INTRODUCTION

Mergers & Acquisition have become very popular throughout the world in
the recent times. This has become popular due to globalization,
liberalization, technological developments & intensely competitive
business environment. Mergers and acquisition are a big part of corporate
finance world. This process is extensively used for restructuring the
business organization. In India, the concept of mergers and acquisition
was initiated by the government bodies. The Indian economic reform since
1991 has opened up a whole lot of challenges both in the domestic and
international spheres. The increased competition in the global market has
prompted the Indian companies to go for mergers and acquisitions as an
important strategic choice. The trends of mergers and acquisitions in India
have changed over the years. The immediate effects of the mergers and
acquisitions have also been diverse across the various sectors of the
Indian economy.

MEANING OF MERGERS & ACQUISITION

The phrase Mergers & Acquisition refers to the aspect of corporate

strategy, corporate finance and management dealing with the buying,
selling and combination of different company that can aid, finance or help
a growing company in a given industry, grow rapidly without having to
create another business entity.

In a merger, two companies come together and create a new entity. There
are mergers between equals and unequals. But, In general there are
mergers of equals rather than mergers of unequals.

Examples of few mergers between equals are:

1. Merger between Arcelor and Mittal Steel forming Arcelor-Mittal.
2. Citicorp and Travellers forming Citigroup.
3. Ciba and Sandoz forming Novartis.

Examples of few mergers between unequals are:

1. Chase and J.P. Morgan creating JPMorgan
In an acquisition, one company buys another one and manages it
consistent with the acquirers needs. There are two major types of
acquisitions: Those involving acquisition and integration such as made by
Cicso Systems, Infoedge (India) Pvt Ltd; and those involving acquisition
and separation such as between Unilever and Best foods.

Thus, a merger or acquisition is a combination of two companies where

one corporation is completely absorbed by another corporation. The less
important company loses its identity and becomes part of the more
important corporation, which retains its identity.

SCOPE OF MERGER & ACQUISITION

M&A has become a daily transaction now-a-days. Mergers and acquisitions
are an important area of capital market activity in restructuring a
corporation and had lately become one of the favored routes for growth
and consolidation. The reasons to merge, amalgamate and acquire are
varied, ranging from acquiring market share to restructuring the
corporation to meet global competition. One of the largest and most
difficult parts of a business merger is the successful integration of the
enterprise networks of the merger partners. The main objective of each
firm is to gain profits. M&A has a great scope in sectors like steel,
aluminium, cement, auto, banking & finance, computer software,
pharmaceuticals, consumer durable food products, textiles etc.

It is an indispensable strategic tool for expanding product portfolios,

entering into new market, acquiring new technologies and building new
generation organization with power & resources to compete on global
basis. With the increasing number of Indian companies opting for mergers
and acquisitions, India is now one of the leading nations in the world in
terms of mergers and acquisitions. Till few years ago, rarely did Indian
companies bid for American-European entities. Today, because of the
buoyant Indian economy, supportive government policies and dynamic
leadership of Indian organizations, the world has witnessed a new trend in
acquisitions. Indian companies are now aggressively looking at North
American and European markets to spread their wings and become global
players. Almost 85 per cent of Indian firms are using Mergers and
Acquisitions as a core growth strategy.

The merger and acquisition business deals in India amounted to $40

billion during the initial 2 months in the year 2007. The total estimated
value of mergers and acquisitions in India for 2007 was greater than $100
billion. It is twice the amount of mergers and acquisitions in 2006. Thus,
we can say that M&A has become a day to day transaction now-a- days.

OBJECTIVES OF MERGER & ACQUISITION

The main objective of Merger & Acquisition transaction is as follows:

o Proper utilization of all available resources.

o To prevent exploitation of unutilized and underutilized
assets and resources.
o Forming a strong human base.
o Reducing tax burden.
o Improving profits.
o Eliminating or limiting the competition.
o Achieving savings in monitoring costs.

REASON FOR FAILURE OF MERGER

The main reason for failure of merger is non-integration of human
resources of both the transferor and transferee company.

It is also not successful because the merger of two organizations is

actually a merger of individual and groups working in company which had
a great impact on individuals working in a company such as it creates ego
clashes among individuals working in a company.

There is also failure of M&A when purchasers plans & strategies are not
clear to the employees of the acquired firm.

IMPACT OF MERGERS & ACQUISITION ON EMPLOYEES &

WORKING CONDITIONS

Merger & Acquisition helps a Company to grow in a better way but it has a
great impact on the employees working in a company & on working
conditions. The employees of the companies merging and acquiring are
mostly affected by M&A. Due to this reason, there is mostly failure of
M&A. To break the mindset of people working in companies undergoing
M&A and to convince them that merger is for common good & will help
them in their growth is normally an uphill task.

1. When 2 companies who have different style of functioning

merge, there is a clash between the companies which pulls them
together into different direction apart from their aims &
objectives and in the process endanger the advantages
envisaged both in the real life as well as in the scheme of
amalgamation. Thus M& A had a great impact on the individual
or group working in company & on work culture.

2. Company enters into M& A activity without recognizing the

impact on the organization and the overall affect on the human
element within the two merging company. when M&A activity do
not meet corporate objectives it results in

Lost revenue
Customer dissatisfaction
Employers attrition issues

3. Many personnel issues such as salaries, benefits, pension of

employees are also affected due to M&A. Since the
organizational structures are different, differences in
compensation packages and designation can take place
normally.

4. There are ego clashes between the top management and

subsequently lack of co-ordination among them may lead to
collapse of company after merger. This problem is more
prominent in cases of mergers between equals.
5. There is also a separation anxiety among the employees
because they think some of their co-workers will be leaving the
company. The atmosphere of apprehensions leads to company
wide rumours.The employees loose faith in their organization
and tend to become demotivated.

6. Employees are the main victims when M & A takes place. They
may be hurting themselves by trying to cope with new changes.
When they realize that their potential for future growth within
the organization dwindles, they often become withdrawn and
frustrated which can affect productivity of the company
severely.

7. M&A affects the CEOs of the company because they are the
most creative and talented people within the organization. The
resultant loss of control devastates these individuals. The stress
level experienced by these executives often travels through the
chain of command, affecting subordinates as well.

8. Employees of the company are mostly scared by M&A that they

will be given step motherly treatment. This question is always in
the minds of employees of the transferor company. This fear of
transfer and retrenchment, the loss of position in the
hierarchical level are some of the thoughts which always remain
in the minds of employees of both the company.

9. There is also lot of reorganization & restructuring in the

company during the days when M&A process is going on .The
process of M&A by which company is bought or sold can prove
difficult, slow and expensive. This M&A transaction typically
require six to nine months and involve many steps. Locating
parties with whom to conduct transaction forms one step in the
overall process and perhaps it is the most difficult step in the
transaction. This process of M&A has a great impact on the work
culture during those days as it disturbs whole organization of the
company.

10. In an acquisition the buyer assumes the dominant parent role

and the acquired company assumes the subordinate role, acting
in the role of stepchild. Just as step parents may deny
stepchildren certain family resources acquired company may
also experience similar after an acquisition takes place. This
situation is caused due to lack of fit between the two
organizations. Such lack of fit is an issue and it has a great
impact on the acquired company as it affects its work culture,
organization and mainly on the employees working in the
company.

11. The uncertainties of M&As shift the focus of employees from

productive work to issues related to interpersonal conflicts,
 layoffs, career growth with the acquirer company, compensation
etc .Moreover, employees are worried about how they will adjust
with new colleagues. The merger involves downsizing, hence the
first thing that comes to the mind of employees is related to
their job security. Merger also leads to change in the well
defined career paths of employees. Due to these reasons
employees find themselves in completely different situation with
change in job profiles and work teams. This may have negative
impact on the performance of the employees.

12. Each company has its own set of values which may conflict with
those of acquired company. The employees may not be able to
accommodate themselves in new culture and thus may lead to
cultural shock. Inability to adapt to new culture increases stress
level among employees and results in low job performance. The
need therefore is to follow structured approach in dealing with
cultural differences.

13. The employees face great uncertainty which in turn produces

stress .Such stress ultimately affects their perception and
judgments. Due to stress among employees by M&A ,the most
common reactions displaced by them are as follows:

Loss of identity.
Lack of information & anxiety.
Talent is lost.
Family repercussions

WAYS TO OVERCOME IMPACT OF M&A ON EMPLOYEES &

WORKING CONDITIONS

1. Firstly organization must effectively develop and implement

assistance program for displaced employees. Such program
should include advance notification, severance pay extended
benefits, retaining program and outplacement activities.

2. Strong emphasis needs to be placed in determining whether

the acquired firms personnel is a good fit for the acquiring
organization and to whether the mass lay off can be avoided.
Moreover communication from the executive team with
employees in the pre-acquisition phase needs to be
consistent so that anxiety levels among the personnel can be
kept at low level.

3. Moreover a company not only needs to select a right target,

but also must have culture in place that accepts the
acquisition as quickly as possible.

4. There is need for developing and executing effective

employee communication, particularly conveying the
 employees that how the transaction will impact organizational
members. Communication between the members of
transferor and transferee Company should be open, honest
and strategic. Any information regarding the progress of the
deal or integration should always be shared among the
members because communication is very important
throughout M&A process.

5. Finance and the Legal departments are essential for the

successful implementation of the integration plan. Therefore,
the inputs from these departments should be taken into
consideration while working on the plan.

CONCLUSION

Thus in nut shell we can say that M&A have become common in our
countrys business set up. There is a tremendous need for people to grow
and become global players expanding their business spheres.

If success is to be achieved in M&A cohesive, well integrated and

motivated workforce is required who is willing to take on the challenges
that arise in the process of M&A and their should be proper organization
among employees and they should be provided with proper working
conditions.
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