INTRODUCTION

WHY DO MERGERS OR ACQUISITIONS TAKE PLACE?

A Merger is a legal transaction in which two or more organizations combine operations through
an exchange of stock. In a merger only one organization entity will eventually remain. An
acquisition is a purchase of one organization by another. In recent years, there were quite a few
acquisitions in which the target firms resisted the take-over bids. These acquisitions are referred
to as hostile takeovers. It is natural for the target organization’s management to try to defend
against the takeover. Although they are used synonymously, there is a slight distinction between
the terms “Merger” and “Acquisitions”.

When a company takes over another to become the new owner of the target company, the
purchase is called an acquisition. For the legal angle, the “target company” ceases to exist and
the buyer “gulps down” the business and stock of the buyer continues to be traded.

It is believed that mergers and acquisitions are strategic decisions leading to the maximization of
a company’s growth by enhancing its production and marketing operations. For example, it is
recommended that mergers and acquisitions are indented to:

 Limit competition

 Utilized under-utilized market power

 Overcome the problem of slow growth and profitability in once own industry

 Gain economies of scale and increase income with proportionately less investments

 Circumvent government regulations

 Reap speculative gains attendant upon new security issue or change in P/E ratio

 Create an image of aggressiveness and strategic optimism , empire building and to amass
vast economic power of the company
PROBLEM DEFINITION

The merger of both the companies i.e. erstwhile Indian Airlines Limited and Air India to form a
new entity namely NATIONAL AVIATION COMPANY OF INDIA LIMITED, along with a
comprehensive transformation program, is imperative to improve competitiveness. It will
provide an opportunity to leverage combined assets and capital better and build a stronger
sustainable business, the merger will

 Create the largest airline in India and comparable to other airline in Asia

 Provide an integrated international/ domestic footprint which will significantly enhance

customer proposition and allow easy entry into one of the three global airline alliances.

 Enable optimal utilization of existing resources through improvement in load factor and
yield on commonly serviced routes as well as deploy ‘freed up’ aircraft capacity on
alternative routes.

 Provide an opportunity to fully leverage strong assets, capabilities and infrastructure.

 Provide an opportunity to leverage skilled and experienced manpower available with both
the companies to the optimum potential.

 Provide a larger and growth oriented company for the people and same shall be in large
public interest.

 Potential to launch high growth & profitability businesses (ground handling services,
maintenance repair and overhaul etc.)

 Provide maximum flexibility to achieve financial and capital restructuring through

revaluation of assets

 Provide an increased thrust and focus on airline support businesses.

RESISTANCE TO CHANGE

Most people prefer predictability and stability in both their personal and professional lives.
People typically avoid situations that upset order, threaten their self-interests, increase stress or
involve risk. When faced with changes to the status quo, people usually resist initially.

People don't like change because they don't like being changed. When change comes into view,
fear and resistance to change follow – often despite its obvious benefits. People fight against
change because they:

• fear to lose something they value, or

• don't understand the change and its implications, or

• don't think that the change makes sense, or

• Find it difficult to cope with either the level or pace of the change.

Resistance emerges when there is a threat to something the individual value. The threat may be
real or it may be just a perception. It may arise from a genuine understanding of the change or
from misunderstanding, or even almost total ignorance about it.

WHY IS CHANGE SO HARD?

First of all, most people are reluctant to alter their habits. What worked in the past is good
enough; in the absence of a dire threat, employees will keep doing what they've always done.
And when an organization has had a succession of leaders, resistance to change is even stronger.

A legacy of disappointment and distrust creates an environment in which employees

automatically condemn the next turnaround champion to failure, assuming that he or she is "just
like all the others" Calls for sacrifice and self-discipline are met with cynicism, skepticism, and
knee-jerk resistance

PEOPLE SUPPORT CHANGE WHEN

 • They expect that it will result in some personal gain.

• They expect a new challenge as a result.

• They believe that the change makes sense and is the right thing to do.

• They were given an opportunity to provide input into the change.

• They respect the person who is championing the change.

• They believe it is the right time for the change.

SCOPE OF THE STUDY

The target segment of my study included the employees of the two organizations across different
departments. The merger was between Air India and Indian Airlines each having different work
cultures and market operations. While Indian Airlines operated in the domestic sector, Air India
was in the international sector. Hence it was natural that the resistance to the change process
would not be identical owing to these differences.

There existed a difference of opinion over the reason for the merger in the 2 organizations. Each
has been affected in a different way. Now that it is a merged organization, coherence is required
therefore it was essential to compare and study the employees’ perceptions of both the
companies separately and as a whole.

Such a study would help in identifying problems unique to each company as well as each
department and help in devise specific plans to minimize the resistance in the organization.

RESEARCH METHODOLOGY

Management questions are basically restatements of the management dilemma in question

form. Keeping in mind all this, the MANAGEMENT OBJECTIVE of the company was:

To determine ways to minimize the resistance of the employees towards the merger and
therefore make it an acceptable change process.
RESEARCH OBJECTIVE

A research question is one which best states the objective of the study. By asking the right
research questions I arrived at my research objective which is stated as follows:

• “To understand the employees’ perspective of the merger and analyze the factors
responsible for resistance to the merger.”

• “To determine, why mergers and acquisitions are required”

• “To study what are the factors leading to mergers etc.”

The research objective was formulated keeping in mind that the merger was a current happening
in the organization. It is an extremely sensitive topic and the employees’ perspective (which was
the need of the hour) was not taken into consideration.

This study will be extended to employees of both Air India and Indian Airlines, so as to see if
there is any variation amongst responses of people in both the organizations. In addition a lot of
primary sources of data, secondary sources of data like the newspapers, magazines and
tertiary sources like the internet to find out about the latest happenings in the aviation sector is
utilized.

Primary sources are original works of research or raw data without interpretation or
pronouncements that represent an official opinion or position. Secondary sources are
interpretations of primary data where as tertiary sources aids to discover primary or secondary
sources or an interpretation of a secondary source. Based on the information collected at this
stage it is decided to proceed with the construction of the questionnaire, the methodology of
which is explained in the next section.

The data generated were both nominal as well as ordinal.

A single open ended question will be designed keeping in mind the difficulty in analyzing them
as well as their usefulness in conveying information.

After the initial preparation of the questionnaire, a pilot survey will be conducted on 20
respondents to study the short comings of the questionnaire. This task will reveal that whether
some minor changes is required in the questionnaire.

DATA COLLECTION

The main objective of the study is to understand the employees’ perspective on the merger. A
clear study of this is needed to understand the reasons for the resistance to the merger. In
addition the study is needed to find out whether there was a difference in perception of the
employees’ of the different departments as well as the two organizations i.e. Air India and Indian
Airlines. Hence the data collection is planned in such a way that a number of samples from
different departments collected.

SAMPLING TECHNIQUE AND SAMPLE SIZE:

The sampling technique used for data collection is judgmental sampling which is a type of non
probability sampling. Non probability sampling is an arbitrary and subjective sampling
procedure where each population element does not have a known, non zero chance of being
included. Probability sampling is a controlled, randomized procedure that assures that each
population element is given a known, non zero chance of selection.

The objective of this research is to collect as many samples as possible whose responses
reflected that of the majority of the population. Since non probability sampling met those
requirements and also because of the cost and time constraints it is chosen over probability
sampling. Judgmental sampling is a type of non probability sampling in which the researcher
arbitrarily selects sample units to conform to some criterion. This technique will be used keeping
in mind its simplicity and accuracy. Having chosen the sampling technique I had to decide on the
sample size.
It is advised to sample about 200 employees, 100 each of Air India and Indian Airlines. This
was done on the advice of the industry guide as that sample size would be representative of the
organization. Also owing to the time constraints a larger sample size would not be possible.

Limitations of the Study:

1. The major limitation of the study is that the results will be skewed towards the employee

perception in Northern region only.

2. As the level of fear and mistrust in the employees may be very high and the scope of the

project misunderstood, a lot of them may refuse to fill in the questionnaire. Also they

might have been a bit apprehensive and hence not given the exact responses.

3. The shortage of time is the major limitation to carry out such a study.

Chapterization

Chapter 1: Introduction

Chapter 2: Review of Literature

Chapter 3: Organizational Profile

Chapter 4: Research Methodology

Chapter 5: Data Analysis and Findings

Chapter 6: Conclusion and Suggestions

References

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Dr. Edward Amoroso, AT&T
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tml

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