HRM Concerns in Cross Border Mergers and Acquisitions

Abstract 

Mergers and acquisitions (M&A) have become an increasingly global trend in which companies engage in cross-border business negotiations to expand their scope on the worldwide front. M&A embraces the idea that to penetrate a new market in a foreign country, it is essential that a company has a partner in that said country to smoothen the transition into the market. However, as this article will discuss in the subsequent subchapters, the increasing penetration into foreign markets equally translates into increased competition for the industries involved. Therefore, to reduce these chances of competitions, companies have learned to come together under M&A to build one strong front that seeks to dominate both markets involved. However, there is the issue of human resource management for these M&A companies since the M&A embraces two different cultures. How then does the M&A company built, in this case, draw a middle ground between these two cultures and environments? This article considers the scholarly works of renowned researchers in the world of business to measure the different paradigms involved, while at the same time it considers the insights of businesspeople through reviewing case studies, to identify the various M&A issues raised, and the possible solutions to these scenarios.  

Introduction 

The world has increasingly become a global village in the last couple of decades, owing to the advancement in technology. Businesses can now operate their branches in almost every other country throughout the world from a central point, the headquarters. Goods can be shipped from one location to another of the world thanks to the developed logistics systems. While these improvements may have played a leading part in the increased establishments of international businesses, there is the other issue of international firms which technology has not been able to handle rather effectively; the increased levels of competition. Industries are at loggerheads trying to establishing market dominance and monopoly over each other, which would then translate to cheaper products and services mostly developed out of substandard productions. To answer to this, companies have been seeking to engage in cross-border mergers and acquisitions, to ensure competition is reduced, while the quality of products and services offered by a particular industry remain of high quality to ensure profitability. For all the advantages associated with cross border M&As, there has been the pressing challenge of human resource management (HRM) concerns, taking into account the fact that M&As brings together companies f varied cultures and cultural values, which might not agree on a few aspects of managing employees, clients and the society in general. With the increased levels of HRM concerns in cross border M&As, it is critical that companies develop a strategy that establishes a common ground for the companies involved to agree on a few aspects in their HR management. 

Method of Data Collection 

For this research study, the paper focused on two main ways of data collection, article reviews, and case studies. The article reviews featured scholarly articles which have done extensive research on the HRM issues in cross border mergers and acquisitions. On the other hand, the case studies majorly involved reviewing the direct and personal feedback given by business operators, managers, and directors on some of the issues they have had to deal while undergoing cross border mergers and acquisitions, and how they resolved these issues. Additionally, this project featured, though in limited versions, the direct observations of stakeholders in companies that have undergone cross border mergers and acquisitions, in the form of surveys and questionnaires which the responders were asked to fill in their observations on the asked questions. The research paper then analyzed these responses against each other to determine some of the pressing HRM concerns raised by most of the responders, and their suggested approaches to these issues. 

In the use of contextual data, this article considered and analyzed such materials as company policy data documents, highlighting the possible challenges of HRM that were to be faced during the cross borders M&As, and how the companies involved planned to address these challenges effectively. In regards to secondary sources, the article not only considered scholarly works by other renowned researchers, but it also accessed the memorandum of understanding signed between the merging companies (Palinkas et al., 2015) , which highlighted as well some of the potential M&A HRM concerns, and how the partners planned to address them. But more particularly, the materials that proved to be of great benefit to the research were the primary sources of data, which included the staff, clients, and the general stakeholder fraternity of the partner organizations. This was through interviews and questionnaires that they were asked to fill, highlighting some of the challenges they believed they were likely to face in the management of the human resource, how these challenges might affect the formation of the global companies, and how these challenges could be addressed. To collect this data, the researchers embarked on a journey of conducting a scoping exercise which majorly involved reviewing the literature and research materials that were already in the public domain. These sources were majorly gotten from the publications of previously conducted studies, made accessible through the internet by the researchers. The second step then was to clarify the objective and the audience of the research by defining the purpose of the study (Palinkas et al., 2015) . The target audience is businesses that are considering going into cross border mergers and acquisitions to increase their market scope. The main aim of reaching out to these businesses is to prepare them for the journey, giving them tips that will go a long way in helping them navigate the murky waters of HRM concerns that will be raised. 

Limitations 

The research was not without its fair share of challenges, one of which was the unwillingness of the partners to devour the confidential and classified information of the formation of these partnerships. The personnel interviewed through the questionnaires expressed their reluctance to disclose the information they thought were vital to the operations of the business, such as precisely the challenges they faced when it came to establishing a mutual human resource management department, the composition of this department and how the duties would be allocated and divided between the parental departments. In this scenario, the research lacked clear and precise information to work with; instead, it built on speculations, even though these speculations were guided by previous research. The other challenge the research faced when it came to interviewing stakeholders was the lack of credibility. Due to the sensitive nature of the information sought by the study, there is a high possibility that the interviews concealed some information by revealing information that is somewhat untrue, especially when it came to statistics and monetary figures (Sutton & Austin, 2015) . However, despite all these challenges, the research would like to assure the audience that to the best of its ability, most of the information reported in the findings section is correct and authentic to the best knowledge of the researcher. To ensure this is the case, the research formulated some approaches and research methodologies, to ensure that every information gotten through a given paradigm would correspond to the information obtained through another model. In this case, by highlighting the type of data sought from one source, it was easier to establish its authenticity by matching the findings to another source. 

This approach was crucial because while some information may be classified and confidential, depending on which party you ask, it may be freely and openly given by another source. For instance, the main challenge the research faced when collecting data was the unwillingness of the staff to reveal some information which they felt would not reflect well with the expectations by the employer. Lack of knowledge equally presented a challenge when interviewing the lower level of staff (Kosecki & Caballero, 2016) . This is because most of these employees do not have access to such classified information on the operations of the M&A processes the managers and stockholders engage in. However, by equally interviewing the team of management that actively spearheaded the merger and acquisition process, it became easier to access the information the lower levels of staff could not disclose, either out of fear, or their lack of knowledge. This approach reflected well with the fourth procedure of collecting data, which is triangulating the data. This approach, in other words, emphasized on the need of gathering the data from multiple sources, which would then make it easy to compare and match them against each other, to establish their credibility and authenticity, thereby verifying the same before making the official observations and developing them into a complete report. However, the main challenge that was witnessed on the overall following this approach in data collection was time consumption (Kosecki & Caballero, 2016) . It took a lot of time collecting information from the different sources, comparing them against each other to establish their authenticity, before developing the final observations into findings. Equally, based on the vast number of challenges of HRM raised in cross border M&A, it was not easy narrowing down these challenges according to their urgency, while at the same time ensuring that all the problems were addressed adequately. 

Findings 

Mergers and acquisitions are a type of interorganizational encounter in the sense that they share characteristics with other types of interorganizational dealings, like joint ventures, partnerships or outsourcing approaches. However, as opposed to these interorganizational encounters, merged encounters enter into a contract of dissolution in the sense that the companies involved dissolve their previous independent statuses to become a new venture, whether this arises out of mergers and acquisitions. Although the term mergers and acquisitions are used widely in such concepts, the truth is that about 90% of such encounters in M&A are acquisitions, which means that one company takes over another, thereby in most cases, the acquirer retains its original rights of independence and has more rights over the acquired company (Reiche, Stahl, Mendenhall & Oddou, 2016) . In other words, the distinctive feature of M&A dealings when contrasted with other interorganizational transactions is that M&A transactions result in a change of ownership, whether it is mergers or acquisitions. It is the alteration of ownership that is at the center of the HRM concerns raised by the employees. There is no denying that an employee in any given setting has sworn allegiance and loyalty to the employer, and so it becomes a bit challenging when the employee is tossed over to a new employer, whether or not this new employer works alongside the original employer. If not handled correctly, mergers and acquisitions could lead to high employee turnover rates, considering the fact that the psychological change of employment takes a toll on the employee who will feel divided between the two employers, not knowing which employer should be given more loyalty (Sarala, Junni, Cooper & Tarba, 2016) . In simple terms, M&A presents HRM concerns on the part of the employee when one has to consider the fact that for the employee, the change of business ownership not only means a change in the employer but also a change in the contract, though psychological, with the employer. 

When one has to consider M&A from a managerial perspective, then it implies that one firm is taken over by another, losing its hold in the business world, and subsequently its ownership of the employees. This is mainly the case when it comes to acquisitions, which is mostly the reality of M&A transactions. In acquisitions, the acquiring firm purchases the target firm either using stock or cash, while in the case of mergers the two firms come together to combine into one legal entity (Zhou, Fey & Yildiz, 2018) . Although this article majorly builds on mergers and acquisitions has involving two firms, M&A could include more firms, such as three or four, or any other number of firms which wish to come together to do business. In mergers, the companies involved come together to create a pool of resources to take over a market actively. In acquisitions, however, it is mostly the case of one firm taking over the operations of another firm that is either running bankrupt or one which does not have the skills and the ability to continue providing for a market on its own. In acquisitions, the acquirer takes over the target firm, which implies everything the target firm owned is turned over to the new firm, thereby signing of all its ownership and power over to the new firm (Bari, Abrar, Bashir, Baig & Fanchen, 2019) . This includes signing over equipment as well as employees over to a new firm. Due to different organizational cultural values, employees who have been signed over to a new employer often find it hard adjusting to the change in management since they would like to retain the mentality of conducting operations in the manner they were used to before, which might not sit well with the new boss. 

In addressing the factors which might hinder successful transitions of business operations in M&A, various factors have been brought forward, one of which is the difficulty of post-deal integration and implementation management. This does not only question change management or strategy implementation, even though it is without denial that both of these factors are challenging endeavors in their own rights. The main challenge, in this case, is the ability to combine two hitherto separate legal entities into one, considering the fact that either of these entities had their own rights and cultural values which had guided their endeavors up to the time of the merger (Cooke, 2016) . This merger would, therefore, introduce cultural clashes, either at the team level, the organizational or the national levels of cultural values. In cross border mergers and acquisitions, it becomes even more challenging because each company has a set of national cultural values that guide its operations (Gomes, Mellahi, Sahadev, & Harvey, 2017) . Consider the case of a merger or acquisition between a company in the middle east and an American company. While the American company would advocate for such values as equality and fair representation in the workplace, the Middle East company, coming from a more reserved culture, would place great emphasis on gender disparity, favoring the male workers over the female employees. It would even be trickier if the conservative firm were to be the one acquiring the liberal firm. How would it ease into this progressive culture without losing sight of its values while at the same ensuring that it does not lose the faith and the goodwill of not only the employees but also of the target audience? These are some of the pressing issues that came up during the research, and which it is essential to develop effective HRM solutions to, to ensure the smooth transition of both firm ownership and market penetration. 

Implementation 

Having developed the question that formed the basis of the thesis for the research, it is essential now that the article makes suggestions on the possible intervention’s firms can adopt to ensure the smooth transition into the new ownership, assuring the employees through minimal changes in management, thereby ensuring that employees are adequately prepared. This not only prepares the employees for the change in management but also ensures that they extend the same level of loyalty to the management team. According to the research conducted, reports showed that the employees who were well informed of the changes in management and briefed of their expectations were 45% more prepared for the M&A, and hence readily adapted to the change in working environment, showing fewer turnover rates as compared to the employees who were not actively engaged during the M&A process (Tarba, Cooper, Sarala, & Ahammad, 2016) . Therefore, it is crucial that firms prepare their employees for such takeovers. One way of doing so is conducting workshops in which employees from either firm are allowed to experience the environment on the other firm through receiving hands-on training. By spending some time on the acquiring firm before the acquisition, employees get to familiarize themselves with the cultural environment they are about to be exposed to in the post-acquisition era. Such pieces of training can be given through a series of benchmarking processes and exercises over the course of about two or three months. They can also be provided such exposure through seminars conducted by the two firms in which the employees will be explained to their expectations by both firms in an open, interactive and engaging fora to ensure they are well familiarized with the working environment they are about to sign up for. 

The other way mergers and acquisitions can address the HRM concerns raised by employees is through conducting the M&A in successive phases. Successive phases imply the idea of a company taking over another following set phases for the period, about a year at most (Tarba, Cooper, Sarala, & Ahammad, 2016) . This phase of acquisition can start by the acquirer treating the target firm as one of its branches in which the current management is allowed to continue in its duties, although in a limited capacity. As opposed to drastic takeovers, M&A conducted gradually in phases allows the employees enough room to slide into the new organizational culture through a process of a smooth transition, guiding them through the necessary steps of learning and familiarizing themselves with the environment as they progress (Tarba, Cooper, Sarala, & Ahammad, 2016) . This approach not only ensures the employees are not shifted drastically, thereby impacting their psychological ownership, but it also ensures they are guided into the new environment expertly. Such a transition, therefore, gives the employees room to ask questions, learn of new techniques, and adjust accordingly, lowering their rate of turnover. 

Conclusion 

In conclusion, it is critical to point out that the issue of mergers and acquisitions is a subject of immense weight, not only because a firm explores new markets, but because it equally introduces a new HRM culture to the employees. This organizational cultural shift may be a good thing since it allows the employees' room to learn of techniques they hitherto never knew about, but it can also be the beginning of the downfall of the firm if it is not handled correctly. Employees are the backbone of any business venture, they not only have the duty of producing goods and services for the firm, but they also have the privilege of interacting directly with the clients, both of which have the potential of sinking the firm if not done the right way. Therefore, in as much as M&A offers a business with better opportunities of increasing its profitability, the process should be done in such a manner that it reflects well on the HRM policies, ensuring the rights of the employees are protected. 

References 

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Cooke, F. L. (2016). Human resource management in the context of mergers and acquisitions. In Mergers and Acquisitions in Practice (pp. 136-151). Routledge. 

Gomes, E., Mellahi, K., Sahadev, S., & Harvey, A. (2017). Perceptions of justice and organisational commitment in international mergers and acquisitions. International Marketing Review , 34 (5), 582-605. 

Kosecki, J., & Caballero, A. M. (2016). U.S. Patent No. 9,258,188 . Washington, DC: U.S. Patent and Trademark Office. 

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Sutton, J., & Austin, Z. (2015). Qualitative research: data collection, analysis, and management. The Canadian journal of hospital pharmacy , 68 (3), 226. 

Tarba, S. Y., Cooper, C. L., Sarala, R. M., & Ahammad, M. F. (2016). Mergers and acquisitions in practice: a state-of-art and future directions. In Mergers and Acquisitions in Practice (pp. 15-18). Routledge. 

Zhou, A. J., Fey, C., & Yildiz, H. E. (2018). Fostering integration through HRM practices: An empirical examination of absorptive capacity and knowledge transfer in cross-border M&As. Journal of World Business .