Impact of Mergers and Acquisition on Employees Behaviour

A merger occurs when two or more companies combined their business and assets to convert them in a new company (or to one of themselves). On the other hand, an acquisition occurs when one company acquires no of shares in another to get control of that company. The shareholders of the acquired company are paid off and the acquirer becomes owner of all or a substantial part of the assets of the acquired company .In merger one of the two companies losses its old identity to make a new one (Kithinji and Waweru, 2007). The profitability and efficiency of merged organization is higher than non merged organizations and they are in strong position (Amir, Diamantoudi and Xue, 2008). Merger or acquisition creates real potential for explosive growth and enhanced profitability by making appreciation of people, who involved themselves in its success or failure through their contribution (Daniel and Metcalf, 2001)

Barros (2003) identified through research study that almost 63 percent of M&A failed due to problems related to the management of people. As compared to dealing with systems and structural issues the ability to manage people may, in reality, be more important (Lindgren and Spangberg, 1981). The human-related problems has been attributed the cause of failure (Cartwright and Cooper 1990) also found that for one-third to one-half of all merger failures are due to employee problems.

Successful management of people-related issues leads to value creation. To make HRM (Human resource Management) as an effective strategic partner there is a need to involve them in negotiation period and formulation of people management polices to overcome their resistance towards of M&A (Tanure, 2007).The changes in the general procedures and practices fo...

... middle of paper ...

...integration phase which are likely to affect the way employees react to the merger ( Shrivastava, 1986).

Organizational culture has been treated as an important variable in the study of acquisition process, determining employee beliefs, attitudes, and behaviors (Pablo, 1994). Differences in organizational culture, management styles, systems and procedures can also create uncertainty, low commitment, distrust, conflict, hostility (Cartwright and Cooper, 1989; Ivancevich et al., 1987). Employees experience the negative effects of cultural shock by entering new organizational environment (Cartwright and Cooper, 1989). Older employees, who have long time attachment with company, are more likely to engage in passive behaviors, since their alternative opportunities are limited, while highly educated employees’ shows active behavior (Rusbolt et al., 1986).