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Managing a Business/Mergers and Acquisitions.

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QUESTION: Dear Aniket

http://en.wikipedia.org/wiki/Mergers_and_acquisitions

Examples :

1. Company A has been acquired by Company B.
2. Company A has been merged with Company B.

From the Employees perspective who are working in Company A, which among the two i.e. Acquisition OR Merger could be more risk prone from Job security point of view ?.

Awaiting your reply,

Thanks & Regards,
Prashant S Akerkar

ANSWER: Acquisition: Legally, acquisition is termed as taking over of one company by another company may be 100% or in some ratios. Acquisition varies from a section of the organization to the complete organization. E.g. company A acquires company B completely, in that case its upto company A to either use the name of company B for marketing or not. It entirely depends on the market value of company B.
As far as the job security of employees of company B is concerned, it entirely depends on the decision makers of company A and the credibility of the company B resources. Company A holds the full rights of entertaining the resources of company B and it also depends on how company B sells its resources to company A.
It has been seen on several occasions that the company A mostly retains the employees of the  company B for some time and with the course of time the allocations of the resources is done as per the demand. In the case of cross-border acquisitions the job-security is very high when there is no facility of company A in that region and company A has to expand its market in that particular region.
But when we think of same region acquisitions or small segment acquisitions, there is always a threat of job-loss because most of the times, company A may demand the relocation of the resources to the most likeable region. E.g. company A is from Bangalore and acquires a stake in company B which is located in Pune, in that case company A will try to relocate the resources of company B to Bangalore instead of opening a new facility in Pune. But again it entirely depends on the market value of the stake it acquired and the credibility of the resources working for that stake in company B.
Normally at the time of the 100 % acquisition, the job-loss threat is minimal and instead the resources are sometimes benefitted with the policies of the new company.
Merger: Legally, it is the consolidation of the two companies either complete or up to some extent. E.g. Nokia merged with Siemens and became Nokia-Siemens, KPIT merged with Cummins and became KPIT-Cummins and many others but in these cases the merger was not 100% as Cummins, Nokia, Siemens are running their businesses in other sectors individually.
During the merger of the two organizations, the job-security is very high as the two organizations respect the credibility of each other resources and the merger is done after checking the market value of the two organizations and how well the resources perform in the respective fields. In this case the policies of the merged entity are redefined and the resources are benefitted with these new policies only which sometimes lead to the unlikely situations but it's manageable.
So, at broader level the job threat to the resources is more in the case of the acquisition comparing with the merger. Certain factors which lead to the job threats during acquisition are (consider company A acquires company B completely):
  Resources of company B are not competent enough to match the competence level of the resources of company A
  The management of company B has shown some fake credentials to company A to sell off the entity
  The company A is located in some other part of the same country and the resources of company B are not willing to relocate. On the other hand, company A is not interested in opening a new facility at the location of company B.
During the time of the merger, the market value of both the organizations is analyzed and then only the consolidation is done and thus it has a minimum threat of job-loss.
There are certain other factors involved in the M&A which cannot be discussed in one page answer. I hope you have got the answer to your question.


---------- FOLLOW-UP ----------

QUESTION: Dear Aniket

Thank you.

Can there be scenarios where mergers or acquisitions can take place between more than two companies  ?.

i.e. n > 2 where n = Company / Organisation / Corporate / Firm.

Example : n = 3

1. Company A is merged with Company B and Company C.

Company A is the Parent Co.

2. Company A acquires Company B and Company C.

Company A is the Parent Co.


In reality, Can this business transaction/s take place (n>2) ?.

i.e. 1 or 2 can also happen ?.

Or

Mergers and Acquisitions will be always hold true for the equation n=2.

Awaiting your reply,

Thanks & Regards,
Prashant S Akerkar

ANSWER: Hi Prashant,

Theoretically, the M&A is possible for n>2 as well (in this case n=3). But if we check the practical aspects we would find that there are certain glitches in the process. The organization with the least number of shares will suffer the most as the policies of that organization will not be considered much and in turn the job threat to the employees of the organization with the least number of shares would increase.
However I have not seen any M&A where n>2 but the but the world has seen many unpredicted collaborations.

The process will require regressive assessments before finalizing the steps for M&A of more than two organizations to avoid any grievances in the future.

Br/Aniket

---------- FOLLOW-UP ----------

QUESTION: Dear Aniket

Thank you.

The following mentioned below are just hypothetical examples.

DaimlerChryslerAudi  - Daimler - Primary Co (Acquiring), Chrysler and Audi Secondary (Acquired) cos.
MercedesBenzNissan - Mercedes - Primary Co (Acquiring), Benz and Nissan Secondary (Acquired) cos.
The Bank of Tokyo-Mitsubishi UFJ-HSBC Bank plc -  The Bank of Tokyo - Primary (Merging) Co, Mitsubishi UFJ and HSBC Bank plc - Secondary (Merged) cos.

Theoretically, as you mention the above examples can be possible but
maybe not practical because it may lead to Business Risks, Business Transactions Complexities ?.

Awaiting your reply,

Thanks & Regards,
Prashant S Akerkar

Answer
Yes, apart from the business complexities, there is branding and endorsement planning as well. The two companies merging or a company acquiring other always checks the brand value of the other company.
As I said there may be possibilities where you can find a merger of more than 2 organizations. You can search it online. By the way if you find any such merger, do let me know as well. I would be keen to learn the history of such merger.

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Aniket S Sharma

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I can answer questions related to business analysis, requirements gathering and management, requirements assessment, solution validation and assessment, Risk analysis, Gap Analysis, SWOT analysis, knowledge areas of business analyst, Use Case estimation, Functional and Non-functional requirements, business case and plan, business communication, presentation skills, conflict management, ITIL processes, Service Operation, Service Transition, Change Management, Problem Management, Incident management and many more.

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