1. MGTO 630B Managing People Globally for Competitive Advantage
Mergers & Acquisitions
Saturday, March 8, 2003

2. Summary of Ferodo Turnaround
John Tharme arrived as Managing Director of FTL (spent only 2 days with Mr. Worawut, previous MD)
Engineer, 30 years in SAfr. JV, few years as MD
Brought in by T & N management group
Found out that Peter Farrell never visited Thai factory, no strategic planning for Thai JV
Realized that Worawut was caught between being MD of FTL and being Mr. Subhawat’s friend
Had long-term view: JV would need 5 years before being profitable, need time to build up export, domestic markets

3. What Tharme did Provided marketing support for Boonpong – Mr. Subhawat
Cleared backlogged shipment to Ferodo, Australia
FTL bough back stocks from Boonpong, used stock to fill remaining Australian orders
Boonpong became non-exclusive distributor
David Jones brought in from South African JV to become Sales and Marketing Manager for FTL
Could sell in domestic as well as export market

4. Ferodo (B) illustrates
Successful transfer of business practices (Mr. Worawut  Mr. Tharme)/ sales and marketing (Boonpong, Mr. Subhawat  FTL, David Jones) knowledge from local (Boonpong) to global (FTL, T & N)
Turnaround in JV performance

5. Characteristics of Knowledge
Context specific versus context generalizable
Higher level versus lower level
Individual versus collective
Present versus future focused
Tacit versus explicit
General versus specific

6. Keys to Successful IJVs
Choose right partner
Goals, strategy, reliability
Find right local general manager
Local networks, ministries, suppliers, markets,
Choose right location
Control the IJV
Be prepared to be patient!

7. Alliance Takeaways Usually short-lived entities
HRM manages interface between alliance companies and people within them
Alliances characterized by duality between cooperation and competition, leveraging and developing competencies
Common characteristic of these conflicts is knowledge acquisition and learning – must be approached strategically for these learning objectives to be realized
Most important single factor determining IJV success or failure is CHOICE OF PARTNER

8. By the end of the M&A module, you should be able to:
Diagnose reasons for the failure and success of M&As
Develop strategy for improving success of M&A

9. Which factors influence the integration / differentiation of HRM Practices?
Factors contributing to local isomorphism (adapt to local context: internal consistency, integration)
Sector
Market
Embeddedness in local environment
Local environment
Factors contributing to differentiation
Organizational origin
Resource flows: capital, information, people
Corporate culture

10. HR practices that tend to be localized
Time off
Benefits
Gender composition
Training
Executive bonus
Participation

11. Knowledge Transfer and the Role of Alliances / M&As and Culture
National
Firm
Regional
Motivation and
Incentives to form
alliances, M&As
Knowledge transfer
through alliances, M&As
Ability to transfer
Knowledge through
alliances, M&As

12. AICC case PDI UAI IDV MAS LTO Switz. 34 (45) 58 (33) 68 (14) 70 (4) --
Does national culture and/or organizational culture influence what happened at AICC? What other factors contributed to the problems?
What are your recommendations for fixing the problems?
PDI
UAI
IDV
MAS
LTO
Switz.
34 (45)
58 (33)
68 (14)
70 (4) --
USA
40 (38)
46 (43)
91 (1)
62 (15)
29 (17)
Country rank (out of 50 for all except LTO (23)) in brackets

13. “Ever since they tried to make us an organization, we have stopped being an enterprise” -- Ron Wheeler
Is the present situation the result of poor adaptation of AICC to the changing business environment or is it the result of the different culture imposed by Masseverk?

14. Figure 6-1 (p. 252). Trends in International Mergers and Acquisitions
Source: Mergers and Acquisitions Almanac, February 2001, p. 37.

15. Mergers & Acquisitions: A few observations
Essential element of company growth strategy
Resource dependency and transaction cost theory support M&A activity
increase firm knowledge while minimizing transaction costs

16. Are mergers successful?
Measured by actual business results in comparable companies, less than ½ of merged / taken-over companies successful
No direct relationship between market or share value paid for a company and success of the merger
No direct relationship between relative size of the merging businesses and success of the merger
No direct relationship between whether mergers took place in associated or different industries and success of the merger

17. “If we buy up a company and the most important knowledge workers make off, then we have lost out already. Loyalty of our employees has a considerably higher value than in the past”. –Andy Grove, former Chairman of Knowledge-Based Company.

18. Turnover Rate of Executives

19. Summary: Reasons for M & A failures
Difference in vision for new entity
Loss of talent and capabilities, other intangible assets
Lack of understanding of system and processes in acquiring company
High transition and coordination costs
Lack of cultural fit

20. Figure 6-4. The Wheel of Fortune at General Electric
Source: R.N. Ashkenas, L.J. DeMonaco, and S.C. Francis, “Making the Deal Real: How GE Capital Integrates Acquisitions,” Harvard Business Review, January-February 1998, p. 167.

21. Synergon Case
Would events have unfolded differently if the M&As had been systematically planned?
Use the GE Pathfinder model in the previous overhead to diagnose what went wrong.
Develop recommendations about how you would fix the problem.

22. Why Mergers are Successful, part I
Effective strategic formulation of vision
Clear objectives of merger
Practical planning of phase BEFORE companies merged
Careful integration following merger
Source: Booz Allen Hamilton, 1997

23. Why mergers are successful, part II
Complete as quickly as possible (change is expected, don’t prolong the change process)
Make decisions quickly, communicate them openly
Specified schedule observed without deviation
Conflicts between partners to merger discussed openly
New company set objectives that are as ambitious as possible
Sources: Daniel Vasella (1st Chairman of Novartis (formerly
Sandoz and Ciba Geigy); Jurgen Schrempp (Daimler Chrysler);
LSE study.

24. M & A Takeaways
Best predictor of M & A success is previous experience with M & As
Vision and strategy for combined organization a must
Post-merger integration of culture and people consistently rank among main obstacles
HR contributes to M & A success by assessing culture and people practices to ensure retention of key personnel in both organizations
100 day period critical: insight, information, involvement, inspiration