MN5131 HRM in International Mergers and Acquisitions

Strategic Alliances Key aims – expand product, geographic and/or customer reach share strategies and vision handle environment more effectively Different forms, e.g. – merger international joint venture (IJV) wholly-owned subsidiary turnkey agreement Mergers – cyclical: boom in 1990s key means of international reorganisation

International Joint Ventures (IJVs) How do we define an IJV? Why do companies enter into IJVs? increase market power by combining resources reap economies of scale reduce risk by sharing it cooperate and avoid competition regain competitive edge symbolic benefits transfer of technology / management systems different opportunities for different companies What are the critical success factors?

Factors influencing IJV success and failure trust between the partners trust within the project compatible national systems & cultures compatible organizational systems & cultures Key HR issues in strategic alliances assignment of execs / promotion of managers cultural empathy / negotiation skills Criteria for success? – HRM auditing (i) partner selection (ii) start up (iii) venture management

China Recent trends growth of FDI (M&As, IJVs, partnerships) largest number of MNC affiliates in any economy (24m people) attractive location for MNCs (cheap labour, consumer markets) shift in mode of market entry (from IJVs to M&As / WFOEs) shift in R&D investments (from the ‘triad’ to China) Getting into China complex local ‘rules of the game’ role of intermediaries influence of central, regional & local government

Key difficulties in China transparency of laws and regulations customs and export procedures complexity of tax laws and government regulations contracting based on informal connections (guanxi) lack of formal legal contracts intellectual property rights (IPR) not well protected importance of group orientation, clear hierarchies, keeping face recruiting, managing and motivating personnel skill shortages and weaknesses in Chinese management important areas for HR interventions

International Mergers Major HR issues Outcomes depend on context / rationale Corporate transformation through M&As Poor performance of mergers Pressures to integrate – “home country effects” Legacy of distinct national systems - “host country effects” The search for balance – “merger of equals” The political dimension to M&As Role of the HR function

HRs Contribution to International M&As 8 key policy areas: understand strategic rationale, constraints & opportunities ensure cultural “due diligence” prior to deal move quickly but fairly in appointment of new mgmt teams identify realistic “synergy” targets comprehensive data on reward & costs of harmonisation establish flexible project management process communication – consistent, truthful and timely HR as “business-partner” – practical & financially-astute solutions