Post acquisition actions

Resistance to change is a typical privatisation problem. The GVK-led consortium managing the Mumbai airport modernisation had to face heat from the strongly entrenched airport unions before it started work.

Now normally, the company would have resorted to power-point presentations or handouts to communicate its plans to the employees, but in this case, it was faced with an unusual problem — over a third of its 2,500 employees were illiterate.

The company then came up with an out-of-the-box solution — it brought in an expert, who in the past had worked in disaster struck areas like Bhuj and as well as for international NGO Oxfam. The gent used these learnings to create a communications package aimed at reassuring the airport employees and only then could the management begin work at the airport.

In yet another unique example, HDFC Bank spokes person does a quick flashback to a few months ago to the time they spent interacting with the officers of the Centurion Bank of Punjab (CBoP) in Chandigarh, which they acquired in May, 2008. It was an anxious lot, having gone through three other mergers in as many years, and did not seem too interested in what the concerned authority of HR had to say about HDFC Bank.

Finally, an hour into the inter-action, on an impulse the concerned authority has decided to switch to speaking in Punjabi and in no time, the crowd started warming up to her. By evening, people at various offices across the country knew details of that chat, including the exact district in Punjab that her parents belonged to.

It is unlikely that any of the Indian companies, which have been actively acquiring companies all over the globe would have encountered anything like this, and as many have found, integrating an acquisition at home, can be almost as challenging as a merger halfway across the world. Experts tend to agree. At times companies become complacent, thinking that it can’t be all that difficult to manage a local merger.

They are likely to be more aware of the needs of an HR manager in Hungary rather than one in the same city says the principal and business leader for M&A consulting, Mercer. However, in a country as diverse as India, it helps to pay enough attention to each aspect of the integration process.

The biggest mistakes companies can make is to assume that having acquired a company, they can mould it the way they like without investing adequately in the integration effort.

Compared to global acquisitions, domestic acquisitions do have the advantage of shared cultures and a common thread of ‘Indianness’ but it’s still not a cakewalk. Some low hanging fruit does exist in terms of getting the process started.

It can be pointed out that the advantages in a domestic acquisition can kick in as early as the due diligence stage. Often your ex-employees are now working in the company you are in talks with or vice versa providing key inputs during the due diligence process.

Compared to a foreign firm, a local company is more accepting of things like a long drawn regulatory process and time lines not being met.

And, as is the case with most marriages, experts say that companies realise that the negotiations and due diligence were just a small part of the most diffficult task that lies in store for them post acquisition. Cold statistics point out that more than 70 per cent of acquisitions end up destroying value rather than create it for the acquiring company.

Before the integration, the first thing the company needs to get right is the basic reason for the acquisition. If you are not clear as to why you are acquiring domestically, no matter what you do, the integration is not likely to work.

For HDFC bank they were clear about the acquisition as it was to gain from the larger distribution and strengths of both banks that HDFC and Centurion. The combined branch network is now close to 1400 branches, making it among the largest in the country.
One of the first steps after the acquisition is to set up a team of carefully selected leaders from both firms to execute the process. It is important to have a special team in place as the whole organisation cannot be consumed by the integration process.

At Mindtree, a program management team was set up, with representatives from both organisations, along with a steering committee, to shape the strategic direction and keep track of the integration process. The need for two separate bodies is not to lose sight of they we are doing, and hence they needed to link strategic context with tactical execution.

If you think it’s ok to start planning once the acquisition gets the final go-ahead, think again. Planning is very much a pre-merger activity. Mahindra & Mahindra (M&M), which acquired Punjab Tractors (PTL) in July 2007 was ready to slip into action mode as soon as the court approvals came through. President, farm equipment sector, M&M, was ready with a list of priorities by the time they had the final go-ahead to merge the two companies. After assembling a senior management team at PTL, the next step was to attack the ‘to-do’ list, which included clearing up the over stocked distribution channel, tackling the huge out standing on the company’s balance sheet and increasing productivity at the PTL plants. Even in AV Birla Group’s their HR team often get involved in the acquisition process as early as the due diligence stage at times.