Thursday, March 29, 2012

Research Paper on Mergers and Acquisitions

Research Paper on Mergers and Acquisitions

Modern businesses are determined to face the challenge of flexibility and ability to react promptly to the changes in the business environment. At the same time, numerous companies search for additional sources of generating income, often entering new markets and investing assets into other businesses. Within this framework, a lot of companies face mergers and acquisitions. The process itself is quite complex, and is even more complicated due to numerous differences between the companies that tend to be united.

When AssetOne decided to acquire TaurusBank, it has been looking for new opportunities in personal investment business. Choosing Taurus, AssetOne’s management staked on a smaller (and thus more flexible) business that had numerous professionals (even from other industries) that had brought new bright ideas into the businesses of online banking and personal investments. This approach was quite opposite to the trend AssetOne had in human resources management. And this has certainly caused some strains in the ranks of TaurusBank employees.

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Another problem that might have caused discomfort within the merging companies was the secrecy of the acquisition. The employees prefer to have a secure future and any changes within their workplace are desired to be known beforehand. Psychologically it is quite difficult to accept even minor changes, acquisitions are almost often treated as “hard times”, and, of course, the secrecy has caused negative effect in the acceptance of the deal among the employees.

When merging, it is very important to make sure employees know their job is secure, and they will not suffer. It is often better to emphasize nothing will change or that the changes will be minor, and will not worsen the course of business life. When the CEO of AssetOne proclaimed TaurusBank would become a “seamless extension of AssetOne”, he had certainly shocked the emloyees and brought panic into their minds.

Becoming a part of a bigger business often means fewer opportunities for career growth and development, no wonder within the first year one third of TaurusBank’s fund managers were lured away by competitors.

Thirdly, as private investment and online banking are the businesses subject to rapid change, AssetOne management should have considered leaving Taurus’ managerial style as it was, and not bringing “the value of detailed analysis and cautious decision making”. Sometimes, quick decision-making is critical for greater profits, and it is obvious TaurusBank’s specialists were good at that (otherwise, AssetOne wouldn’t have chosen it as a company to acquire). Bringing more bureaucracy and decision making at the top was harmful for the success of the business.

To avoid the corporate cultures clashes in future mergers and acquisitions, it would be useful for the AssetOne’s executives to carefully consider the correlation between the types of organizational management and the type of the businesses, and to choose the better ones appropriately. Moreover, it is clear that when some company is good at some business, its professionals should be given the maximum freedom possible. For example, TaurusBank might have been acquired but left to be as a separate unit, self-managed and working for gaining profit.

It is also extremely important to communicate the future changes beforehand. The employees should not be left with a feeling things are getting worse. The merger is most effective when it is almost imperceptible.

Another thing to emphasize is the value of specialists. In further acquisitions, AssetOne’s management should make sure the employees of the company acquired do not have the feeling the opportunity of growth and development is threatened. For financial stimulation is sometimes less efficient and valuable than the chance for self-realization and psychological safety.
Corporate culture is a very vulnerable aspect. It is being learned for years and it not easy to change. No wonder, AssetOne has faced confrontation from the employees of the TaurusBank – the corporate culture they had was changed without their accordance and participation. With further mergers and acquisitions, it might be beneficial for the AssetOne to leave the merged company’s culture and way of doing business “as is” for a certain time. If the changes are to take place, the employees of both companies should feel they are one team and they both should learn new rules of behavior and gain common experience in the corporate culture.
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