Strategic management Lecture 8 Strategic decision and strategic goals.
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A
GROUP PROJECT REPORT
ON
“MERGERS & ACQUISITION STRATEGY”
SUBMITTED TO
SCHOOL OF MANAGEMENT
SRM UNIVERSITY
UNDER THE GUIDANCE OF
Mr. Prem Kumar
(Lecturer)
SUBMITTED BY
MRINAL DEO (35107176)
MEGHA SHARMA (35107167)
SATYA SHOBHAN NAYAK (35107287)
(BATCH 2007-09)
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Acknowledgements
We express our sincere thanks to Mr. Prem Kumar, our mini project guide to
have given us the opportunity to work on such a challenging project. We also
would like to thank the student fraternity for their feedback and response,
without which it would not have been possible to accomplish the project
successfully. Their timely directions & advice at every stage of the project has
facilitated in bringing the project in the present form.
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PREFACE
Mergers and acquisitions has been always at the forefront of corporate world,
especially India Inc., as it has proved to be a blessing in disguise and has yielded
significant brownie points for Indian economy. During the last few years when
our economy was on song, M & A’s has been selling like hot cakes and the
corporate honchos were making a beeline to acquire companies in order to add
value to their company profile and at the same time expand their global footprint.
In the present group project we have concentrated more on Merger and
Acquisition of Mittal-Arcelor, Hindalco-Novelis, Tata-chorus.
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Mergers and acquisitions
Introduction
Common ways to expand your business include making a strategic
acquisition or merging with another business.
An acquisition is when you buy another business and end up controlling it.
A merger is when you integrate your business with another and share control of
the combined businesses with the other owner(s).
It explains what you should know and understand about your own business,
how to find out whether a merger could benefit your firm, how to evaluate abusiness you hope to buy and staffing matters. It also goes into the legalities
involved in mergers and acquisitions.
OBJECTIVE OF THE STUDY
1. To study the review of Merger and Acquisition in the corporate world.
2. To understand the process of Merger and Acquisition involved.
3. To understand why the firms merge.
4. To understand how business is benefited through merger and acquisition.
5. To review the Merger and Acquisition of Mittal-Arcelor, Hindalco-
Novelis, Tata-chorus. Top 10 acquisitions made by Indian companies
worldwide.
6. And to understand why merger and acquisition fails.
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RESEARCH METHODOLOGY
The present study is focus on review and recent corporate Mergers
happened in India and analyzed the process followed and pitfalls. It aims
to provide analysis to go for better mutual beneficial deals in the form of
Merger and Acquisition in the corporate world.
DATA COLLECTION METHOD
Data has been collected from the following websites and articles published
in the newspapers.
www.wikipedia.org
www.einnews.coms
www.newsfeedmaker.com
www.economictimes.indiatimes.com/News
www.consultant-news.com
Types of Mergers
Mergers appear in three forms, based on the competitive relationships between
the merging parties. In a horizontal merger, one firm acquires another firm that
produces and sells an identical or similar product in the same geographic area
and thereby eliminates competition between the two firms. In a Vertical Merger ,
one firm acquires either a customer or a supplier. Conglomerate mergers
encompass all other acquisitions, including pure conglomerate transactions
where the merging parties have no evident relationship (e.g., when a shoe
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producer buys an appliance manufacturer), geographic extension mergers,
where the buyer makes the same product as the target firm but does so in a
different geographic market (e.g., when a baker in Chicago buys a bakery in
Miami), and product-extension mergers, where a firm that produces one product
buys a firm that makes a different product that requires the application of
similar manufacturing or marketing techniques (e.g., when a producer of
household detergents buys a producer of liquid bleach).
Corporate Merger Procedures
State statutes establish procedures to accomplish corporate mergers. Generally,
the board of directors for each corporation must initially pass a resolution
adopting a plan of merger that specifies the names of the corporations that are
involved, the name of the proposed merged company, the manner of converting
shares of both corporations, and any other legal provision to which the
corporations agree. Each corporation notifies all of its shareholders that a
meeting will be held to approve the merger. If the proper number of
shareholders approves the plan, the directors sign the papers and file them with
the state. The Secretary of State issues a certificate of merger to authorize the
new corporation.
Some statutes permit the directors to abandon the plan at any point up to the
filing of the final papers. States with the most liberal corporation laws permit a
surviving corporation to absorb another company by merger without submitting
the plan to its shareholders for approval unless otherwise required in its
certificate of incorporation.
Statutes often provide that corporations that are formed in two different states
must follow the rules in their respective states for a merger to be effective.
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Some corporation statutes require the surviving corporation to purchase the
shares of stockholders who voted against the merger.
Analysis: It is usual to consider mergers and acquisitions, in terms of the extentto which the business activities of the acquired organization are related to those
of the acquirer as falling into four main types:
1. Vertical: those of a vertical type combine to organizations from
successive processes within the same industry, e.g. A manufacturer may
acquire a series of retail outlets. The 1993 $6.6 billion merger between
Merck, a pharmaceutical manufacturer, and Medco, a pharmaceutical
distributor, is an example of a vertical deal.
2. Horizontal: Horizontal M&A combine to similar organizations in the
same industry.
3. Conglomerate: refers to the situation where the acquired organization is
in completely unrelated field of business activity.
4. Concentric: the organizations acquired is in an unfamiliar but related
fields into which the acquiring company wishes to expand, e.g. A
producer of sports good might acquire a leisure wear manufacturer.
Why Do Firms Merge?
Growth: One of the most common motives for mergers is growth. There are
two broad ways a firm can grow. The first is through internal growth. This can
be slow and ineffective if a firm is seeking to take advantage of a window of
opportunity in which it has a short-term advantage over competitors. The faster
alternative is to merge and acquire the necessary resources to achieve
competitive goals.
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Synergy: One of the most common arguments for mergers and acquisitions is
the belief that "synergies" exist, allowing the two companies to work more
efficiently together than either would separately. Such synergies may result
from the firms' combined ability to exploit economies of scale, eliminate
duplicated functions, share managerial expertise, and raise larger amounts of
capital.
Diversification: Other motives for mergers and acquisitions include
diversification, whereby companies seek to lower their risk and exposure to
certain volatile industry segments by adding other sectors to their corporate
umbrella. The track record of diversifying mergers is generally poor with a few
notable exceptions. A few firms, such as General Electric, seem to be able to
grow and enhance shareholder wealth while diversifying. However, this is the
exception rather than the norm. Diversification may be successful, but it seems
to need more skills and infrastructure than some firms have.
To gain tax advantages: In some cases, firms may derive tax advantages from
a merger or acquisition.
• A company may seek an acquisition because it believes its target to be
undervalued, and thus a "bargain" - a good investment capable of
generating a high return for the parent company's shareholders. Often,such acquisitions are also motivated by the "empire-building desire" of
the parent company's managers.
Mergers and acquisitions
How business is benefited:
There are many good reasons for growing business through an acquisition or merger. These include:
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• Obtaining quality staff or additional skills, knowledge of industry or
sector and other business intelligence. For instance, a business with good
management and process systems will be useful to a buyer who wants to
improve their own. Ideally, the business you choose should have systems
that complement your own and that will adapt to running a larger business.
• Accessing funds or valuable assets for new development. Better
production or distribution facilities are often less expensive to buy than to
build.
• Business underperforming. For example, if business is struggling with
regional or national growth it may well be less expensive to buy an existing
business than to expand internally.
• Accessing a wider customer base and increasing the market share. Your
target business may have distribution channels and systems you can use for
your own offers.
• Diversification of the products, services and long-term prospects of the
business. A target business may be able to offer you products or serviceswhich you can sell through your own distribution channels.
• Reducing your costs and overheads through shared marketing budgets,
increased purchasing power and lower costs.
• Reducing competition. Buying up new intellectual property, products or
services may be cheaper than developing these yourself.
•
Why mergers and acquisitions fail?
• However, even a deal that is financially sound may ultimately prove to be
a disaster, if it is implemented in a way that does not deal sensitively with
the companies' people and their different corporate cultures. There may
be acute contrasts between the attitudes and values of the two companies,
especially if the new partnership crosses national boundaries (in which
case there may also be language barriers to contend with).
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• A merger or acquisition is an extremely stressful process for those
involved: job losses, restructuring, and the imposition of a new corporate
culture and identity can create uncertainty, anxiety and resentment among
a company's employees.
• Managers, suddenly deprived of authority and promotion opportunities,
can be particularly bitter: one survey found that "nearly 50% of
executives in acquired firms seek other jobs within one year". Sometimes
there may be specific personality clashes between executives in the two
companies.
Strategies for a successful merger & acquisition
Why are so many organizations apparently unable to overcome such
difficulties? A merger or major acquisition is often a unique, one-off event in
the lifetime of a firm; companies therefore have no opportunity to learn fromtheir experience and develop tried-and-tested methods to ensure that the process
is carried out smoothly.
1. The integration of acquired companies is an ongoing process that should
be initiated before the deal is actually closed. During the period in which
the acquisition is being negotiated and subjected to regulatory review, the
management of the two companies can liaise with each other and draw up
a clear integration strategy. Starting earlier not only allows the integration
to proceed faster and more efficiently, but also gives the opportunity to
identify potential problems (such as drastic differences in management
style and culture) at a stage when it is not too late to abandon the deal if
the difficulties encountered seem so severe that the acquisition is likely to
fail. Unfortunately, however, even if a very thorough investigation is
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done prior to the acquisition, there are often potential problems that will
not manifest themselves until long after the deal has been done
(Ravenscraft and Scherer 1987). It is also impossible to take early steps
towards integration in the case of a hostile takeover bid (where the
managers of the company being acquired refuse to co-operate with their
potential buyers).
2. Integration management needs to be recognized as a "distinct business
function", with an experienced manager appointed specifically to oversee
the process. The 'integration managers' must have the interpersonal skills
and cultural sensitivity necessary to foster good relationships between the
management and staff of the parent company and its new subsidiary.
3. If uncomfortable changes (such as layoffs and restructuring) have to be
made at the acquired company, it is important that these are announced
and implemented as soon as possible - ideally within days of the
acquisition. This helps to avoid the uncertainties and anxieties that can
demoralize the workforce of a newly-acquired company, allowingemployees to move on and to focus on the future.
4. Perhaps the most important lesson is that it is important to integrate not
just the practical aspects of the business, but also the firms' workforces
and their cultures. A good way to achieve this is to create groups
comprising people from both companies, and get them to work together
at solving problems.
However a question arises whether aiming for total integration of two
contrasting company cultures is necessarily the best approach. There are, in fact,
four different options for reconciling cultural differences: complete integration
of the two cultures, assimilation of one culture by another, separation of the two
cultures (so that they are maintained side by side), or de-culturation (eventual
loss of both cultures). The optimal strategy may depend upon the degree of
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cultural difference that exists between the organizations, and the extent to which
each values its own culture and identity.
Tetenbaum (1999) suggests an alternative set of "seven key practices" to assistwith a successful merger or acquisition:
1. Close involvement of Human Resources managers in the acquisition
process; they should have a say in whether or not the deal goes ahead.
2. "Building organizational capacity" by ensuring that close attention is paid
to the retention and recruitment of employees during the acquisition.
3. Ensuring that the integration is focused on achieving the desired effect
(for example, cost savings), while at the same time ensuring that the core
strengths and competences of the two companies are not damaged by the
transition.
4. Carefully managing the integration of the organizations' cultures.
5. Completing the acquisition process quickly, since productivity is harmed
by the disorganization and demoralization that inevitably occur while the
change is underway.
6. Communicating effectively with everyone who will be affected by the
change. Other authors agree that "being truthful, open and forthright"
during an acquisition is vital in helping employees to cope with the
transition
7. Developing a clear, standardized integration plan. Tetenbaum cites theexample of Cisco Systems, which, like GE Capital, makes large numbers
of acquisitions and has been able to learn from its experiences and build
up tried-and-tested processes for carrying them out successfully.
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Recent Mergers and Acquisitions
Mergers and Acquisitions have been very common incidents since the
turn of the 20th century. These are used as tools for business expansion
and restructuring. Through mergers the acquiring company gets an
expanded client base and the acquired company gets additional lifeline in
the form of capital invested by the purchasing company. The recent
mergers and acquisitions authenticate such a view.
Novartis AG acquired 25% stake in Alcon Inc.
• This acquisition was worth 73,666 million common shares of the
company.
• They bought this stake from Nestle SA for $10.547 billion by
paying $143.18 for every share.
• It was a privately negotiated transaction that needed to have a
regulatory approval. Simultaneously, Novartis AG also received an
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offer of 52% interest that was equivalent of 153.225 million
common shares of Alcon Inc.
Indian Mergers and Acquisitions: The changing face of Indian Business
Nowadays, Indian Companies acquiring foreign business are more common
than other way round.
Buoyant Indian Economy, extra cash with Indian corporate, Government
policies and newly found dynamism in Indian businessmen have all contributed
to this new acquisition trend. Indian companies are now aggressively looking atNorth American and European markets to spread their wings and become the
global players.
The Indian IT and ITES companies already have a strong presence in foreign
markets; however, other sectors are also now growing rapidly. The increasing
engagement of the Indian companies in the world markets, and particularly in
the US, is not only an indication of the maturity reached by Indian Industry but
also the extent of their participation in the overall globalization process.
Here are the top 10 acquisitions made by Indian companies worldwide:
Acquirer Target CompanyCountry
targeted
Deal value ($
ml)Industry
Tata Steel Corus Group plc UK 12,000 Steel
Hindalco Novelis Canada 5,982 Steel
VideoconDaewoo Electronics
Corp.Korea 729 Electronics
Dr. Reddy’s Betapharm Germany 597 Pharmaceutical
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Acquirer Target CompanyCountry
targeted
Deal value ($
ml)Industry
Labs
Suzlon Energy Hansen Group Belgium 565 Energy
HPCLKenya Petroleum
Refinery Ltd.Kenya 500 Oil and Gas
Ranbaxy Labs Terapia SA Romania 324 Pharmaceutical
Tata Steel Natsteel Singapore 293 Steel
Videocon Thomson SA France 290 Electronics
VSNL Teleglobe Canada 239 Telecom
Graphical representation of Indian outbound deals since 2000.
Indian outbound deals, which were valued at US$ 0.7 billion in 2000-01,
increased to US$ 4.3 billion in 2005, and further crossed US$ 15 billion-mark
in 2006. In fact, 2006 will be remembered in India’s corporate history as a year
when Indian companies covered a lot of new ground. They went shopping
across the globe and acquired a number of strategically significant companies.
This comprised 60 per cent of the total mergers and acquisitions (M&A) activity
in India in 2006. And almost 99 per cent of acquisitions were made with cash
payments.
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Indian outbound deals, which were valued at US$ 0.7 billion in 2000-01,
increased to US$ 4.3 billion in 2005, and further crossed US$ 15 billion-mark
in 2006. In fact, 2006 will be remembered in India’s corporate history as a year
when Indian companies covered a lot of new ground. They went shopping
across the globe and acquired a number of strategically significant companies.
This comprised 60 per cent of the total mergers and acquisitions (M&A) activity
in India in 2006. And almost 99 per cent of acquisitions were made with cash
payments.
The total M&A deals for the year during January-May 2007 have been 287 with
a value of US$ 47.37 billion. Of these, the total outbound cross border deals
have been 102 with a value of US$ 28.19 billion, representing 59.5 per cent of
the total M&A activity in India.
The total M&A deals for the period January-February 2007 have been 102
with a value of US$ 36.8 billion. Of these, the total outbound cross border
deals have been 40 with a value of US$ 21 billion.
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There were 111 M&A deals with a total value of about US$ 6.12 billion in
March and April 2007. Of these, the number of outbound cross border deals was
32 with a value of US$ 3.41 billion.
There were 74 M&A deals with a total value of about US$ 4.37 billion in May
2007. Of these, the number of outbound cross border deals was 30 with a value
of US$ 3.79 billion.
The sectors attracting investments by Corporate India include metals,
pharmaceuticals, industrial goods, automotive components, beverages,
cosmetics and energy in manufacturing; and mobile communications, software
and financial services in services, with pharmaceuticals, IT and energy being
the prominent ones among these.
Hindalco – Novelis Merger (February 14, 2007)
Hindalco Industries Limited (HIL)
– Expanding across the Globe
Merger Key Highlights:
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ü Hindalco acquired Novelis in an all-cash transaction, which values Novelis at
enterprise value of approximately $6.0 billion, including approximately $2.4
billion of debt.
ü The combination of Hindalco and Novelis will establish a global integrated
aluminum producer with low-cost alumina and aluminum production facilities
combined with high-end aluminium rolled product capabilities.
ü Post acquisition, Hindalco will emerge as the biggest rolled aluminum
products maker and fifth-largest integrated aluminium manufacturer in the
world.
ü Novelis is the global leader in aluminum rolled products and aluminum can
recycling, with a global market share of about 19%. Hindalco has a 60% share
in the currently small but potentially high-growth Indian market for rolled
products.
ü Hindalco's position as one of the lowest cost producers of primary aluminum
in the world is leverageable into becoming a globally strong player. The Novelis
acquisition will give the company immediate scale and strong a global footprint.ü Novelis is a globally positioned organization, operating in 11 countries with
approximately 12,500 employees. In 2005, the company reported net sales of
$8.4 billion and net profit of $90 million.
ü The company reported net sales of $7.4 billion and net loss of $170 million in
nine months during 2006, on account of low contract prices. Some of these
contracts are expected to continue for next years also.
Positives for Hindalco:
ü Post acquisitions, the company will get a strong global footprint.
ü After full integration, the joint entity will become insulated from the
fluctuation of LME Aluminium prices.
ü The deal will give Hindalco a strong presence in recycling of aluminium
business. As per aluminium characteristic, aluminum is infinitely recyclable and
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recycling it requires only 5% of the energy needed to produce primary
aluminum.
ü Novelis has a very strong technology for value added products and its latest
technology ‘Novelis Fusion’ is very unique one.
ü It would have taken a minimum 8-10 years to Hindalco for building these
facilities, if Hindalco takes organically route.
ü As per company details, the replacement value of the Novelis is $12 billion,
so considering the time required and replacement value; the deal is worth for
Hindalco.
ARCELOR- MITTAL
MITTAL PROFILE:
The company is the largest steel producer in the world, accounting for about
10% of the total steel production Laxmi Mittal owner of Mittal steel, President
of the Board of Directors and Chief Executive Officer of Arcelor Mittal. He isthe founder of Mittal Steel and has been responsible for its strategic direction
and development.. Counting all shareholders 50.6% will be former Mittal
shareholders Mittal steel is the world’s largest and most global steel company,
with shipments of 49.2 million and revenues of over $28.1 billion in 2005. We
own steel making facilities in 16 countries, spanning four continents.
Mittal steel has set the pace for the consolidation and globalisation of the worldsteel industry. We have taken on the range of acquisition, many of the formerly
public sector-owned companies, and madesucceesses of them. In the process we
have spread best practice and modern production techniques our plants. Our
capital investment programme is unmatched in the industry.
Founded Sumatra, Indonesia(1989)
Headquarter Rotterdam, Netherlands
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Key people Laxmi Mittal, Founder, Chairman and chief Executive
Industry Steel
Products Steel, Flat Steel products, Coated Steel, Tubes and pipes
Revenue $4.746 billion USD year to 31 Dec 2005
Operating income $4.746 billion 2005
Net income $3.365 billion 2005
Employees 320000 2006
ARCELOR PROFILE
Arcelor has an annual installed production capacity of 11 million tons of flat
and long steel and is among the largest steel companies operating in latin
America. With a work force of 14,500.
Arcelor was created by the merger of Aceralia, Arbed and usinor and the
determination of these European groups to mobilise their technical, industrial
and commercial synergies in a joint venture to create a global leaderwith the
ambition of becoming a major player in the steel industry.
BACKGROUND (BEFORE THE DEAL)
Mittal Steel- the largest producer of steel in term of volume. Despite the fact
that Mittal steel is based Netherlands ,it is perceived that the company is non-
europan because it CEO lakshmai mittal is Indian .arcelor-headquartered in
luxembourge,the merger of three steel companies- aceralia,arbed and usinor led
to the creation of arcelor .in 2005, arcelor had revenues of 32 billion euros
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The orginal bid:-
In ja nuary 2006, mittel steel launched a $22.7 billion offer to Arcelor’s
shareholder. The deal was split between Mittal share (75 percent) and .the deal
was split between mittel shares (75percent) and case (25percent).under the
offer,Arcelor shareholders would have received 4 Mittal steel shares and 35
euros for every 5 Arcelor shares they held.
• The steel industry is highly fragmented ,the top 5 manufacturers in the
steel industry account for lase than 25 percent of the market. L.N.Mittalbelieves that the consolidation will end with three of four major
companies dominating the industry around 2010.
• Bigger steel manufactures have better better bargaining power against
customers (such as as auto manufactures) and against suppliers (iron ore).
• Consolidation helps in companies improving their sourcing of raw
materials; access to more market, better utilization, more flexibility in
production scheduling and better efficiency.
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The controversy:-
Arcelor management :the management believed that Arcelor
itself would have been doing the acquisitions and not the other way
around. The management was extremely hostiles to Mittal steel bid from
the beginning. Arcelor repeatedly played the patriotic card in order for
shareholder to reject the bid . The CEO of Arcelor dismissed Mittel steel
as a “company of Indian” and unworthy of taking over a Europeancompany.( all the fact that most industry and indvestment bank pointing
out that the deal was in Arcelor’s best interest)
ARCELOR MITTAL PROFILE:
Arcelor Mittal is the number one steel company in the world, with 320,000
employees in more than 60 countries. Created from the merger between Arcelor
and Mittal Steel, the Group is the leader in all major global customer segments,
including automotive, construction, household appliances and packaging.
Arcelor Mittal has leading Research and Development (R&D) and technology,
sizeable captive supplies of raw materials and outstanding distribution networks
to support its production process forming a truly integrated business model.
With an industrial presence in 27 European, Asian, African and American
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countries, the company has a substantial presence in all the key steel markets
providing
geographic as well as product diversity The company believes that globalisation
and consolidation are the only way forward to ensure long-term sustainability
and maintain profitability, throughout variable steel cycles.
BENEFITS OF ARCELOR MITTAL MERGER
• After merger Arcelor Mittal produces a diversified portfolio of quality
products and services to meet a wide range of customers’ needs across all
steel consuming industries.
• Strong relationships with customers are further strengthened by
innovative R&D facilities satisfying the most sophisticated customer
demands.
• The merger has also boosted financial strength and sustainability. The
year 2006 financials show combined revenues of US$88.6 billion, with a
crude steel production of 118 million tonnes, representing around 10 per
cent of world steel output.
• The merger is creating many benefits on both a geographic and product
basis. For example the plants in Eastern Europe are benefiting from the
expertise of their new colleagues in Western Europe. This will enable
them to more quickly improve product mix and take advantage of the
demand growth for more sophisticated products in this market.
• The success of the merger is also reflected in the financials. Mittal Steel
reported record results for the twelve months ended 31 December 2006
with sales soaring 109.3% to US$58.9 billion, EBITDA increasing 68%
to US$9.8 billion and net income up 52.4% to US$5.2 billion on account
of the merger with Arcelor.
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• Share price has performed very well since the merger was announced,
rising some 40% and further potential the merger has
Created.
Findings
• One of the most common motives for mergers is growth.
• How business is benefited through M&A-
a. Obtaining quality staff or additional skills.
b. Accessing funds or valuable assets for new development.
c. Accessing a wider customer base and increasing your market share.
d. Diversification of the products, services and long-term prospects of
your business
e. Reducing your costs and overheads through shared marketing
budgets
f. Reducing competition.
• Hindalco acquired Novelis in an all-cash transaction, which values
Novelis at enterprise value of approximately $6.0 billion, including
approximately $2.4 billion of debt.
• The combination of Hindalco and Novelis will establish a global
integrated aluminum producer with low-cost alumina and aluminum
production facilities combined with high-end aluminium rolled product
capabilities.
• After merger Arcelor Mittal produces a diversified portfolio of quality
products and services to meet a wide range of customers’ needs across all
steel consuming industries.
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• Strong relationships with customers are further strengthened by
innovative R&D facilities satisfying the most sophisticated customer
demands.
• The merger has also boosted financial strength and sustainability. The
merger is creating many benefits on both a geographic and product basis.
Conclusions
Although there are many different opinions on precisely what causes so many
mergers and acquisitions to fail, and on how these problems can be avoided,
there are certain points that most analysts appear to agree on. It is widely
accepted, for instance, that the 'human factor' is a major cause of difficulty in
making the integration between two companies work successfully. If the
transition is carried out without sensitivity towards the employees who may
suffer as a result of it, and without awareness of the vast differences that may
exist between corporate cultures, the result is a stressed, unhappy and
uncooperative workforce - and consequently a drop in productivity.
With this in mind, it is important that a clear 'integration plan' is in place, and
that it is overseen by a dedicated manager with the experience and interpersonal
skills to calm employees' anxieties and reconcile cultural differences.
Preparation for the transition should begin as soon as possible, preferably before
the deal has been signed, and any necessary changes should be implemented as
quickly as possible to avoid stressful uncertainties that can damage morale.
Open and honest communication throughout the process is vital in retaining the
trust of employees.
Even when following these principles, there may be situations in which a tie-up
between two companies could never be made to work effectively, because there
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are irreconcilable differences in corporate culture or because the drawbacks of a
merger would outweigh any potential benefits.