MERGERS & ACQUISITION

The phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of
corporate strategy, corporate finance and management dealing with the buying,
selling and combining of different companies that can aid, finance, or help a
growing company in a given industry grow rapidly without having to create another
business entity.

Acquisition
An acquisition,(the ‘target’) by another. Consolidation is when two companies
combine together to form a new company altogether. An acquisition may be private
or public, depending on whether the acquiree or merging company is or isn't listed
in public markets. An acquisition may be friendly or hostile. Whether a purchase is
perceived as a friendly or hostile depends on how it is communicated to and
received by the target company's board of directors, employees and shareholders.

Distinction between Mergers and Acquisitions

Although they are often uttered in the same breath and used as though they were
synonymous, the terms merger and acquisition mean slightly different things.
When one company takes over another and clearly established itself as the new
owner, the purchase is called an acquisition. From a legal point of view, the target
company ceases to exist, the buyer "swallows" the business and the buyer's stock
continues to be traded.
In the pure sense of the term, a merger happens when two firms, often of about
the same size, agree to go forward as a single new company rather than remain
separately owned and operated. This kind of action is more precisely referred to as
a "merger of equals." Both companies' stocks are surrendered and new company
stock is issued in its place. For example, both Daimler-Benz and Chrysler ceased to
exist when the two firms merged, and a new company, DaimlerChrysler, was
created.
In practice, however, actual mergers of equals don't happen very often. Usually, one
company will buy another and, as part of the deal's terms, simply allow the acquired
firm to proclaim that the action is a merger of equals, even if it's technically an
acquisition. Being bought out often carries negative connotations, therefore, by
describing the deal as a merger, deal makers and top managers try to make the
takeover more palatable.
A purchase deal will also be called a merger when both CEOs agree that joining
together is in the best interest of both of their companies. But when the deal is
unfriendly - that is, when the target company does not want to be purchased - it is
always regarded as an acquisition.
Whether a purchase is considered a merger or an acquisition really depends on
whether the purchase is friendly or hostile and how it is announced. In other words,
the real difference lies in how the purchase is communicated to and received by the
target company's board of directors, employees and shareholders.

Varieties of Mergers
From the perspective of business structures, there is a whole host of different mergers. Here are a
few types, distinguished by the relationship between the two companies that are merging:

• Horizontal merger - Two companies that are in direct competition and share the same
product lines and markets.
• Vertical merger - A customer and company or a supplier and company. Think of a cone
supplier merging with an ice cream maker.
• Market-extension merger - Two companies that sell the same products in different
markets.
• Product-extension merger - Two companies selling different but related products in the
same market.
• Conglomeration - Two companies that have no common business areas.

There are two types of mergers that are distinguished by how the merger is financed.
Each has certain implications for the companies involved and for investors:
o Purchase Mergers - As the name suggests, this kind of merger occurs when one
company purchases another. The purchase is made with cash or through the issue
of some kind of debt instrument; the sale is taxable.
Acquiring companies often prefer this type of merger because it can provide them
with a tax benefit. Acquired assets can be written-up to the actual purchase price,
and the difference between the book value and the purchase price of the assets
can depreciate annually, reducing taxes payable by the acquiring company. We
will discuss this further in part four of this tutorial.
o Consolidation Mergers - With this merger, a brand new company is formed and
both companies are bought and combined under the new entity. The tax terms are
the same as those of a purchase merger.

IMPORTANCE OF MERGERS&ACQUSIATION

• Achieving economy of scale

• Complementary tax benefits
• Eliminating efficiency
• Obtaining proprietary rights for product services
• Expanding market share
• Penetrating to new global region
• Providing management with new opportunities
• Increase plant capacity utilization
• To make better use of existing sales force
• Reduce managerial staff
• Gain new technology
HR INTERVENTIONS

• Designing board members

• Who will occupy which job
• Assessing culture
• Human capital audit& management team
• Efficiency
• Retaining talent

Talent asses on various factors

• Feedback from superiors

• Subordinates feedback
• Past performance

What is Diversity Management? Diversity management is a

strategy that is intended to foster and maintain a positive workplace environment.
Usually initiated by Human Resources professionals and managed by department
heads and supervisors, an effective diversity management program will promote
recognition and respect for the individual differences found among a group of
employees. The idea of this management style is to encourage employees to be
comfortable with diversity in the workplace and develop an appreciation for
differences in race, gender, background, sexual orientation or any other factors that
may not be shared by everyone working in the same area of the company. The
underlying principle of diversity management has to do with acceptance. While
individuals retain their own sense of values and ethics, diversity management
encourages people to recognize that not everyone is alike. Rather than being
intimidated or prejudiced by those differences, employees are encouraged to accept
the fact that there are diverse interests, diverse values, and diverse physical and
emotional characteristics present within the office environment. Further, the
diversity present in the office does not have to hamper productivity or create
conflict. Instead, the diversity may function as helpful attributes that promote the
attainment of the goals and objectives of the department. Diversity management
can be adapted to many different types of working environments and be integrated
into many different types of management styles. Promoting recognition and
acceptance of diversity among the employees can convert a hostile workplace
environment into a welcoming environment where people freely communicate and
support one another with any tasks associated with the job. In doing so, the
implementation of a diversity management approach often makes it possible for
productivity levels to increase dramatically. One of the main advantages of a
strong diversity management program is that it tends to encourage the
development of latent skills and talents among employees. Individuals who may
have felt unable to move forward in the company due to factors such as race,
gender or sexual orientation find that these attributes are no longer issues. When
this happens, employees begin to feel valued and are more willing to step outside
their comfort zones and enhance their skill sets for the benefit of the departmental
team, the company as a whole and for the individual.

Diversity-Management Strategies
• Segregation
• Assimilation
– Overt
– Disguised as
• Transitory Pluralism
• Residual Multiculturalism
• Federative Pluralism
• Interactive Multiculturalism

Segregation is the “hierarchical separation of groups; where a more powerful group

keeps other group(s) separate and marginalized. At least one language of high status is
used to exclude speakers of low status languages
South-African Apartheid is one extreme example.
Assimilation
o complete and unconditional surrender of one’s own culture and the
adoption of the mainstream culture, resulting in the elimination of cultural
differences”
o “the micro-cultures of a country must rid themselves of their basic cultural
integrities and adopt the cultural value system of the dominant culture”
• assimilation wastes human capital of immigrant manpower (e.g teachers) & parents
Transitory Pluralism
• It’s OK for immigrants to hold on to their culture of origin and mother-tongue, but
only as temporary crutches that sustain them during the first period of
immigration; as soon as they master the dominant language, they are expected
to give up these crutches and adopt the new culture and language

Managing international assignments Many

multinational companies see advantages in posting employees abroad, to deploy
talent to best effect. But foreign postings can bring challenges. The company will
need to comply with tax and social security legislation in both the host country and
in the country of origin. At the same time, it will need to create employment
structures which avoid unnecessary tax or social security burdens.Managing
international assignments can be a complex process. And it can be both costly and
time consuming, especially if something goes wrong. So you need a strategic
partner, one who understands and is supportive of your company values and goals.
Not just now, but as your business changes and grows.
At Sterling, we believe that excellence comes with being more than just a service
provider. And we know that to provide a truly superior service, we need become an
extension of your HR team. We make it our business to know our clients’ challenges
and ambitions, just as well as we know our own. We ask what matters most to
them, and make sure that these are the areas where we excel.
What does this mean for you?
Improved service delivery: an account team that works in partnership with your
HR team, reducing your administrative burden and relieving your stress;

Reduced overheads: our focus on process efficiency and problem-solving means

you get impeccable quality, at attractive prices;

Decreased ‘noise’: our account handlers are the best in the business, and satisfied assignees
means fewer headaches for you;

Rapid project start-up: a thorough implementation process need not mean lengthy start-up
times, our stringent project planning means we really hit the ground running;

Reduced risk: we’re a stable partner for turbulent times: with steady growth and low levels of
corporate debt, you can count on us.

Some 44 per cent of multinational companies report an increase in the number of international
assignments to and from locations other than the headquarters over the past two years, according
to the annual International Assignments Survey carried out by Mercer Human Resource
Consulting.

The Process of Managing Expatriates

It is very important to develop a basic framework for the discussion of how to Manage
expatriates on global or international assignments. Black et al use people management to
effectively move and manage people in Global assignments. They identify a Global Assignment
Success Cycle to Conceptualize the term people management through. They view people
management as a set of activities instead of a function of a specific
Department. This means that each activity builds upon the others as the
process becomes an integrated package.
They identify five generic functions of managing people:
• Recruiting/selecting (getting the right people),
• training(helping people to do the right thing),
• appraising (determining how people are doing),
• rewarding (encouraging the right things that people do), and
• Developing (doing things right for people).
This is more or less inline with most other researchers who identify at least four stages; selection,
training (and development), adjustment and repatriation .Some researchers extend this and also
include other stages such as compensation, appraisal, and retaining No matter how many specific
phases the process is divided into the process of managing and supporting expatriates on
international assignments can be divided into three broader phases;
before the assignment, during theassignment and after the assignment.
The phase before the assignment would usually contain identification, selection, training and
development, and compensation. The argument for putting compensation in the phase before
the assignment is that it is typically agreed upon before the expatriate go on the assignment.
Before the Assignment
This phase contains selection and training of the expatriate. The time beforethe assignment can
vary, sometimes the international assignment arisesbecause of problems that have to be fixed
quickly, other times it is a process that expands over several months. No matter how long the
time horizon isthe company should pay attention to the selection and training stages in the
process of managing expatriates.
During the Assignment
When the expatriates and their families are send overseas adjustment and integration are very
important aspects of the process of managingexpatriates.
After the Assignment: Repatriation
Some might think that the process of managing the expatriate on an international assignment is
over once the expatriate returns to the home country. Some actually forget their employees when
they are overseas. But one of the most important phases in the process of managing expatriates is
the repatriation stage – and it is often forgotten.The question from companies around the world is
often: “why should we pay attention to the adjustment of expatriates and their families during
repatriation?” Based on research and experience by Black et al. (1999) failure to pay attention to
repatriation adjustment can have a negative impact on the bottom line, which can mean reduced
executive and managerial performance.

Cross-Cultural MANAGEMENT

Accordingly, significant rapid changes are continuously happening in the international market.
With these changes, the only way for the organizations to adapt and adjust is to consider
management models and approaches different from the traditional practices. Specified affective
aspects such as increasing global competition as well as rapid technological change urged most
companies to become more inclined with global operations and to managers to be transferred to
manage employees with diverse cultures .It can be said that culture is an essential aspects in
comprehending a company, because in order for the company to operate efficiently, the must for
some extent have a general set of assumptions, norms and belief. Because understanding the
context of culture is said to help organisations to be aware of how employees perceived about the
company and to determine how different attitudes, beliefs, and values affect the workplaces and
implicate the work of the manager (Bennett, Aston & Colquhoun, 2000). Comprehending and
assessing the national culture and organizational culture can mean the difference between the
success and failure of a manager in handling diverse employees. It can be said that cultural
differences posts some of the issue and opportunities for a manager, specifically Hong Kong
manager. Primarily, the main goal of this paper is to understand different theories of cross-
cultural management. In addition, this paper will also discuss how this cross-cultural diversity
affects Hong Kong managers.

Cross-Cultural Management Theories

 Aforementioned, one of the elements which must be given attention by the management
of the company is the cultural aspects, specifically if the company or the manager is managing
different or diverse cultures. There are various cross-cultural management theories that have
been provided by different theorists. In this paper, the cross-cultural management theories that
will be analysed include that of Edward T. Hall and Mildred Hall, and Geert Hofstede and Fons
Trompenaars.

It was stated by Hall and Hall (1973) that the most essential factors for having a successful
cross-cultural management system is to consider an efficient cultural communication. Herein, the
management or the manager of the company must make it sure that there are open avenues for
people to communicate efficiently. Hall & Hall (1976) has been able to identify two categories
of culture which have an impact on business operations and organizational performances. Such
categories include the High Context Culture and the low context culture. High Context categories
are regarded to have a very high established homogenous view in terms of religious values,
nationality and beliefs and attitudes (Hall & Hall, 1976). This form of culture can be easily
recognized among Arab countries and Japanese style of management. In this regard, the
communication aspects are given consideration such as gestures and body language. On one
hand, the low context culture notes that the concept of communication is more identified in
formal written records like what can be seen in the United Kingdom and United States.

The next theorist and cultural theory that will be considered is that of the cross-cultural
management theory of Geert Hofstede. According to this theory, culture can be classified
through different dimensions at a national level (Hofstede, 1991). Such dimensions include
power distance, masculinity-femininity, individual collectivism, long-term versus short-term
orientation and uncertainty avoidance.

Ø Large versus small power distance. it is noted that the large power distance is the extent
to which the employees or staffs or the members of the society admits that power in
organisations and companies is distributed unequally; while small power distance is the
notion in which members of a society or employees or staffs accept that power is
distributed fairly

Ø Strong versus weak uncertainty avoidance. This aspect means that strong uncertainty
avoidance addresses that the degree to which the employees feel uncomfortable with
ambiguity and uncertainty, which leads them to support beliefs that promises certainty
and to sustain institutions protecting conformity; while the weak uncertainty avoidance is
the level in which employees tend to be relatively tolerant of uncertainty and ambiguity
and needs autonomy and lower structure (Hofstede, 1991; Rodri

Ø Individualism versus collectivism. The individualism aspect is known to be the

preference for a loosely knit social model in society; whereas collectivism referred to a
preference for a tightly knit social model.

Ø Masculinity versus femininity. The context of masculinity refers to the preference for
fulfillment, heroism, fierceness, forcefulness, and material success; whereas the notion of
 femininity referred to a preference for modesty, relationships, nurturing and caring for the
weak and the quality of life.

It can be said that such cultural dimensions can assist the manager’s approach to
managing diverse culture (Hofstede, 1980). In addition, this can also help management strategies
easier to be implemented (Hofstede, 1980).

The next theory to be considered for analysing cross-cultural management is the theory
established or formulated by Fons Trompenaars. As noted by Trompenaars (1997), there are
seven dimensions of culture which is relevant to the relationships with employees or personnels
in an organization. These seven dimensions are Individualism vs. Collectivism
(communitarians), Universalism vs. Particularism, Specific vs. Diffuse, Neutral vs. Emotional,
Linear vs. Circular and internal vs. external control and Achievement vs. Ascription, Such
dimensions are attributed as the factors which can be useful for managing cultural diversities.