Question

TASK

back to top

In the contemporary management environment, mergers and acquisitions are hot topics; particularly as mergers and acquisitions are among the most commonly used strategies for growth. The pitfalls of mergers are well known and well-studied in the management literature.

Yet, there are some fundamental challenges that organisations keep stumbling over. One of them is integration. Preoccupation with due diligence and political factors surrounding merger negotiations too often leaves a crucial piece in the merger puzzle left till it is too late – integration of cultures and structures and people. It is well known today that poor results from mergers can so often be put down to people issues.

In this major assessment you are asked to analyse the following case and answer the questions below using a business report format. Further detail on the format of the business report are provided below.

Questions

Using the knowledge that you have gained from the subject up to and including Topic 9, Managing people, answer the following questions.

1. Identify and explore the potentially conflicting values in the case using relevant management theory and concepts. Contextualise your answer with reference to literature on integration problems in mergers and acquisitions, with specific reference to people issues. (Maximum 400 words)
2. Using theory and concepts from mergers and integration studies and with particular reference to structure and senior management, evaluate the process that is being applied to work out the details of the integration. Ground your answer in evidence regarding people and culture issues. (Maximum 700 words)
3. Make specific recommendations on how these issues of conflicting values can be resolved. (Maximum 500 words)
4. What process should the two senior executives and their HR teams follow to work through the detailed integration of the top management structure? (Maximum 500 words)
5. Critique the usefulness or otherwise of the management and organisational theories and practices from this subject that you have applied in analysing this case. (Maximum 400 words).

Case study: Who goes, Who stays?

HBR CASE STUDY

The merger between two pharmaceutical companies generated headlines first-and then headaches. One reason: CEO Steve Lindell has two executives for every available slot. As the stock price drops and talented people head for the exits, he must quickly decide whom to keep and whom to let go. Pass the aspirin.

The merger announcement between DeWaal Pharmaceuticals and BioHealth Labs was front-page, top-of-the-hour news. Pictures of CEO Steve Lindell and chairman Kaspar van de Velde, beaming at each other like long-lost friends at a college reunion, had appeared in newspapers around the world. DeWaal, based in the Netherlands, was an established European drugmaker, and BioHealth, head-quartered just north of New York City, had in recent years become competitive at the highest tier of the market. Both companies made and sold a wide range of drugs, from over-the counter pain relievers to AIDS medications. The new mega company, DeWaal BioHealth, would reap the benefits of scale: it would consolidate plants and staff while having more products to push through its distribution channels. Global headquarters would be in New York, but European manufacturing and sales would continue to be directed from Rotterdam. The new company's combined revenues were projected to top $8 billion.

Now, two months later, the TV cameras had moved on to a new story, and the hard labor of integration loomed. Ever since the announcement, Steve had worked tirelessly on clearing the regulatory hurdles presented by the FTC and the European Commission. And he noted with a mixture of satisfaction and relief that all signs pointed toward approval in the near future.

Yet Steve knew that the anticipated victory would be just the beginning of the game. The real challenge would lie in bringing together two very different cultures as quickly and efficiently as possible. He had to get the new company moving, and the first hurdle-it looked more like a pole vault to Steve-was selecting the top layers of management. At the moment, there were some 120 people on two continents for about 65 senior-level jobs.

Steve drained his third cup of coffee of the morning and checked his watch. Already 11AM. He'd been at the office since 6:30 and in meetings for the past three hours. Now he had an hour to prepare for his meeting with Kaspar at one of New York's finest restaurants. Steve had suggested the company cafeteria, but Kaspar had cajoled him into making the drive to the city by invoking "the need to maintain a civilized life in this frantic world of ours." The meeting's agenda consisted of one item: deciding who would fill the high-level management posts.

The Exodus

As Steve gathered up the mass of papers he would need and stuffed them into his briefcase, there was a knock on his half-open door. Alison Whitney poked her head in and said, "Hey -- got a minute?"

Alison was BioHealth's director of sales and marketing. She had shot into that position a year ago, at age 33, after establishing herself as the company's best sales rep. She had an easy, bantering relationship with Steve and was known for having her finger on the organization's pulse.

"I'm just out the door. What's up?'

"Yeah, I know, I know. You're meeting with Kaspar - that's what I need to talk with you about. I'll keep it brief."

"Fire away."

"I just have to let you know, before you make any final decisions about people, that everyone, and I mean everyone, here at corporate is terrified. Right or wrong, they think Kaspar is calling the shots. We've already lost, what, five people? And I can tell you, without naming names, that I know of three or four others who are weighing serious offers right now. Like I said, I had to let you know."

This wasn't the first time Steve had heard that people were confused about who was in charge. The question had already been raised by a handful of Wall Street analysts and a Business Week reporter. The confusion puzzled and irritated Steve. He was, after all, the leader of the bigger organization and the new company's CEO -- end of story. True, Kaspar had lost none of the drive and charisma that had made him one of Europe's most respected CEOs, but he was 62 and widely presumed to be on the road to retirement. That's why he had agreed to the position of chairman, Steve figured. But Kaspar, with his ability to charm the media, seemed to be creating the perception that he had more say in key decisions facing the new company than Steve.

The two men had worked well together during the merger negotiations. They had carefully traded off the positions at the very top of the new organization. Kaspar had insisted on having his people lead HR, operations in Europe, and global marketing; Steve, in return, had held out for COO, CFO, and head of R&D. Overall, Steve had been happy with the horse trading. The reports of tension between the two were based only on rumors, but Steve knew rumors could sometimes become facts if they are not quickly dispelled. All this flashed through his mind as he faced Alison.

Steve exhaled a big rush of air. He already knew what Alison didn't: that DeWaal's Albert Schenk, based on his extensive knowledge of global markets, was going to take over as the new company's director of sales and marketing. Steve was planning to offer Alison a job as head of U.S. marketing, but he wasn't sure she'd take it. He hated the thought of losing her.

"Look, Alison, do me a favor. Try to calm people down a little. I can guarantee you that our best people will have jobs - I'll see to it one way or another. And remember: this deal is going to be rewarding financially to the people who stay-that includes you. So a little more patience is in order. Okay?"

After a pause, Alison quietly responded. "Sure. Okay. Well" She looked a little embarrassed. "Have a good lunch, and watch out for that third martini."

Steve, who rarely drank, forced a smile. With a short wave, Alison left, and Steve realized that his heart was pounding. Four more people about to leave? That was news he could have done without. Just this morning, he had learned that a leading brokerage was downgrading BioHealth's stock from buy to hold. Steve had watched nervously in the past two months as BioHealth's stock price dipped 20% once the initial euphoria over the deal wore off. He knew that part of the drop was attributable to a general softening of the market, but stories about difficulty with the integration process had certainly contributed. As the company's stock options became less valuable to his managers, could he really be so surprised that people were heading for the exits?

Steve picked up the phone and dialed Bruce Bollinger, who would accompany him into the city.

"Bruce, you ready to roll? Let's go."

Going Nowhere Fast

Bruce had been BioHealth's head of HR. It was widely known that Bruce wasn't exactly a workaholic, but in Steve's eyes he made up for his 9-to-5 mentality in other ways. Bruce and Steve went way back. They had worked together for years, and the two played golf together every chance they got. Bruce was known for his stand-up comedy routines at company functions and his good humor on the golf course, which he treated like a second office. More important, he wasn't afraid to give his boss tough messages when he thought Steve needed to hear them, and he had a way of cutting through the baloney at staff meetings. When Kaspar had insisted on naming Christian Meyer as the head of HR, Steve had reluctantly agreed to demote Bruce to director of corporate training.

As Steve walked out of his office, he heard Brace booming down the hall at him. "Did you see that Tiger pulled out another one? I watched all 18 holes. Unbelievable."

Steve waited for him to catch up and replied, "No, no, I missed it. These days, I'm not sure I'd recognize my clubs if they fell on my big toe."

"You've got to get out more" Bruce continued to analyze Tiger's round until they ducked their heads into the car.

As they drove along, at first rapidly and then haltingly in the stop-and-go traffic of Manhattan, Steve unburdened himself to Bruce about the tough staffing decisions that lay ahead.

"You know, I don't care what the investment bankers say, I like to go with my gut. I like to look people in the eye and find out what they've really got. And I'm not that impressed with a lot of the people from DeWaal. Somehow our guys just seem to get it, and I can't get a good read on the Dutch. All right, so eight of them have left us already. They don't want to move to New York. They're fearful. Alison tells me that our people are too. I mean, I knew the headhunters would be hovering, but I can't believe they got to Sandy Allen. I always thought she would take my job someday, and what really gets me is that I negotiated hard to get the CFO job for her. Anyway, I'm sympathetic to every someone's fears and I'm trying to be as objective as possible, but ... Brace, help me out here"

Bruce looked up from the interview notes and résumés he'd been flipping through. "I think this meeting today is crucial" he said. "We've got to get resolution on our key people. Don't worry, I'll take on Meyer."

Steve hated to admit it, but Christian Meyer had become a bit of a thorn in his side. He wanted to do a lot of testing of the executives-for IQ, for emotional intelligence, for who knew what else. And he constantly talked about the fairness of the process. Steve's view was that fairness was a noble goal - and one they would strive for - but he had to look at the big picture, And speed, as the market

"We need to get on with this even if we don't make the perfect choices right now, we can fix things later. Meanwhile, we've got to consolidate where we can and get the reps up to speed on all our products."

As they pulled up to the restaurant, Bruce got in a final word. "One more thing: if I see Kaspar working his charms on you and getting the upper hand, I'll signal you by knocking over my beer."

Trouble Abroad

They had reserved a small private room at the restaurant. Steve and Bruce were on time; Kaspar and Christian, staying at nearby hotel, walked in 15 minutes later. After an exchange of pleasantries, the four sat down and ordered.

Steve, remembering what he'd been told about European corporate etiquette, held back form jumping straight to business. He reminded himself that they had the rest of the afternoon. Still, unlike his counterpart, he wasn't much for small talk -- and Kaspar's discourse ran from the fate of the euro to Quentin Tarantino, from Afro-Cuban music to the problems of reaching the world's poorest people with desperately needed medications.

That last topic, in a roundabout way, finally got them to the task at hand as the coffee arrived. Both DeWaal and BioHealth had several foreign plants, and Steve wanted to nail down which ones would remain open and who would run them.

Steve's plan for Asia went like this: they would close the DeWaal plant in Indonesia, which was redundant, and keep the BioHealth plant in Shanghai. Steve believed it was imperative to maintain a presence in China, and he was prepared to offer someone from DeWaal the number two spot there to sweeten the pill.

Meanwhile, the Dutch company had an operation in Bangalore, India, and the U.S. company had one in Bombay. The Bangalore plant was extremely efficient, and Steve was prepared-in the interests of fairness and despite his fear of seeing the headline "Lindell Caves to van de Velde (Again)" -- to close down the Bombay operation, The question was who to put in charge. The Dutch fellow -- what was his name, Peter Krug? -- had headed up the Bangalore operations for three years, and his resume was impressive. But Steve had a candidate too. Vijay Naipaul, who had been in the United States the past ten years since coming to business school from Delhi, was an ambitious and talented executive. If not for the merger, Steve would have put him in charge of operations at the Bombay plant. Being in charge of India would be his dream job, and Steve had been told by his COO that Vijay might walk if he get the job. Steve hoed that Kaspar wasn't too attached to Krug.

He quickly laid out his thoughts on Asia, hoping to move on to the touchy question of R&D management.

Kaspar looked up from his espresso and broke into a broad grin. "Oh dear, Steve, what are you saying. You know they will have my head in Rotterdam if we close the Indonesia plant-ties to the former colonies and all that. And you know, there are outstanding people running that plant. Really and truly! As for India, well, yes, by all means close the plant, but can we decide so quickly who will run the remaining one? Christian tells me we have a ways to go in the process of deciding such matters -- isn't that so, Christian?"

Steve jumped in . "Well, I'm sure we could find another spot for Krug. Perhaps if he and Naipaul were co-leaders of the Bombay plant...."

He was interrupted by the sound of a beer bottle falling to the floor.

Answer 1

To solve potential conflict issues need tp categorise this into 4 stages they are as follow =

Premerger stage.The premerger stage starts with the examination of a possible merger and ends with the official announcement of the merger. This stage includes planning and discussions among top managers and executives regarding a possible merger (Garpin & Herndon, 2000) and emerging rumors about the possible merger among employees (Ivancevich et al., 1987). The organizations are still likely to be relatively stable during this phase (Buono & Bowditch, 1989). Initial planning and formal combination stage. This stage starts after the M&A has been announced and ends once the former organizations have been legally dissolved and a new organization, often with a new name, has been created. This stage involves the creation of a new vision, new goals for the combined organization, and joint committees and teams to make decisions regarding management changes, staffing plans, and new organizational structure. Operational combination stage. This stage involves actual integration of organizational functions and operations. Interactions between the members of the combined organizations are extended from top management and joint committees to general work units and day-to-day operations (Garpin & Herndon, 2000). During this phase, budgets, space, work assignments, and reporting responsibilities are realigned. Employees are pushed to learn new ways of doing things, meet new performance standards, and adopt new value and belief systems (Marks & Mirvis, 1992). Because this phase impacts virtually all aspects—procedural, cultural, and role related—of the combined organization, it usually takes much longer than managers typically expect, sometimes years (Buono & Bowditch, 1989). Stabilization stage. The final stage is the consolidation process, as the operational integration is completed. Although changes and adjustments may continue throughout this stage, organizational stability recurs, and norms, roles, and organizational routines are stabilized.

2

the use of acquisitions to redirect and reshape corporate strategy has never been greater. Many managers today regard buying a company for access to markets, products, technology, resources, or management talent as less risky and speedier than gaining the same objectives through internal efforts.

Leadership and talent retention are critical HR-related components in post-merger and acquisition (M&A) integration, but the extent to which these factors interact with each other and eventually contribute to the success of post-M&A integration is under-explored. The present study investigates the effect of leadership styles on talent retention strategies and on the effectiveness of post-M&A integration in a Chinese context. Based on in-depth examination of an M&A case study, we propose that an authoritative, coaching, task-focused and relationship-focused approach has a positive influence on talent retention and effective post-M&A integration in a Chinese context. As far as talent retention strategies are concerned, authoritative leaders use communication, whereas leaders adopting a coaching style use an incentive structure to positively influence talent retention. Furthermore, task-focused leaders use position and performance in order to identify and retain talented employees. By contrast, relationship-focused leaders emphasize the guanxi network, communication and an incentive structure in their

strategies of talent retention.

HBR CASE STUDY =

In context to the case study, the best suitable organizational and management practice or theory that the merging companies; namely, DeWaal Pharmaceuticals and Bio-Health Labs must take under consideration is the “Agency Problems and Managerial Theory” (Leepsa and Mishra, 2016). When undergoing a merger or acquisition, every company tends to face a number of issues. For instance, as witnessed in the case study, the various conflict between the managers owing to their different interest, principals of stakeholders of the companies and so forth. Leepsa and Mishra (2016), have discussed the potential repercussions in context of agency problems. It has been further studied that the manager also considered as the agents of the shareholders and the company experience a number of conflicts during the merger. For instance, an executive who possesses fewer amounts of shares tends to give less time and effort to the profit generation activities of the company