Impact of Mergers & Acquisitions on Human Resources


S. Naga Pavani
Asst. Professor
AMC Engineering College
M.B.A Department
Bannerghatta Road, Bangalore

"Always recognize that human individuals are ends, and do not use them as means to your end."


Mergers and acquisitions have become a common phenomenon in recent times that synergies exist, allowing the two companies to work more efficiently together than separately. A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another with no new company being formed.

The merging entities give a great importance to financial matters and the outcomes, HR issues are the most neglected ones. Ironically studies show that most of the mergers fail to bring out the desired outcomes due to poorly managed HR issues. HR should play a significant role in all mergers and acquisitions LONG before the deal is executed. 

All areas of human resources and labor relations must be monitored and analyzed employment practices (job descriptions, classifications) compensation practices, etc. benefits (design & administration), organization design, training & development practices, performance management, safety and risk management, communications, employee relations. Differences in any of those areas may seem minor to leadership, but major to the employees who are impacted. 

Any decision to carry out a merger or acquisition should consider not only the legal and financial implications, but also the human consequences It is widely accepted, that the 'human factor' is a major cause of difficulty in making the integration between two companies work successfully. If the transition is carried, without awareness of the vast differences that may exist between corporate cultures, the result is a stressed, unhappy and uncooperative workforce and consequently a drop in productivity.

Recent Mergers & acquisitions undertaken Some of those are :Hindalco acquired Canada based Novelis, Tata Steel acquired Corus Group, Dr. Reddy's Labs acquired Betapharm  Ranbaxy Labs acquired Terapia SA and VSNL acquired Teleglobe.

The process of mergers and acquisitions has gained substantial importance in today's corporate world. This process is extensively used for restructuring the business organizations. In India, the concept of mergers and acquisitions was initiated by the government bodies. Some well known financial organizations also took the necessary initiatives to restructure the corporate sector of India by adopting the mergers and acquisitions policies. The Indian economic reform since 1991 has opened up a whole lot of challenges both in the domestic and international spheres. The increased competition in the global market has prompted the Indian companies to go for mergers and acquisitions as an important strategic choice. The trends of mergers and acquisitions in India have changed over the years. The immediate effects of the mergers and acquisitions have also been diverse across the various sectors of the Indian economy.

Mergers and Acquisitions Across Indian Sectors:

Among the different Indian sectors that have resorted to mergers and acquisitions in recent times, telecom, finance, FMCG, construction materials, automobile industry and steel industry are worth mentioning. With the increasing number of Indian companies opting for mergers and acquisitions, India is now one of the leading nations in the world in terms of mergers and acquisitions. 

The merger and acquisition business deals in India amounted to $40 billion during the initial 2 months in the year 2007. The total estimated value of mergers and acquisitions in India for 2007 was greater than $100 billion. It is twice the amount of mergers and acquisitions in 2006.

Mergers and Acquisitions in India: the Latest Trends

Till recent past, the incidence of Indian entrepreneurs acquiring foreign enterprises was not so common. The situation has undergone a sea change in the last couple of years. Acquisition of foreign companies by the Indian businesses has been the latest trend in the Indian corporate sector. 

There are different factors that played their parts in facilitating the mergers and acquisitions in India. Favorable government policies, buoyancy in economy, additional liquidity in the corporate sector, and dynamic attitudes of the Indian entrepreneurs are the key factors behind the changing trends of mergers and acquisitions in India.

The Indian IT and ITES sectors have already proved their potential in the global market. The other Indian sectors are also following the same trend. The increased participation of the Indian companies in the global corporate sector has further facilitated the merger and acquisition activities in India.

Major Mergers and Acquisitions in India

Recently the Indian companies have undertaken some important acquisitions. Some of those are as follows:

Hindalco acquired Canada based Novelis. The deal involved transaction of $5,982 million. Tata Steel acquired Corus Group plc. The acquisition deal amounted to $12,000 million. Dr. Reddy's Labs acquired Betapharm through a deal worth of $597 million.Ranbaxy Labs acquired Terapia SA. The deal amounted to $324 million. Suzlon Energy acquired Hansen Group through a deal of $565 million. The acquisition of Daewoo Electronics Corp. by Videocon involved transaction of $729 million. HPCL acquired Kenya Petroleum Refinery Ltd.. The deal amounted to $500 million. VSNL acquired Teleglobe through a deal of $239 million.

When it comes to mergers and acquisitions deals in India , the total number was 287 from the month of January to May in 2007. It has involved monetary transaction of US $47.37 billion. Out of these 287 merger and acquisition deals, there have been 102 cross country deals with a total valuation of US $28.19 billion.

S. Naga Pavani
Asst. Professor
AMC Engineering College
M.B.A Department
Bannerghatta Road, Bangalore

Source: E-mail December 19, 2011


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