9/10/2008

The Perfect Fusion

Publication: Times Of India Mumbai;Date: Sep 10, 2008;Section: Times Ascent;Page: 47

ANY MERGER AND ACQUISITION (M&A) REQUIRES METICULOUS PLANNING. AFTER ALL, ADDRESSING ISSUES RELATED TO SORTING OUT ALIGNMENT OF STRUCTURES AND POLICIES OF THE INTEGRATING ENTITIES OR MATTERS OF EMPLOYEE RETENTION AND COMMUNICATION CAN BE QUITE DAUNTING. YASMIN TAJ DISCUSSES THE FACTORS LEADING TO THE SUCCESS OR FAILURE OF AN M&A AND THE CRUCIAL ROLE THAT HR PLAYS IN THIS EXERCISE

India Inc. has been grabbing headlines for quite sometime now because of the highly talked about mergers and acquisitions taking place in the market. From the ever famous Mittal-Arcelor deal to the Jet-Sahara, TataJaguar, Kingfisher-Deccan and Vodafone-Hutch mergers and acquisitions, Indian companies are destined to take brand India to newer heights. Companies look for various strategies to maximise the potential of their performance and in turn, increase profitability. They undertake restructuring measures to come out of stagnation and improve performance. One amongst these steps has been the M&A route. But any M&A isnt an easy task for the companies and the employees involved. But if addressed with utmost planning and care, it can also be a smooth ride. A HAPPY UNION Ashish Taneja, CEO, Vertex (India) shares, Vertex was acquired by a consortium of three leading US investment firms - Oak Hill Capital Partners, GenNx360 Capital Partners and Knox Lawrence International in January 2007. The process by which a company is bought or sold can sometimes prove to be time consuming and expensive. Typically, a transaction takes six to nine months and involves many steps. This transition period is very crucial and the HR team in tandem with the communications department needs to have the communications flowing so that the most important question how does it affect me? is answered. The most difficult challenges are the retention of key people (which are not necessarily people at the top), communicating that the move would increase value of the organisation and also addressing the cultural issues. Companies that dont address these issues may suffer a loss of profitability, top talent, and confidence in leadership decisions. HTMT Global Solutions Ltd. is on the other side of the fence and has acquired a number of companies since the company was formed. Essentially, our acquisition strategy is around creation of value for our stakeholders. In assessment of a merger or acquisition, we consider a number of factors around long term strategic value, expresses Patrick David, Executive Vice President - Global Human Resources Strategy, HTMT Global Solutions. For him, integration is the biggest challenge in any M&A. The importance of a change management programme with robust communication is essential to the success of integration. A new name, a new logo or a new brand matter very little at the grassroots level. The employee wants to understand the extent of change and its impact on them, he says. Since 2000, our approach in the Earth Water Group has been to act as an incubator. We bring resources and
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freedom of working to organisations with great ideas, informs Sunil Ghorawat, Managing Partner, Earth Water Group. A SUCCESSFUL UNION It has been observed that many a times, M&As fail to become a success. Though the reasons can be varied, there are too many intricacies involved and not every organisation can tackle it efficiently. So, what are, the factors that would determine whether a certain M&A is a success or failure? While acquiring Deolalikar Consultants, we decided to retain their name as the man himself commanded immense respect in the industry. Look at positions: are they strengthening the business and the people holding them? But are they, at the same time acknowledging long-term employees, also, is a vital question, suggests Ghorawat. He adds, While taking over, we had clearly made up our mind of allowing the acquired business to be run independently, within the framework of our groups ideology. Key people were taken into confidence and allocated roles that suited their interests without compromising on growth and values. The idea is to have a core set of shared values amongst the group. Beyond that, each team has the working freedom to operate and grow as they please. We wanted to ensure that we treated all employees with respect and provided them a challenging work environment. Fortunately, being a young band of people with an average age of just 27 years, we have managed to mould employee mindsets and evolve a composite culture. According to David, The true success of a merger or acquisition is the extent to which two organisations align themselves effectively to ensure business continuity, at the same time ensuring that business efficiencies are identified i.e. there is no replication of functions across two organisations, that resources are deployed optimally and that policies are standardised and institutionalised, across the new entity. I believe, we have been quite successful in addressing all issues that come up during a merger and acquisition. Our entities in the Philippines and the US were acquisitions. Today, I believe, we operate effectively as a single entity offering differentiated solutions to our customers, across these two geographies as well as India. Our policies, management structure, and career opportunities are aligned, and most importantly, our employees view us as one organisation. For Taneja, many factors can contribute to a failed merger or acquisition; however success depends ultimately on the effective use of the human capital. An important and almost neglected issue of M&As is assessing the culture of their merging organisations before the deal. Such issues are essential to the process and must not be treated as an afterthought, he elaborates, adding, Vertex India had made extensive communication and HR centric plans to address issues that could possibly crop up due to acquisition. Speedy, timely and clear communication was the reason for us handling the phase well. The integration first started with announcements. Often, communication efforts are fragmented with different messages and information flowing to investors, employees, managers, and customers. Messages to our stakeholders were well planned and consistent. A LUCRATIVE UNION HR is an intrinsic part of the integration team in an M&A because of its ability to evaluate the compatibility of corporate cultures and different options for combining enterprises. HR must also be the trusted source of information for employees about what the M&A means for them. The key HR initiative of Vertex during the M&A was a carefully designed and implemented integration plan, with the HR element at the heart of it. We wanted to be completely transparent and honest with all our employees. All of our change-management expertise was called upon to address employees anxieties about the acquisition and the employees were updated in real time on all the developments, states Taneja. According to David, HR plays two roles one is at the due diligence stage i.e. before an M&A is formalised, assessing cultural fit and synergies, as well as understanding how effective the integration might be based on leadership ability of the target, policies, processes, etc. The HR team also looks at alignment of compensation and benefit plans, organisational structure, decision making etc., all critical to post M&A finalisation. Post M&A, HR plays the critical role of bringing the organisation together ensuring that two entities mesh as one, through the championing of the entire change management intervention, he avers. At Earth Water Group, they organised regular employee engagement activities by making them feel as a part of a
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bigger organisation with strong employee centric values during their M&A. We have a very transparent working style and a monthly open forum, which allows all employees to share their opinions. There is a conscious effort to engage, involve and share, adds Ghorawat. Though M&As are extremely hyped these days, not all of them become successes. And those who do reach that point are true manifestations of a lot of thought, effort and planning put together by the two organisations and their employees as well. yasmin.taj@timesgroup.com

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