Tale of 2 Mergers

Assignment 4
Strategy Formulation and Implementation (MGMT.691-061)
Manning School of Business
University of Massachusetts, Lowell, MA
Instructor: Prof. Ashwin Mehta
16 July 2016

Assignment 4 Tale of 2 Mergers

Introduction:
A merger is a deal to unite two existing companies into one new company. There are several types
of mergers and also several reasons why companies complete mergers. Most mergers unite two existing
companies into one newly named company. Mergers and acquisitions are commonly done to expand a
companys reach, expand into new segments, or gain market share. All of these are done to please
shareholders and create value. Mergers and acquisitions have been on overdrive for more than a year.
Every company wants to grow, and M&A is traditionally seen as one of the key drivers for growth.
Making it happen, however, can be challenging. I found that as many as 75 % of mergers and acquisitions
fail to produce their intended financial results because people do an inadequate job of engaging
employees and integrating the culture of merging organizations (Sperduto, 2007)
In 2015, there was a record $4.30 trillion worth of mergers and acquisitions announced. Deal
making continues to be a popular way to grow revenue and earnings for companies of varying size.
Mergers are most commonly done to gain market share, expand to new territories, and unite common
products. There are five main types of company mergers:
Conglomerate: nothing in common for united companies
Horizontal: both companies are in same industry, deal is part of consolidation
Market Extension: companies sell same products but compete in different markets
Product Extension: add together products that go well together
Vertical Merger: two companies that make parts for a finished good combine
The case study examines P Pharmaceuticals horizontal merger experiences; first with S
Pharmaceuticals, and later with U Pharmaceuticals. The case compares and contrasts each merger process
from leading and communicating the change effort to the resultant transformations in corporate culture.
As the case study unfolds, the aftermath of leading change and the resulting corporate merger outcomes
are discussed.
This article was written to provide a student insight into:

Steps to Take for a Successful Merger

Key success factors for merger strategy and role of organizational culture in mergers
Some mistakes that companies make in mergers and how to avoid them

Assignment 4 Tale of 2 Mergers

Q1: Compare and contrast the implemented change processes between the two merger events.
A1: The actual change processes for each merger resulted in different cultural outcomes.
The first merger produced a marriage made in heaven mindset, while the second merger was
viewed more as a marriage of convenience. The PS merger closely followed Kotters process for
successfully leading change, while the PU merger appeared to be a rushed, dysfunctional process that
overlooked many of the structural methods required to ensure a smooth employee transition to a new
corporate culture. In the first merger, much of the procedure was planned around communication.
Management had a solo plan known by all, was getting everybody on board with the change and allowed
employees to get thrilled about the merged new company. They organized a merger party praising the new
company due to be completed 6 months later. In PU merger, Employees in both companies were not as
knowledgeable of the behind-the-scenes negotiations as they were with the PS Pharmaceutical merger
The organization in the first merger instituted key human resource management practices to
ensure employees are in the proper jobs, have the appropriate skills, and are compensated and rewarded
accordingly. In second merger there was poor implementation of key HR practices and also lack of
cultural collaboration within the newly formed company. There was loss of job of employees and no plans
for a unified culture were ever expressed. Everything was operated in confidence. Since the merger was a
go, no endeavor was utilized to try and build a new single company. Both companies kept their
headquarters instead of combining. There was insignificant or no cross training: even within the sales
team - while it was combined that was in form only; people remained with their previous products.
Even the firm name bossed to isolate employees that had initiated with S. Its nearly as if
company administrators didnt believe in the unification and thought that the companies might divide in
the future. It would appear that the company considered zero from its first merger experience.
Q2: Discuss what interpersonal communication skills are needed by organizational leaders,
managers, and staff employees during times of change.
A2: The leaders view integration as more strategic than non-managerial employees. The senior
management team focuses on the organizational structure, getting resources in place, and merger costs.
Employees feel the priorities during integration need not be designed around strategies of structure but for
senior leaders to focus more on the soft side of the merger. Employees want and need higher levels of
communication during times of change.
Leaders need to be on board and communicate the what and the why consistently and
confidently. They need to seek out employees reactions and feelings, listen to concerns with empathy and
take action when valid concerns are raised. Employees need to listen and ask questions to make sure they
understand what is happening and their role in it.
In first marge, organizational leaders, managers had more plan for employee, such as: organized a
transition team with members from both companies and representing all levels of the corporate
workforce; offered the golden parachute Because of the sensible policy for employees of both

Assignment 4 Tale of 2 Mergers

companies, so not having big problems in merger strategy. However, in second merger, problems between
leaders and employees are not attention. Employees were not as knowledgeable of the behind-the-scenes
negotiations. 10% of employees lost their jobs, feeling of distrust and disappointment
Therefore, following interpersonal skills are required:

Interpersonal communication: It is very important skill which is required by all level employees so that
there will be minimum or no confusion during the time of change. All the decision should be

communicated in an effective ways and proper feedback of impacted employees should be taken.
Ability to manage conflict: There are more chances of rise of conflict during implementation of change

because of non-approval of change by some employee or clash of interest.

Demonstrating responsibility: help to create a confidence in companys employee when manger will

perform the thing that he promised. It also gives a good indication about the impact of change.
Problem solving: During process of change, a lot of problem come in way, thus the entire employee

should have this ability to manage problematic situation.

Showing appreciation: a very important skill, helps in boosting self-confidence of employees.
Q3: Discuss how to implement cultural change during mergers.
A3: Organizational culture has been viewed as a key driver of organizational effectiveness and
performance, relating to many crucial organizational outcomes such as employee job satisfaction,
customer satisfaction, employee organizational commitment, withdrawal intentions, and turnover.
Differences in organizational cultures of merging may have a great impact on these work outcomes.
It is no having big conflict culture in the first merger, because when beginning, during and after merger,
managers always have good plan for their employees and this made their employees feel that they is a
important part for this merger. While in the second merger involved companies sharing a competitive
history, they had some conflict in culture: name for company, relationship between employees and
manager (employees were not as knowledgeable of the behind-the-scenes negotiations)
The new companys name should be considered thoroughly as it can have a direct effect on how
employees feel as evident in the PS-U merger. After the merger has been inked, a decision on whether to
keep one of the company cultures or merge into a new one should be made.
When two companies are merger, it is natural that people would compare their own group with
the other and make distinctions favoring their own group. It means that culture similarity can increase the
likelihood of successful merger. Moreover, the degree of cultural fit between two companies is a measure
of the shock that employees will experience by entering a new organizational environment. However,
the organizational culture fit is not always a necessary condition. In some cases, when organizational
culture is dysfunctional, both leader and employees want changes that lead to more constructive work

Assignment 4 Tale of 2 Mergers

environment.
Managers should know where the culture differences are and how each one will be resolved. The
P/S merger utilized assistance from an outside consultant. They had some things in common, namely the
strong and structured human resource practices that the employees were wanted to move forward into
the new company. Incentives and measurable goals should be put in place to encourage the movement
toward the new culture. Finally, clearly communications throughout the company help everyone knows
the new culture and is actively working to live it.
Q4: The second merger discussed in this case study did not result in a positive change experience.
What could organizational leaders have done differently to ensure a more positive outcome?
A4: Organizational leader could have done following things:

There should be a common plan for unifying culture of the two companies.
Effective communication among the employees so as to make them feel an important part of

organization and critical for merger.

Departments should be modified, as per the new requirements and lot of cross training should be

performed which is an effective way of building team.

Maintaining the integrity of company by retaining the presence of each company or making
complete change of name.

The communication surrounding the second merger was unpleasant. There were secret meetings
before the merger happened that left employees in the dark. Plus, employees received information of the
first talks failure from news reports. Because of the companies competitive history, leaders should have
agreed to not talk badly thus resulting in employee nervousness. Openly communicate their intentions
should had made it better.
In addition, there was no constant, combined plan for the merger, and combined culture was not a
goal. Each company had its own merger team. This lack of planning and foresight made several of PS
key leaders quit. This issue could have been rectified by a combined transition team and stated cultural
goals. Pre-merger research should have been done to foreseen the key leaders resigning and to prevent it
with good retention packages.
Next, Naming was a failure. Eliminating S from the name alienated those who had come from S.
Getting employees vote on the name is a better alternate. This would have made employees satisfy and
understand their importance to the company.
Finally, an inability to integrate operations was the result of focusing on telling employees that
nothing would change. Promoting a combined new culture should have been promoted to prevent ill will
among the two companies employees (as they did with the first merger).
Q5: What strategies can PU Pharmaceuticals implement now (long after the merger) to promote a
more positive organizational climate?

Assignment 4 Tale of 2 Mergers

A5: The first thing they would do is attempting to identify all the ways they failed in the merger. After
that, they would have a wide meeting and offer an apology to all employees, admitting their error and
claiming fault, and pledging to identify and fix the issues. They would encourage feedback from all levels
of the company, and provide an anonymous way for them to do so. Just based on the text some likely
starting points would be:

Focus on creating a unified culture so that structural changes that were lacked in the new system should
be created. Convene a committee, possibly enlisting outside consulting resources to identify the failures

in the cultural merge and determine ways to move forward and merge the two cultures.
Rebuild employee trust starting with opening up as much as possible the communication about what will
be happening to correct the issues. Consider a more inclusive company name; open it up to employee

suggestions.
Focuses on team building and Focuses on creation of an environment of equality where each employee

should be motivated to work for a common goal.

The structure of HR and another critical department should be reviewed so that fair representation of

peoples can be achieved.

Start investigating what it would take to have a single company headquarters. The company promotes the
thinking of one company and one goal at different point of time and reminding its employee about the
common values, vision and mission of the company.
Conclusion
No merger is easy. Each one takes into account a different set of variables: employees, products, culture,
history, etc. Advance planning will not only make mergers go more smoothly, it will help ensure a
successful merger with a promising future and make employees proud to be part of the new organization.
Good communication is essential to successful mergers. The communication role needs to begin during
the preliminary stages to set the scene. Too often the communication doesn't start until too late. Besides,
culture must be a focus in efforts to integrate companies, because when left to itself culture will often
undermine value-creation. By tying culture to value-creation and to identifying and changing specific
behaviors when necessary, culture can become an effective tool for achieving post merger integration
objectives.

Works Cited
http://www.investopedia.com/terms/m/merger.asp
Sperduto, V.W. (2007). The impact of the appreciative inquiry summit process on employee engagement
and organizational culture in a merger and acquisition. Dissertation,

Assignment 4 Tale of 2 Mergers

http://www.wsj.com/articles/four-mistakes-companies-make-in-mergersand-how-to-avoid-them1456110331
http://www.bain.com/publications/articles/integrating-cultures-after-a-merger.aspx
http://www.cuttingedgepr.com/articles/changecomm_good_comm.asp