February 19, 2020
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Acquiring More Than A Business

India Inc picks up some people skills as it realises that skillful handling of people post mergers proves crucial. People-issues become more and more complex with mergers and acquisitions happening so frequently.

Acquiring More Than A Business

With India stepping harder on the peddle to drive into the acquisition arena in 2007, skillful handling of people post mergers has become crucial. People issues are becoming more and more complex with mergers and acquisitions happening so frequently -- Fortis buying Escorts, Kingfisher Airlines getting a stake in Air Deccan, Jet buying Sahara Airlines and so on -- in the business arena. India Inc is realising that this factor would distinguish the winners from the also rans. 

Clear, well defined strategic direction, consistency between strategic intent and post merger integration and engagement with the society in which the business is located have become intrinsic to practices of Indian companies. Studies reveal that 60-75 per cent of the M&As fail due to integration issues.

While the economic goals of an M&A deal are hard and clear -- improved profit margins, greater market share, economies of scale -- the means to achieve them are largely `soft'. These include formation of a transition management team, assigning a people-sensitive executive leader with excellent strategic and interpersonal skills to oversee the post-acquisition integration process full-time; and clear, timely, messages to the employees. Indian companies are veering around to adopt some of these tools. 

Along with these acquisitions, people issues are also becoming more and more complex, feels Santhosh Babu, Managing Director, Training Alternatives. "Some of the typical problems faced by employees include feeling of loss as teams are split up and are merged into a new team, lack of trust in the new team members and unclear roles that give rise to uncertainty and negativity," says Babu, who has customised programmes for Airtel, VST, Dalmia Sugar, Daksh IBM, Ranbaxy, Birla Soft among others. 

Groups like the Tatas conduct what they call a "cultural due diligence". For example, when Tata Steel acquired NatSteel in Singapore, the code of conduct was put together and several sessions held to communicate what was acceptable behaviour. During the Voltas and Kelvinator acquisition by Electrolux, HR officials thought it was essential to reach out. First they used the informal channel--basically opinion leaders and spokespersons in the acquired company, who influence opinion and who people listen to. The employees were then also allowed to operate in their same designations for six months more, working parallel. In six months a proper assessment of the performance was made, and background and profiling, then only were they given a level setting. 

Companies like Hinduja stress on a strong leadership to steer cross cultural dynamics into a fruitful integration exercise. "With that in mind, hiring of talent at the level of leadership has also undergone a subtle change," says Ramachandra Rao, Group President, HR, Hinduja Group India Ltd. "People with global mindsets, who have the potential to function and take challenges across borders, ability to tackle complicated environments and are flexible enough to be deployed anywhere are favoured. At the same time, potential leaders are rotated across geographies as part of their training to tackle integration issues." 

For a particular bank acquisition in India , the cultures and pay scales were different, the imbalance was too difficult to mange. This resulted in all synergies being lost. 

Marriages are made in heaven, but M&A deals on earth, industry captains are realising.

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