Project Report On

Merger and Acquisition and its Effect in the Banking Sector

CONTENTS

I. Mergers and Acquisition and its effect in the Banking Sector 1 1. Objective ...1 2. Methodology .1 II. Introduction.2 1. History2 2. What is Merger?.................................................................................3 3. Acquisition..4 4. Merger Vs Acquisition5 5. Types of Mergers.5 6. Reasons for Mergers6 7. Process of Merger9 8. Challenges..11 III. Benefits of Mergers and Acquisitions14

1. Achieving Cost Reduction.14 2. Increasing Revenues..15 IV. Mergers and Acquisition in the Banking Sector-A study from HR Perspective.16 1. Review of Literature.16 2. HR Dimensions of Mergers and Acquisitions..17 3. Problematic Issues in Mergers and Acquisitions..18 4. HR role in Mergers and Acquisitions19 5. HR role before Mergers and Acquisitions.19 6. HR as an Internal Consulting Group..22 7. HR Impediments.23

V. Impact of Mergers and Acquisitions on employees and working conditions..25 1. Ways to overcome impact of M&A on employees and working conditions.28 VI. Employees Survey Findings.30 VII. Case Study on HR issues in Banking Merger.35 VIII. Difficulties in Bank Mergers.40 IX. Conclusion43 X. Suggestions48 XI. Annexure (Questionnaire for Survey)..50
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XII. References..54

I. Merger & Acquisition and its Effect in the Banking Sector 1. Objective
We are all aware of both the opportunities and obstacles inherent in the strategic restructuring process. Any significant structural transition will impact the people at all levels of the organization. As a result, a particular area of consideration that holds both promise and peril is that of human resources, or HR. A highly integrative restructuring - anything from a joint venture to a merger - is all about transitions, and the needs, perceptions, concerns, fears and possibilities of people all become magnified during transitions. If the organization's leadership does not articulate its knowledge of the dynamics and emotions felt throughout the organization, and provide a clear vision of the future and the path to get there, then the likelihood that any strategic restructuring effort will be successful will be

seriously diminished. This is especially true for mergers, where the degree of change is greatest. Thus while these concepts are applicable to all forms of strategic restructuring, we will look in most detail at the role of HR in mergers.

2. Methodology
This project will commence by giving background information on Merger and Acquisition and further to the survey details and findings. The effects of Merger and Acquisition among the bank employees will be carried out by the way of survey method. A sample size of 20-25 employees will be taken to conduct the survey. These respondents will be administered by a questionnaire which will contain close ended questions. The responses will be compiled and a general conclusion will be drawn regarding the satisfaction of employees with new merged entities.The project will also take into consideration the role of the HR manager to retain employees after merger and how he/she can make employees work in the changed atmosphere. I will also try to find out different ways a merger/acquisition can be made successful.

II. Introduction 1. History

In 1987, Stephen Jaques Stone James merged with Mallesons and they named their new firm as "Mallesons Stephen Jaques." At the time of the merger, Stephen Jaques Stone James was one of the leading Sydney based firms and comprised 79 partners and 251 solicitors and Mallesons was one of the leading Melbourne based firms and comprised 37 partners and 83 solicitors. This merger happened as a result of advancement in telecommunications and computer technologies and in addition, it was felt that the merger of the two firms with their similar cultures, and with many shared clients would give them the necessary depth of legal talent, and the level of technological support, to be able to assist their key clients internationally, as well as in Australia.

The European University Association is the outcome of the merger between the Association of European Universities and the Confederation of European Union Rectors' Conferences, which took place in Salamanca, Spain on 31 March 2001. The purpose of the merger was to create a single organization, serving and representing the whole university community in Europe, with a stronger voice and a more powerful presence. Rite Aid's first store started in September 1962 as Thrif D Discount Center in Scranton, Pennsylvania. From the beginning, the company grew rapidly through acquisitions and the opening of new stores, expanding to five northeastern states by 1965. It was formally named Rite Aid Corporation in 1968, the same year it made its first public offering and started trading on the American Stock Exchange. Rite Aid acquired Perry Drug Stores, the largest drugstore chain in Michigan in 1995 and it is the largest acquisition to date for Rite Aid. In June 1988, the acquisition of Tower Federal Savings Bank of South Bend, Indiana was completed. The bank acquired two savings institutions in Michigan, which are the First Federal Savings and Loan Association of Kalamazoo, and Peoples Savings Bank in Monroe in 1989. In September 1991, Standard Federal entered the Ohio market, gaining a significant presence in the northwest Ohio area through the acquisition of United Home Federal Savings and Loan Association of Toledo in September 1991.

2. What is Merger?
A Merger is a tool used by companies for the purpose of expanding their operations often aiming at an increase of their long term profitability. There are 15 different types of actions that a company can take when deciding to move forward using M&A. Usually mergers occur in a consensual (occurring by mutual consent) setting where executives from the target company help those from the purchaser in a due diligence process to ensure that the deal is beneficial to both parties. Acquisitions can also happen through a hostile takeover by purchasing the majority of outstanding shares of a company in the open market against the wishes of the target's board. In the United States, business laws vary from state to state whereby some companies have limited protection against hostile

takeovers. One form of protection against a hostile takeover is the shareholder rights plan, otherwise known as the "poison pill". In business or economics a merger is a combination of two companies into one larger company. Such actions are commonly voluntary and involve stock swap or cash payment to the target. Stock swap is often used as it allows the shareholders of the two companies to share the risk involved in the deal. A merger can resemble a takeover but result in a new company name (often combining the names of the original companies) and in new branding; in some cases, terming the combination a "merger" rather than an acquisition is done purely for political or marketing reasons. Historically, mergers have often failed to add significantly to the value of the acquiring firm's shares. Corporate mergers may be aimed at reducing market competition, cutting costs (for example, laying off employees, operating at a more technologically efficient scale, etc.), reducing taxes, removing management, "empire building" by the acquiring managers, or other purposes which may or may not be consistent with public policy or public welfare. Thus they can be heavily regulated, for example, in the U.S. requiring approval by both the Federal Trade Commission and the Department of Justice.

3. Acquisition
An acquisition, also known as a takeover, is the buying of one company (the target) by another. An acquisition may be friendly or hostile. In the former case, the companies cooperate in negotiations; in the latter case, the takeover target is unwilling to be bought or the target's board has no prior knowledge of the offer. Acquisition usually refers to a purchase of a smaller firm by a larger one. Sometimes, however, a smaller firm will acquire management control of a larger or longer established company and keep its name for the combined entity. This is known as a reverse takeover. Drucker (1981) has identified 5 commandments for successful acquisitions. Acquirer must contribute something to the acquired company. 6

A common core of unity is required. Acquirer must respect the business of the acquired company. Within a year or so, acquiring company must be able to provide top management to the acquired company. Within the first year of the merger, managements in both companies should receive promotions across the entities.

In order to ensure successful acquisitions, it is important to focus our attentions on the fit between the two firms. There are 3 types of fits to be considered strategic, financial and organizational/cultural fits.

4. Mergers vs. Acquisitions

These terms are commonly used interchangeably but in reality, they have slightly different meanings. An acquisition refers to the act of one company taking over another company and clearly becoming the new owner. From a legal point of view, the target company, the company that is bought, no longer exists. Acquisition in general sense is acquiring the ownership in the property. In the context of business combinations, an acquisition is the purchase by one company of a controlling interest in the share capital of another existing company. A merger is a joining of two companies that are usually of about the same size and agree to meld into one large company. In the case of a merger, both companys stocks cease to be traded as the new company chooses a new name and a new stock is issued in place of 7

the two separate companys stock. This view of a merger is unrealistic by real world standards as it is often the case that one company is actually bought by another while the terms of the deal that is struck between the two allows for the company that is bought to publicize that a merger has occurred while the company that is doing the buying backs up this claim. This is done in order to allow the company that is bought to save face and avoid the negative connotations that go along with selling out.

5. Types of merger
Mergers appear in three forms, based on the competitive relationships between the merging parties. In case of Horizontal Merger - Horizontal mergers are those mergers where the companies manufacturing similar kinds of commodities or running similar type of businesses merge with each other. The principal objective behind this type of mergers is to achieve economies of scale in the production procedure through carrying off duplication of installations, services and functions, widening the line of products, decrease in working capital and fixed assets investment, getting rid of competition, minimizing the advertising expenses, enhancing the market capability and to get more dominance on the market. Vertical Merger - One firm acquires either a customer or a supplier. Vertical mergers refer to a situation where a product manufacturer merges with the supplier of inputs or raw materials. It can also be a merger between a product manufacturer and the product's distributor. Vertical mergers may violate the competitive spirit of markets. It can be used to block competitors from accessing the raw material source or the distribution channel. Hence, it is also known as "vertical foreclosure". It may create a sort of bottleneck problem.

Conglomerate Mergers - Conglomerate mergers

encompass all other

acquisitions, including pure conglomerate transactions where the merging parties have no evident relationship (e.g., when a shoe producer buys an appliance manufacturer), geographic extension mergers, where the buyer makes the same product as the target firm but does so in a different geographic market (e.g., when a baker in Ahmedabad buys a bakery in Mumbai), and product-extension mergers, where a firm that produces one product buys a firm that makes a different product that requires the application of similar manufacturing or marketing techniques (e.g., when a producer of household detergents buys a producer of liquid bleach).

6. Reason for mergers

M&A are to have several advantages. In general, mergers and other types of acquisition are brought about in the hope of realizing an economic gain. For such an activity to be justified the two firms involved must be worth more together than they were apart. Deregulation, competition, technological advancement, reducing margins and other developments have been changing the banking scenario in India. Some of the potential advantages of mergers and acquisition include the following: Achieving Size: It is a competition for reaching size of efficient operations. Size is important for capital base. Implementation of Basel II norms is expected to put pressure on capital for credit, market and operational risks and therefore relatively weaker banks need to improve capital base for meeting Basel II norms and o remain in business. So there could be some merger of weaker banks with the stronger banks. Whether size always matter is matter of debate in the context of general impression of too big to fail which is perhaps not always true. Too large size created complex problems. Achieving economies of scale and scope: There is a view that there is a point of saturation even for this. It is considered that economies of scale is accrue up to a

point say USD 5 billion business and thereafter diseconomies start operating or operating in systematic financial efficiency and shareholders values. Some authors also argue that as the organization grows to large and too complex it becomes difficult to achieve cost economies. So balancing act is needed using technology advancement. Greater Geographical Penetration: Larger reach for larger business.

Growth: Choice between organic growth and inorganic growth. Inorganic growth is referred by firms which are dynamic and ready to capitalize on opportunities because organic growth is very slow, steady and relatively consumes more time.

Financial Capability: To have a strong financials and operational structure capable for greater resources/deposit mobilization.

Customer Base: Improves larger customer network which will enable larger banking and financial services and products.

Diversification: One effective method of controlling risks inherits in banking lending is to diversify operations across different geographic regions and different types of customers. Mergers can help diversify such risks.

Technological Edge: Provision of different products like internet banking, phone banking, ATMs and array of financial services and products to a large customer base with savings in cost and operating expenses.

Synergy: It is a phenomenon where 2+2 => 5? This translates into the ability of a business combination to be more profitable than the sums of the profits of the individual companies that were combined which may be in the form of revenue enhancement or cost reduction.

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Managerial Efficiency: Some acquisitions are motivated by a feeling that the acquires management can better manage the acquire resources leading to rise in the value of the target firm and elimination of inefficiencies. Providing managers with new opportunities for career growth and advancement.

Strategic: Combining complementary business interests leading to consolidating market position and market power on account of mergers. Enhanced market image and brand name by obtaining proprietary rights to products or services.

Increased Bargaining Power: In banking, bargaining takes place in three arenas between bank and there regulators; between banks and their customers and between acquiring institutions and target firms. On average in ten merger deals studied acquirer customers fared much better than customers of target banks. Target customers experienced significantly negative returns, while small credit constrained corporations lost in market cap.

Focus on Priority Sectors: Through rural branch network- ICICI Bank of Madura merger-opportunity for micro finance activities through SHGs.

Market Entry: Cash rich companies use acquisition as a strategy to enter a new market territory on which they can build their platform.

Garnering Tax Advantages and Tax Shields : This plays a significant role in acquisition if the distressed firm has accumulated losses and unclaimed depreciation benefits on their books. Ambiguous and costly duty provisions differing from state to state are observed to be pushing up the cost of acquisition. Therefore India inc wants the government to extend the benefits of Sec 72 (a) of IT act which allows the company to carry forward and set off the accumulated loses and unabsorbed depreciation in

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amalgamation as currently such a benefit is available only to a few sectors and among banks only state owned banks enjoy the benefits.

7. Process of merger
In order to avoid the pitfalls and to make the merger activity successful, firms should follow a systematic action plan for there M&A activity. The merger process consists of following stages: Defining the corporate strategy: A firm needs to first clearly define its corporate strategy What business the firm is currently in? What business it intend to be in? How does it wish to grow, and be known as? Implementing the corporate strategy: Next, the firm should define a route or road map to implement its corporate strategy whether it intends to use mergers or joint ventures, or internal development as a strategy for its growth/diversification plan. This stage clearly intales a detailed evaluation of the various alternatives available with the firm in terms of M&A vis--vis internal development. Target identification: If the firm finds it attractive to pursue the M&A route, sufficient effort should be devoted to identification of the right kind of a target form to merge/acquire. The parameter for identification should include the financial consideration, business strengths and weaknesses, the specific resources, competencies and capabilities the target firm will bring to the merger, market power the merger will bring about, as all as the effort required in integrating the two firms there structures, strategies, culture and processes. Valuation of the merger: then, financial evaluation of the merger should begin. The specific cost and the premium that firm would like to pay for acquiring shares/management control of the target firm would again depend on the projected synergies that the merger is likely to bring about.

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Merger implementation: the tax, regulatory, the market issues dominate the next stage of the merger process the merger implementation. In this stage, when the merger is being implemented, depending upon the local laws, conditions and share holder preferences, merger could happen through a stock swap, a tender offer or any other method. Issues like registration of the merger, opting board and share holder approval, announcement to the public and notifying the stock exchanges are activities that form part of this stage of the merger activity.

Post merger integration: the final stage called the post merger integration includes activity like asset striping (selling off those asset in the target company that are not likely to add value to the merged/acquired firm); efforts at improving the operating efficiency and setting up managerial system at the acquired firm; efforts at stream lining the operations of the combined firm to ensure that the projected synergies are reaped and initiatives in establishing the right kind of corporate culture, providing the right management directions/leaderships and ensuring the competitiveness of the combined firms.

8. Challenges
Increased Geographical locations, rural and semi branches: Urban branches and level of competition, challenge to turn around the entities and managing rural branches, be in term of staffing or business improvement are challenge so far. However, the thrust of financial inclusion offers potential business model in terns of developing longer term banking relationships in the hitherto unbanked areas propelled by facility of appointing business facilitators and business correspondents for banking operations. Managing client base and customer orientation: Research has shown that a customers decision to stay loyal to a particular bank is most often based on

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customer service rendered. The merged institution must prevent customer attrition. The normal customer attrition rates for large US banks is found to be about 15% and in some cases attrition rates exceeds to 30%. For example when Fleet and Bank Boston merged in 1999 customer attrition in some markets reached 25%. Managing Systems and Software: Bigger Challenge.

Managing Human Resource: In fact this is the biggest challenge. Business growth through people growth- a new paradigm stated by R.G Bhatnagar former Chief General Manager State Bank of India in the context of people being an organizations most important asset. He feels that the ability of the bank to meet competition will depend upon the speed, quality and efficiency of delivery system through a conducive work climate and responsive work force.

Dissimilarities in structures: A major task at re organization and re engineering of world processes, systems and controls.

Problem of evaluation: In the normal course of operations banks would be constantly looking for opportunities of inorganic growth. Banks which operate with capital above the minimum levels have an edge over the other banks to the extent that they would be able to seize an opportunity for merger/acquisition as and when it is available without any loss of time. However it would be necessary for such banks to improve their internal controls and risk management systems before embarking on a path of inorganic growth.

Time factor: While merger make the balance-sheet look attractive in the short terms the impact of the synergies that will flow from the merger will be visible only over a long period of time.

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Trade unions representing the workers of the banking and insurance sector are concerned about the possible job cuts resulting from the merger.

Implementation Issues: It is no wonder that more than half of all mergers fail to deliver on their promise. The fact is that even mergers that make perfect strategic sense often falter when it comes to implementation. Its notoriously difficult to integrate organizations, processes and technology necessary to deliver success.

In a highly acquisitive market, the risk of mergers is only heightened. Due diligence is conducted in short time frame as a result attention to the details of `integration of operations, technology and culture is typically postponed until after the deal is completed. Integration is critical to a success of merger. A disciplined approach is needed to achieve integration of applications and infrastructure. Otherwise it could end up with a patchwork of technology which adds complexity and cost. Even more critical is the potential negative effect on customers.

Merger alters Bank Rankings.

Merger and Acquisition are no substitute for poor asset quality, lax management, indifference to technology up gradation and lack of integrated HR strategy.

Challenges to Regulator
Challenge to the regulator as the report of the committee on banking sector reforms or narasimham committee stated that the RBI needs to devise suitable tools or norms for financial institutions regulation or supervision consistent with the nature of their operations. Problem of large size: Regulation and supervision with appropriate tools for supervision. The setting up of banks by financial institutions and non banking

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financial companies and setting up of insurance, merchant banking, mutual funds, housing finance and investment companies either as subsidiaries or as joint ventures will bring into focus the need for consolidated supervision. Consolidated accounting and supervisory techniques would have to evolve and appropriate firewalls need to build to address the risks underlying such large organizations and banking conglomerates. One of the concerns for policy makers : Makers are the possible impact of consolidation on the transmission mechanism of monetary policy. The impact of bank consolidation on the transmission of monetary policy is a multi dimensional issue. According to most empirical studies an increase in banking concentration trends to drive loan rates up in many local markets thereby probably hampering to some extent the pass through from market to bank lending rates.

III. Benefits of Merger and Acquisition 1. Achieving Cost Reduction

Cost reduction through economy of scale- Consolidation helps in scaling up operations thereby reducing per unit cost. Cist reduction through economy of scope This is achieved through synergy involved in the ability to offer multiple products using the same infrastructure. For example bank can offer insurance and investment products using their branch network and thereby achieve economy of scope.

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Cost reduction through rationalization of manpower. The merged entity will be able to identify the right person to man critical functions from a larger pool of human resources.

Reduction in risk. The merged entity will be able to reduce credit risk through spreading it across wider geographies or product range.

Cost reduction through possible reduction in tax obligations.

Cheaper sourcing of inputs with increases bargaining power with vendors and suppliers.

Ability to enter new business areas which reduced initial cost as compared to a new set up.

2. Increasing Revenue
A bigger entity will be able to serve large customers better. By offering more services and taking a bigger share in the business of the customer the bank will be able to increase the revenue per customer. Product diversification will facilitate one stop shopping by the banks customers.

A larger customer base will generate more revenue.

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Greater visibility in the market place will enhance the ability to attract new customers.

A bigger size and share in the market will boost the banks ability to raise product price without loosing customers.

The merged entity will be able to take greater risk and reap it rewards.

IV. Merger and Acquisition in Banking Sector- A Study from HR Perspective 1. Review of Literature
Mergers and acquisition are the most popular means of corporate restructuring. Such restructuring business has played an important role in the external growth of a number of leading companies in the world. The first merger wave in United States occurred between 1890 and 1904. The second began at the end of the World War-I. The third merger wave commenced in the later art of World War-II and continues to the present day. About two third of large public corporations which have undergone merging. In India about 1180 18

proposals for amalgamation of corporate bodies involving about 2400 companies were filed with the high courts during 1976-1986. It has also reflected that numerous reasons like deregulation, technological advances in industries, high competition from abroad, midsized player strategy to avoid being acquired are responsible for mergers. These factors suggest that most mergers are designed to capture efficiencies which can be expected to lower costs, lower prices and improve products for consumers. In recent years a number of mega mergers have started taking place in India similar to in western countries. Mostly economic forces are the driving cause behind such mergers and acquisitions. It is quite relevant to focus the term merger in order to avoid a great deal in confusion and disagreement regarding its precise meaning with other terms relating to business combination. The banking sector in India is undergoing a phase of transition. In order to lead in the competitive business banks have become more technology oriented. And many of them are adopting steps to enhance retail loan portfolio, reducing NPAs to improve their performance. The smaller banks particularly the private sector banks have been occurring in pursuit of better benefits partner. Mergers in the banking sector have been occurring in pursuit of better benefits and expansion of business. The merging of Times Bank with HDFC, Centurion Bank with Bank of Punjab all are mostly reviving the sick banks and eventually for strengthening the banking sector. The changes spurred on by advances in information and communication technologies and in the expansion of the international trade the closed market organization was considered as obstacle to economic modernization. In December 1997 102 countries signed an agreement to free trade in financial services under the auspices of the World Trade Organization. Like other economic sectors M&As in banking sector are a driving force to meet the challenges of globalization.

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2. HR Dimensions of Merger and Acquisition

It is also confirmed that two thirds of mergers in the world end in failure because of staff hostility and inability to integrate personnel and systems. Some failures are due to differences in cultures and management. It has been found out that efficiency improvements through merger were frequently overestimated. Mergers and acquisition concentrated almost on the economic benefits with least attention paid to the cultural aspects. Although the merger easily lends to globalization yet the cultural differences have often been the root cause of causing disappointment experiences. The acquisitions of the UKs Morgan Grentell Group and Germanys Deutsches Bank have faced such difficulties. The barriers became more difficult due to the wider cultural differences and distinctly different languages. The cultural aspects constitute a significant obstacle to cross border combination even though the differences tend to ease with time, education and cultural integration. And neglecting human issues is also a frequent cause of failure. In M&As the human factor is taken into account to the extent of only 5%. In neglecting the human aspect M&As do not obtain results in keeping with the expectation.

3. Problematic Issues in M&A

Social Obligations Consultation Information Notification Compensation Redeployment Laws and Practices of the Country HR Activities in M&A IR Climate CoDetermination Social Fabric Stress Merger 20 & Acquisition Low Morals Resistance Social Demotivation Dialogue

Pre- M&A Phase Involvement Information Sharing Interest of Stake Holders

M & A Phase Confidence Building Fear Psychosis Positive Outcome

Post M & A Phase Change Management Training & Development Re skilling & Cultural Integration Appraisal

Financial Necessities________________________ Social Responsibilities

4. HR Role in Merger and Acquisition

(Pre Combination.Combination.Solidification)

Marriages Not Always Made in Heaven : Don't let anyone tell you that a merger or acquisition is the union or marriage of two sets of employees. Outside of some of the executives, it is more like two mind sets who have never dated, and now are thrown together because of the wishes of stockholders or boards over whom they have had no control. Merger and acquisition often prove to be traumatic for the employees of the acquired firm. The impact can range from anger to depression. The usual impact is high turnover,

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decrease in moral, motivation and productivity leading to merger failure. Other issues in this activity are the changes in HR policies, downsizing, layoffs, survivor syndromes, stress on the workers, information system issues etc. the human resource issues that become important in mergers and acquisitions activity are: 1. Human Resource Planning 2. Compensation Selection 3. Turnover 4. Performance Appraisal 5. Employee Development 6. Employee Relations These activities present a different set of challenges for the human resource managers in both acquiring and acquired organizations.

5. HR Role before the Merger

The HR leadership has an opportunity before the merger to ensure that both organizations have a strategy mapped out in advance. Once the merger starts taking place, people will often be too busy to keep a strategic perspective. Before the merger takes place, the leaders of both organizations - at least, of the dominant firm - should have a strategy mapped out, including communications to employees and customers, where layoffs will take place (if any do), and how the cultures should be merged. A SWOT (strengths, weaknesses, opportunities, and threats) analysis should be done for the combined company. If possible, a brief culture survey (preferably done via interviews as well as paper or Web/e-mail) should be undertaken in both companies to discover what the cultural differences are. Sometimes this will be obvious in some aspects -e.g. one culture values teams and bottom-up innovation, the other favors command-and-control tactics - but not in others, such as how and whether individuals and teams are rewarded for innovations, how failure

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is dealt with, whether conflict is addressed openly, etc. This will prevent disconcerting delays between the announcement and the implementation of the merger/takeover. If the real purpose of the merger is to acquire another companys assets, in terms of a particular product or brand, its factories or patents, etc., that should be acknowledged and dealt with up front. If employees are fooled at first by pleasant words, they will react more strongly when those words become taunts. Finally, before the merger or acquisition takes place, the leadership teams should consider the non-financial issues. Will people in the two companies be able to work together? Will acquiring a company, or merging with it, destroy the properties or drive away the talent that made it worth having? Can a simple partnership, alliance, or even stock ownership without integration provide more benefits than combining the two companies? These issues may be overlooked by the leadership teams just as they are often ignored or downplayed by investment bankers who want to do the deal. Some questions to ask the leaders, in person or via open-ended survey, are: Are there viable alternatives to the merger (for example, greater integration with suppliers, partnership deals, keiretsu)? Is there a communication strategy to keep employees and customers informed? Are the cultures for the two organizations compatible? Is there a plan for merging the cultures? Will one be dominant, and, if so, how will people operating under the other culture be brought on board? What are each organizations key strengths, weaknesses, opportunities, and threats? What is each organizations strategy? How will they be merged?

One way to get the answers to these questions is to have an outside agency speak with senior leaders, one at a time or, if that is not possible, to have them circulate a brief 23

confidential survey and present the results at a facilitated meeting. Difficult questions, for example whether there are alternatives to a merger, should be raised as early as possible. The HR manager may need to raise the issue of culture - how people work, how they think, what they value, and, of some importance, how they view the other organization. If the acquired (or acquiring) organization is viewed with disdain, these issues must be addressed up front. Likewise, severe cultural differences must be addressed. They can be overcome with attention and work. Some cultural differences are obvious (e.g. one culture values teams and bottom-up innovation, the other favors command-and-control tactics) but others may be subtle (e.g. how and whether individuals and teams are rewarded for innovations). Will acquiring a company, or merging with it, destroy the properties or drive away the talent that made it worth having? If the real purpose of the merger is to acquire another companys assets, in terms of a particular product or brand, its factories or patents, etc., that should be acknowledged and dealt with up front. If employees are fooled at first by pleasant words, they will react more strongly when those words become taunts. The HR leadership may, because of its skill and background, be placed in the uncomfortable but important position of persuading corporate leaders to admit the truth to themselves, and to employees.

6. HR as an Internal Consulting Group

HR is often one of a few units which can work as an internal consulting group during a merger or takeover, along with quality or process engineering teams. In this light, HR managers may be able to use management coaching skills to help managers and executives to communicate effectively and completely, to address power issues, and to deal with cultural issues. In some cases, HR may take a more active role; in others, HR should act as a coach.

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Individual HR staffers need to understand their current skills and may need to update their knowledge or practice with role playing to ensure that they are working as constructively as possible. Process consulting skills are essential. Some key issues in mergers follow. Communication As people look inwards to try to find their place in the merged company and attempt to see their future in it - or outside it - productivity drops. The grapevine can become a major source of headaches. Constant, consistent, and honest communication from leaders and HR is essential. Power and conflict It is essential to bring conflict out to the surface and deal with power issues honestly. If one group is obviously in charge, that should be admitted early on so people dont waste time with second-guessing. Often, people get wrapped up in turf wars which are destructive to both sides, rather than trying to figure out roles for both sides and have a win-win situation. Culture Organizational culture is an organizations shared values, beliefs, and preferred ways to behave - is a key to success, and though many talk about it, few seem to have the skills to grapple with culture and work with both organizations to assure a good fit. Many organizations use a brief cultural fit survey to assist them during mergers. Operations Ideally, processes can be examined to see where true synergies lie. In many mergers and takeovers, power relationships determine operational changes, rather than actual efficiencies or quality concerns. By making changes with facilitated cross-platform teams, HR can help to ensure that the better of the two organizations are preserved.

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7. HR Impediments
HR issues could prove to be a major impediment to bank mergers. Treatment of employees of the transferor upon merger or acquisition could be a major issue in consolidation. This issue was a challenge in the merger of New Bank of India with Punjab National Bank. The uncertainty during the mergers and its related activities may divert the focus of the employees from productive work to issues like: a) Job security b) Changes in designation career path c) Fear of working with new terms d) Working in a new department All the above factors may have a considerable impact on the performance of the employees. Rationalization of workforce utilization could be seen as logical corollary of consolidation exercise. This could create anxiety among employees as to their future in the bank. Fear of loss of job is valid though in the Indian context more so in the public sector domain, retrenchment of any sort may have to be ruled out. This gives rise to challenge of re tooling and re deployment. The skewed age profile of employees in the public sector banks would make retraining a major task. However we need to appreciate that HR issues in the process of consolidation is a universal challenge and not a specific to banking sector. The organizational culture also plays a major role in mergers as the organizational practices, managerial styles and structures largely are determined by organizational culture. Each organization has a different set of beliefs and value systems which may clash owing to the activities. The employees not only need to leave their cultures but also have to accept a new culture. This may lead to stress among the employees and may cause discomfort, lower commitment from the 26

employees. This kind of changes in the cultures in the organizations may develop the concept of us versus them attitude that may be detrimental to the organization growth. For example in every department there were two persons working in the same position. Since no one thought about this problem there was intense politicking among the legacy players fighting for the same space. The mergers and acquisitions have found to have a serious impact on the performance of the employees which is caused by the uncertainty in the environment, cultural differences and differences in organizational structure and changes in managerial styles. If the compensation in the acquired firm is lesser compared to the acquiring firm the acquisition will raise the expectations of the employees of the possible hike in compensation which may be realistic. The pay difference can act as a demotivator for the employees of the acquiring firm and may have some negative consequences. What ails banks the most apart from lack of professionalism and adequate technology up gradation is the lack of a centralized human resource strategy. Banks must therefore immediately evolve an integrated HR system wherein the thrust should be growth with people.

V. Impact of Merger and Acquisition on Employees and Working Conditions

Merger & Acquisition helps a Company to grow in a better way but it has a great impact on the employees working in a company & on working conditions. The employees of the companies merging and acquiring are mostly affected by M&A. Due to this reason, there is mostly failure of M&A. To break the mindset of people working in companies undergoing M&A and to convince them that merger is for common good & will help them in their growth is normally an uphill task.

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When 2 companies who have different style of functioning merge, there is a clash between the companies which pulls them together into different direction apart from their aims & objectives and in the process endanger the advantages envisaged both in the real life as well as in the scheme of amalgamation. Thus M& A had a great impact on the individual or group working in company & on work culture.

Company enters into M& A activity without recognizing the impact on the organization and the overall affect on the human element within the two merging company. when M&A activity do not meet corporate objectives it results in Lost revenue Customer dissatisfaction Employers attrition issues

Many personnel issues such as salaries, benefits, pension of employees are also affected due to M&A. Since the organizational structures are different, differences in compensation packages and designation can take place normally.

There are ego clashes between the top management and subsequently lack of coordination among them may lead to collapse of company after merger. This problem is more prominent in cases of mergers between equals.

There is also a separation anxiety among the employees because they think some of their co-workers will be leaving the company. The atmosphere of apprehensions leads to company wide rumours. The employees loose faith in their organization and tend to become demotivated.

Employees are the main victims when M & A takes place. They may be hurting themselves by trying to cope with new changes. When they realize that their 28

potential for future growth within the organization dwindles, they often become withdrawn and frustrated which can affect productivity of the company severely. M&A affects the CEOs of the company because they are the most creative and talented people within the organization. The resultant loss of control devastates these individuals. The stress level experienced by these executives often travels through the chain of command, affecting subordinates as well. Employees of the company are mostly scared by M&A that they will be given step motherly treatment. This question is always in the minds of employees of the transferor company. This fear of transfer and retrenchment, the loss of position in the hierarchical level are some of the thoughts which always remain in the minds of employees of both the company. There is also lot of reorganization & restructuring in the company during the days when M&A process is going on .The process of M&A by which company is bought or sold can prove difficult, slow and expensive. This M&A transaction typically require six to nine months and involve many steps. Locating parties with whom to conduct transaction forms one step in the overall process and perhaps it is the most difficult step in the transaction. This process of M&A has a great impact on the work culture during those days as it disturbs whole organization of the company. In an acquisition the buyer assumes the dominant parent role and the acquired company assumes the subordinate role, acting in the role of stepchild. Just as step parents may deny stepchildren certain family resources acquired company may also experience similar after an acquisition takes place. This situation is caused due to lack of fit between the two organizations. Such lack of fit is an issue and it has a great impact on the acquired company as it affects its work culture, organization and mainly on the employees working in the company.

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The uncertainties of M&As shift the focus of employees from productive work to issues related to interpersonal conflicts, layoffs, career growth with the acquirer company, compensation etc .Moreover, employees are worried about how they will adjust with new colleagues. The merger involves downsizing, hence the first thing that comes to the mind of employees is related to their job security. Merger also leads to change in the well defined career paths of employees. Due to these reasons employees find themselves in completely different situation with change in job profiles and work teams. This may have negative impact on the performance of the employees.

Each company has its own set of values which may conflict with those of acquired company. The employees may not be able to accommodate themselves in new culture and thus may lead to cultural shock. Inability to adapt to new culture increases stress level among employees and results in low job performance. The need therefore is to follow structured approach in dealing with cultural differences.

The employees face great uncertainty which in turn produces stress .Such stress ultimately affects their perception and judgments. Due to stress among employees by M&A ,the most common reactions displaced by them are as follows: a) Loss of identity. b) Lack of information & anxiety. c) Talent is lost. d) Family repercussions

1. Ways to overcome impact of M&A on employees & working conditions

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1. Firstly organization must effectively develop and implement assistance program for displaced employees. Such program should include advance notification, severance pay extended benefits, retaining program and outplacement activities. 2. Strong emphasis needs to be placed in determining whether the acquired firms personnel is a good fit for the acquiring organization and to whether the mass lay off can be avoided. Moreover communication from the executive team with employees in the pre-acquisition phase needs to be consistent so that anxiety levels among the personnel can be kept at low level. 3. Moreover a company not only needs to select a right target, but also must have culture in place that accepts the acquisition as quickly as possible. 4. There is need for developing and executing effective employee communication, particularly conveying the employees that how the transaction will impact organizational members. Communication between the members of transferor and transferee Company should be open, honest and strategic. Any information regarding the progress of the deal or integration should always be shared among the members because communication is very important throughout M&A process. 5. Finance and the Legal departments are essential for the successful implementation of the integration plan. Therefore, the inputs from these departments should be taken into consideration while working on the plan.

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VI. Employees Survey Findings

With a view to gain insights on what the employee feel after the merger of the particular bank I have conducted a small survey by administrating a questionnaire for the same. The major concern for the employees was the job security, compensation which bothered them the most. It has also been found that the employees start to leave the company within a very small period after the merger or acquisition has taken place. The following graphs depict the different reasons which bother the employees after the merger takes place.

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Sources of Information Employee Survey 25 20 15 10 5 0 grapevine official information was provided computer aided communication formal small group netwroks

Sources of Information

Forms of Communication

Adequate Information from the Comapny

Yes No Training Effectivness 12 10 Employees Survey 8 6 4 2 0 EmployeeAgree Satisfaction with new Organization Strongly Neutral Disagree Agree 18 16 14 12 10 8 6 4 2 0 Strongly Agree Effect of Training Employee Survey Trainig Effectivness

Employee Satisfaction with new Organization

Agree

Neutral

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Disagree

Employee Satisfaction

Encouragment to Employees

Yes No Change in Responsibilty 20 Employee Survey 15 10 5 0 Strongly Agree Agree Neutral Disagree Change in Responsibilty

Salary Structure Change in Responsibilty 16 14 12 10 8 6 4 2 0 Strong Weak Neutral Negative Negative Impact Impact Impact Strong Weak Positive Positive 34 Impact Impact

Employee Survey

Salary Structure

Career Growth Opportunities 16 14 12 10 8 6 4 2 0 Strong Weak Negative Negative Impact Impact Neutral Strong Positive Impact Weak Positive Impact

Employee Survey

Career Growth Opportunities

Career Growth Impact on Job 14 12 10 8 6 4 2 0 Strong Weak Negative Negative Impact Impact Neutral Strong Attrition Rate Positive Impact Impact Weak Positive Impact Employee Analysis

Impact on Job

16 14 12 10 8 6 4 2 0

Employee Survey

Attrition Rate

First 3 Months

3-9 Months

35

1 Year

It was Constant

Period

Job Security 14 12 10 8 6 4 2 0 Strong Weak Negative Negative Impact Impact Neutral Strong Positive Impact Weak Positive Impact

Employee Survey

Job Security

Impact Change in Work Culture 14 12 10 8 6 4 2 0 Strong Agree Agree Neutral Disagree

Employee Survey

Change in Work Culture

Impact

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Financial Success 14 12 10 8 6 4 2 0 Strong Agree Agree Neutral Disagree

Employee Survey

Financial Success

Impact

VII. Case Study on HR Issues in Banking Merger

History of Acquiring Bank It is an Indian private sector bank providing both retail and corporate banking services. The company was incorporated on 1994. it is promoted as a joint venture between two multinational promoting companies. It has a network of ten branches. The main equity of the bank is provided by two promoters. Merger is not new phenomena to this bank which had a previous experience of bank based in north India. History of Target Bank

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The year was 1940. A humble initiative was taken to serve the people of the region with honesty, commitment and dynamism. And the bank was born. While the seeds of expansion were sown in the 60s when three commercial banks merged with this bank the turning point came in 1992 when a reputed group took substantial stake in equity bank. Proposal between two Banks On the merger proposal Managing Director and CEO Acquiring Bank said: Growing by inorganic means is an important component of our strategy the proposed merger with the target bank would further improve our franchise and customer proposition across the country particularly in north India, Karnataka, Kerela and Maharashtra .

Managing Director Target Bank said: We have been evaluating various options to create value for our stakeholders as well as employees and felt that the proposed merger was the preferred option. It is a synergic fit in terms of product offerings and geographical coverage. Analyst said that the merger would help acquiring bank improve its reach in the south. The merger would give acquiring bank an expanded retail presence in southern areas particularly since acquiring bank has strong branch network across northern and western states Employee Point of View A peoples conviction which was held against the merger of the target Bank with Acquiring Bank demanded scraping of the secession and urged the Union Governement to take steps to merge the bank with one of the public sector banks. Lower level employees: as far as lower level employees are concerned the problem they are facing is with the job security. Because modernized bank doesnt have any permanent employees in lower level. Another concern for them is that whether the acquiring bank

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will keep up their assurance. Despite all these concerns also they are willing to take uo any sort of job pressure. Middle level employee: regarding the middle level employees they are not at all concerned about the job security because the acquiring management has assured about that. But the worry for them is that whether they would be transferred to distant places. They are willing to work over south India. The next concern for them is about pension factor under the acquiring bank management there is no such pension scheme. Apart from this the next problem which they think which would arise is about the job pressure. Since the acquiring bank is a modernized bank the job pressure will be high. As per the acquiring management they are ready to continue with employees those who are below 40 years of age. Therefore employees above 40 years have a problem as regards to continuity of their jobs.

Union Point of View One union has opposed the proposed merger of these banks. Once merged the values, culture and priorities so far followed by the bank will completely undergo a change and profit making will be the only agenda in the future. Besides there was every possibility that the rural and semi rural branches of the bank would either be closed down or relocated the statement said: a) United Forum of Bank Unions (UFBU): UFBU said in a statement that the merger would lead to curtailments of social banking services. UFBU warned that the proposed merger:

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Would lead to closure of rural branches of target bank. Introduce the contract labour system leading to retrenchment of permanent staff. It is pointed out that the proposed merger which is also a crisis- driven one would not resolve the financial problems of these banks. The forum said in a statement here that the merger would make the bank which had been providing excellent service to ordinary customers for the last over six decades accessible only to big time corporate customers.

b) All India Bank officers Confederation (AIBOC): The AIBOC has opposed merger of these two banks: State security of AIBOC said in a statement that the contribution of Target bank to the economy of the state had been significant. The bank has given due importance to priority sector advances, agriculture financing and micro finace all these years. Once merged the values, culture and priorities so far followed by the bank will completely undergo a change and profit making will be the only agenda in the future.

Implications The acquiring bank management can take up the following steps to overcome the above impediments Build employees self confidence through regular meetings. Communicate the value of the organizations products and services and the role the organization plays in the market place where it operates. Must keep employees: The HR have to first identify the key employees in target bank. Next they must quickly devise ways to safeguard those intellectual assets i.e. key employees

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Pre merger meetings for culture: Once the merger is finalizing the top HR executives of both banks should meet to prepare a plan for the merger of the human environment. Such per merger talk should typically start with analyzing the existing culture of both organizations. The HR departments have to decide about the culture of the new organization. The two banks have to work out their differences about some sort of agreement. Each of them has to change to some extent and adjust to the merger. The adjustment can be overcome by anyone of the following methods: 1. Cultural Integration The method involves relatively balanced give and take managerial practice between merger partners and no strong imposition of cultural change on their bank. In this method the cultures of both organizations are preserved to a greater extent. This method is suitable in a related merger since an exchange of cultural managerial information and practices would be when the two organizations have much a common culture. Moreover the acquirers culture should have more sub cultures within it so that new culture also becomes a sub culture. 2. Assimilation When one culture dominates over the other the assimilation method comes in to the scene. Here the dominant is not forced rather the members of the acquired organization welcome it. When the employees of the organization that their own culture is not able to achieve success this situation will arise. Then they will become a part of the acquired organization 3. Separation When two organization remains separate with limited managerial and cultural exchanges the method of separation is followed. The key to separation is for the acquirer to allow its acquisition a high degree of independence and only impose essential control systems. Under this method their wont be any cultural exchanges.

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The acquiring banks management can give assurance to the employees of the target bank in the following ways. High growth opportunity Job security High incentives Attractive life style Good salary Good benefits Good work environment Policies and procedures will be conducive Clarity about the management expectations Clarity about the schedule Matching employee expectations with job specification Giving identity

VIII. Difficulties in Bank Mergers

Threats and effects of merger and acquisition

The Indian banking industry expects consolidation to bring in several future benefits. But many fear that the desire for size is leading to unhealthy creation of super banks. Sectoral consolidation and reduction in competition do no give immediate benefits for customers and staff who are directly affected by rationalization of jobs. A study by the Bank of International Settlements reports the experience of majority of the mergers as

42

disappointing with organizational problem almost inevitably underestimated and most acquisitions over priced noting the creation of banks too big to fail. Such super banks may encourage compliancy and also may lead to inefficiency. When such bank fails the host government may be forced to use tax payers money to bail out such bank. As a result such banks are encouraged to pursue imprudent credit and investment policies and may also carry systematic risk along with them.

Merger also results in poor credit flow to small business segments and major share may go to the corporate sector thus affecting the economic cycle. It is also found that larger financial institutions tend to charge more and higher fees than smaller banks.

In majority of the cases merger related restructuring is accompanied by announcement of closure of banks, unprofitable branches and also job cuts. Thus M&A process directly affects the interest of employees. People from rural and suburban areas are the most affected when the branches are closed in these areas.

A merger or takeover upsets the links between implicit and explicit contracts in a company based on trust between managers and workers, between employer and employees. Integration of links requires harmonization of various aspects of terms and conditions of employment to ensure common practice in the combined organization that may change existing human resource management.

Size Challenges and Final Balance of Opportunities and Threats

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Many banks experience post merger profitability below the industry average. The reaction of the related parties to the merger announcements is significantly negative. The success of merger depends on four factors that is profitability (ROA, ROE), credit quality, asset mix and control of operating expenses. The performance and controllability pose a challenge to the management in the merger process. Mist retail banks try to obtain economies of scale by expanding either by extending their network or widening their range of products and services. But there is no automatic link between size and profitability. Sometimes this attempt to expand can produce opposite effects. The complexity of operating large operations can nullify the benefits and losses related to top heavy organizations are often underestimated. The lack of transparency of financial activities and fragmented nature of debts and capital especially mega banks prevent creditors, shareholders and regulators from imposing discipline.

Swap Ratio.

The other main problem in bank mergers is the swap ratio. Swap ratio means the distribution of share in the ratio at which the share is distributed to the shareholders sometimes the banks may not come to the agreement of share distribution.

Other Side of the Coin

1. Merger between two banks and for that matter between two entities would be of any advantage only if it take into account the synergies and complimentaries of the merging unit and provide opportunities for pooling strengths. The overall reduction in cost of operations and the merged entity ensures improved operational efficiency and greatly enhances its competitive abilities. Merger and acquisitions the world over have therefore been primarily volume driven and often in response to the competition or environmental necessities.

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2. the problem get compounded if of the two units merging one is already suffering from serious operational deficiencies and is merging with another comparatively larger unit merely to save its existence in a modifies form. In such a situation while the weak unit merges its deficiency in the stronger unit the merged entity does not get any opportunity to avail post merger advantages. As a result the merged unit itself becomes weak and often losses its competitive abilities. 3. Closure has a number of negative externalities affecting depositors, borrowers, other clients, employees and in general the areas served by the banks being closed. Besides the misery that it will to the depositors a large number of the borrowing clients of banks under closure also could run into difficulties and their businesses may suffer causing substantial economic loss. The overall cost of closure therefore is always high. This is an extreme option and would need to be exercised only after all other options of successful restructuring have been ruled out.

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IX. Conclusion

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A recent Forrester report predicts a major shakeout in the offshore IT industry and recommends that even large players align with each other to prepare for a maturing market. They predict consolidation, not just at the small company level, but among companies of all sizes. We have recently witnessed the acquisition of Mphasis by EDS, one of the more significant deals in the offshore space. In an industry that is seeing consolidation at various levels, it is relevant to examine both the motives behind this trend and, more important, look at what it takes to create a successfully merged entity.

M&A drivers
It is important to understand the causes that motivate mergers and acquisitions as they drive, to a great extent, the method of integration. Broadly speaking, M&A drivers could be customer acquisition and top line growth, new market entry or competence building. Scandent is an example of a company that has grown aggressively over the last two years by almost single-mindedly following an acquisition strategy. Intelenet, a joint venture of HDFC and Barclays, has similarly resorted to inorganic growth to create a significant presence in the domestic market. Infosys, a more conservative player, has bought Expert Information Services to strengthen its presence in Australia while TCS picked up Comicron in Chile, South America.

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Having said this, the most often encountered motivation for an acquisition is competence building. Wipro's acquisition of Spectramind, Nerve Wire and, more recently, Quantech are all related to acquiring or augmenting competencies. Zensar's acquisition of Hyderabad based OBT Global is yet another example of an instance where the company strengthened its skills in SAP through this move.

A strategy
A fourth reason for M&As is to make a significant change to the business model. Valtech's acquisition of Majoris and the EDS take over of Mphasis are examples of companies using acquisition as a strategy to bring about a quick change to their existing business or delivery models. A contrasting example is one of Indecomm Global Services, a fast growing provider of transaction processing services, acquiring Mortgage Dynamics, a leading US based mortgage consulting firm. This acquisition would allow Indecomm to globalize its business model and offer a more sophisticated set of services to its clients. Clearly, there are many reasons for a buyer to seek out companies to acquire. On the flip side, companies sell out either for size and scale benefits or simply for survival. While most of the attention of observers and analysts and, sometimes, even the management is on evaluating companies for M&As and assigning a value to the deal, few companies pay equal importance to integrating the merged companies. Widely researched statistics show that less than 20 per cent of takeovers globally have yielded superior results to shareholders. That's not all, we have seen many examples in the IT industry where M&As lead to confusion at an employee level, ambiguous go-to-market strategies and often, lowered customer satisfaction.

Good synergies

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In one instance of a US-based consulting firm acquiring an emerging IT services company, the synergies were theoretically good the two companies addressed different geographies; one was strong in consulting and the other had a well honed offshore delivery model. However, since the consulting company paid little attention to the real issues to be addressed post acquisition, employee morale dipped and the company has seen plenty of churn at all levels in its India operations. This has undermined the utility of the deal. In my view, there are four important areas where integration efforts need to be focused alignment of values and vision, especially among management; a unified go-to-market strategy; people integration; and operations integration. The relative importance of each would be determined by the level of integration being considered. Often, highly simplistic approaches are taken. For instance, compensation rationalization is equated with HR integration, while merging Web sites and printing new business cards and signage are thought to be sufficient at a marketing level. Talking of marketing integration, it is also necessary to set practical expectations. In another case of a multinational company acquiring an Indian company for extending its delivery model offshore, the management's expectations on how soon the acquisition would yield benefits for higher growth in bottom line were unrealistic. Changing a business model needs to be preceded by a change in mindsets and this is an important task of post merger integration. As we know, this cannot be done overnight and therefore, it is prudent to put in place a series of measures to prove value and change views. If this approach is not taken, it leads to dissatisfaction and doubts.

Integration tactic
The level of integration needed between the companies also decides the post merger integration strategy.

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There are many cases where the acquired company keeps its original identity and more or less continues to work independently. Suffice to say that these situations are easier to handle. Having spoken about the need for a clear post merger integration plan, let us now examine the main ingredients of one (illustrated in the accompanying diagram). Strategy and structure is probably, conceptually, the easiest and the most critical part that has a bearing on the rest of the integration. However, if the acquisition does not have total management buy-in, it may be a problem area too. Some of the key elements of this are leadership consolidation, vision and business philosophy alignment, and cultural alignment, consolidation of business reporting and organization structure definition. Market integration is a more involved exercise and needs to consider issues covering a broad spectrum brand integration (visual and messaging); sales force integration and retraining; product and service integration; channel integration; and supplier integration are key. If done well, this is one area that could lead to tremendous synergies and even not so obvious cost benefits. People integration, the most sensitive area, comprises compensation rationalization, creation and deployment of a communication plan, devising employee retention mechanisms as well as employee feedback processes.

Operational integration
Last, we have delivery or operational integration. This would include process and system alignment, technology integration, consolidation of support functions and workplace branding.

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While chalking out a post merger integration plan, it is a good idea to identify a team comprising members from both organizations to anchor the initiative. Needless to say, the top management should visibly support the initiative, and it is useful but not compulsory to have external help.
It is also practical to be aware of typical challenges:

Maintaining day-to-day business continuity Overcoming cultural differences including management style, company structure, employee mind-set Delivering the needed integration synergies in the first year and deliver sustainable synergy benefits over the long-term Creating and maintaining effective employee communication And address these effectively through the plan. Finally, here are some pointers to a successful integration Quick and speedy integration Swift leadership consolidation Unambiguous and continuous communication to stakeholders Setting up an empowered and small integration team Top management commitment and involvement Detailed plan with milestones and metrics to evaluate success Identifying quick wins and displaying success

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In times to come, we will see more and more companies entering interesting partnerships. Some will go all the way, others may have strategic, but more loosely coupled relationships. However, the above approach will help in all such scenarios

X. Suggestions
Mergers and acquisitions in the banking sector is not an easy task. In different phases of M&As implications of innovative strategies is a paramount importance. Greater the care better the long term outcome. In no way should the HR issues be compromised. The following are some of the suggestions: The complexity of managing large operations can nullify the benefits and losses related to organizations. The regulatory frameworks need to be revised more to avoid complexity. International Co Corporation is required to deal with cross boarder competition problems effectively. It should be handled carefully. In merger the interests of small countries have to be considered in terms of accepting the rules of major countries. The human capital should be centrally placed. It has to be given equal attention like the economic and financial considerations. It would enable the M&A to be more compatible and easier. Communication of information between management and staff would help in minimizing uncertainties of M&A. it would reduce organizational drift. The employees should be informed in time regarding the post M&A phases. It would minimize organizational conflict. Especially the feeling of fear, apathy and demotivatitive issues can be minimized. Suitable innovative HRD strategies should be designed to develop human capital wit requisite skills in the increasing competition, Sectoral consolidation and change in the nature of occupations.

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To meet the challenges and to remain competitive banks have to recruit specialist in various fields. It depends on HR department of the concerned banks. Talent management has to be institutalised. Performance linked flexi time and such other strategies have to be developed. Care has to be taken to create a conducive work environment in such a way that the bankers can take commercial decisions judiciously without any fear.

Cultural differences can spell out failure. Address then early in the process. Evaluate cultural cues as rigorously as financial data. Assess areas such as decision making style, execution discipline and leadership approaches

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XI. ANNEXURE

Questionnaire for the Survey

1. Name of your firm prior to Merger/Acquisition?

2. Name of your organization?

3. How many months have passed since the Merger/Acquisition?

4. What was your department in Operations, Technology, Others)?

the

organization

(HR,

Finance,

5. Was your original company the dominant party in Merger/Acquisition?

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a) Yes b) No

6. How did you have the information about the Merger/Acquisition? a) b) c) d) Formal Small Group Networks Grapevine Computer Aided Communication Official Information was Provided

7. Were you given adequate information about the Merger/Acquisition on time? a) Yes b) No

8. Were you provided with any training for the transition? a) Yes b) No

9. The training provided, if any was effective: a) Strongly Agree b) Agree c) Neutral d) Disagree

10.Are you satisfied with the organization?

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a) Yes b) No

11.To what extent you are satisfied with the Merger/Acquisition? a) Very Satisfied b) Satisfied c) Neutral d) Not Satisfied

12.Post the, Merger your organizations encouragement to employees to innovate and take risk is: a) Yes b) No

13.There is change in your responsibilities/ role after Merger/Acquisition: a) Strongly Agree b) Agree c) Neutral d) Disagree

14.Was it anticipated or known? a) Yes b) No

15.What is the impact on your career growth opportunities? a) Strong Negative Impact

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b) Weak Negative Impact c) Neutral d) Strong Positive Impact e) Weak Positive Impact

16.What is the impact on Salary structure? a) Strong Negative Impact b) Weak Negative Impact c) Neutral d) Strong Positive Impact e) Weak Positive Impact

17.What is the impact on the job security? a) Strong Negative Impact b) Weak Negative Impact c) Neutral d) Strong Positive Impact e) Weak Positive Impact

18.What is the impact of Merger on your job/working team? a) Strong Negative Impact b) Weak Negative Impact c) Neutral d) Strong Positive Impact e) Weak Positive Impact

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19.What was the period of maximum people leaving the organization? a) First Three Months after the Merger b) 3-9 Months after the Merger c) 1 Year after the Merger d) It was Constant

20.There is a change in the work culture of the organization following Merger/Acquisition? a) Strongly Agree b) Agree c) Neutral d) Disagree

21.Is the Merger/Acquisition financially successful? a) Strongly Agree b) Agree c) Neutral d) Disagree

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Signature of the Employee: Date:

XII. References 1. V.G. Chari, Banks Mergers and Acquisitions-Implications and Impediments.SSIM-Excel Series 2. Strategic Management-IGNOU Module 3. http://en.wikipedia.org/wiki/Mergers_and_acquisitions 4. http://www.economywatch.com/mergersacquisitions/trends.html 5. Merger and acquisition by Bhagaban Das and Alok Kumar Pramanik 6. Merger and Acquisition Security by Edward Holibozek and Dr.Gerald Kovacich

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