics – is an interaction and interpersonal relations between group members and the ways by which groups are formed, function, and break up.

Group dynamics - a prominent aspect of successful interaction and is a factor influencing the results of any form of group activity, including training courses. Issues of power, influence, and interpersonal conflict all affect dynamics and group work. Everyone means to help people to create positive group dynamics, sensitivity training³.

Group Dynamics addresses to the interactive nature of people within group contexts. These interactions between people within the group are clearly various than in private interactions. Group Dynamics - group of two or more persons who co-operate with each other in such manner, that each influences on a person and is influenced by other person.

 

 

¹ James. (2008). “Mergers and Acquisitions Career; What is involved and is it for you? Investment Banking. May, 22, pp. 42-45

²Forsyth, D.R. (2006) "Group Dynamics" 4th Edition". Belmont, CA: Thomson Wadsworth

³EncartaWorld English Dictionary .North American Edition. 2009

For a collection of people to be defined as a group, the members must:

- interact with one another

- be socially attracted to each other

- share goals or objectives

- have a shared identity which distinguishes them from other groups

The dynamic of any group can be influenced by the persons of each of its participants, and by what the group is defined to make. Group influence on a person can be strong/weak, influential/inefficient or suppressing/non-significant, depending on the nature of group and the level of participation of the person.

Group Dynamics can influence also the behaviour of people depending on their position within the group, their task within the group and their behavioural sample concerning the group.

What do Mergers and Acquisitions Groups do?

- advise firms on merger and acquisition strategies;

- determine target company valuations using a number of different valuation techniques;

- help the target of a hostile acquisition arrange a defensive strategy where appropriate;

- conduct due diligence on a target or acquiring company (this includes examining the financial results and other business factors that will affect the