Managing All Stakeholders in the Context of a Merger Process
Review of the Relevant Literature
Types of Mergers
Identifying All Stakeholders in a Given Business
Strategic Market Factors Driving Merger Activity
Selection Process for Merger Candidates
Summary, Conclusion, and Recommendations
The Challenge of Managing All Stakeholders in the Context of a Merger Process
Mergers and acquisitions became central features of organizational life in the last part of the 20th century, particularly as organizations seek to establish and maintain competitiveness in an increasingly globalized economy (Nevaer & Deck, 1996). Mergers are generally described as being the formal joining or combining of two corporations or business (Prichett, 1987), although both the framework and the method of merger vary greatly. The reasons for mergers are different based on what a company is trying to accomplish. The acquiring firm may seek to eliminate a competitor; to increase its efficiency; to diversify its products, services, and markets; or to reduce its taxes. Methods used to accomplish mergers may range from friendly to hostile takeovers and may involve varying degrees of company integration (Fitzgibbon & Seeger, 2002).
Statement of the Problem
According to Letza, Kirkbridge and Sun (2004), the current debate and conceptualization concerning corporate governance has been focused on two perspectives: a shareholder perspective and a stakeholder perspective. Although advocates and supporters of each view seek to justify its superiority, rationality and universality, such analysts rarely pay attention to the fundamental conceptions, assumptions and presuppositions that underlie their perspectives which are less credible and valid in matching the continually changing practice of corporate governance.
Justification of mergers are primarily based in three interrelated business themes; synergy, shareholder value, and enhanced competitiveness (Robinson & Peterson, 1995). Synergy would suggest that the two entities in combination may create new opportunities and efficiencies in that could not be realized in singular operation. Furthermore, synergy implies that the merging entities may be substantially different from one another in complementary ways. Competitiveness is grounded in the argument that larger organizations are necessary to compete effectively in an increasingly global market. This concept is closely connected to globalization pressures, suggesting that size is a requisite feature of a success in a globalized economy. Finally, synergy and competitiveness, it is argued, will lead to increased shareholder value in terms of higher stock prices.
Almost inevitably, however, mergers create some level of duplication and the need to eliminate some functions and associated jobs. For internal audiences, such as employees, merger is a source of high uncertainty and reduced job security. This level of uncertainty may result in employee stress and, in some cases, active resistance to the change (Fairhurst, Green & Courtright, 1994). When people are threatened, or perceive the potential for a threat, they may resort to a wide range of behaviors that overtly or covertly serve to undermine or sabotage organizational change (Robbins, 2001). This point is reiterated by House (1996), who points out that most people, just being people, are reluctant to any change in their routine. Many people will passionately challenge each and every effort on the part of management to alter any aspect of their duties; however, when this active resistance originates among key managers, there are more fundamental issues involved.
Furthermore, such conditions are frequently more pronounced in global mergers through arguments about loss of American jobs. In virtually every case, though, the uncertainty and stress of a merger will result in at least a short-term loss of productivity. This uncertainty is most frequently resolved by providing stakeholders with clear statements of justification, articulation of motivation for the merger, and clear and compelling visions of the future (Ford & Ford, 1995). Clear, frequent, consistent and unambiguous messages, therefore, would be most desirable when facing a potential merger (Fitzgibbon & Seeger, 2002).
Moreover, corporate leaders frequently engage in a process of framing, offering world views, perspectives or visions, in order to manage the larger meaning of a merger (Putnam & Fairhurst, 2000). In mergers, these models frequently represent the larger strategic visions of the future that link old structures, cultures and identities with new in persuasive ways. This strategic framing may draw on a number of linguistic and rhetorical devices including catchphrases, jargon, spin and metaphor (Putnam & Fairhurst, 2000, p. 89).
Purpose and Importance of Study
The purpose of this study is to identify the key aspects related to managing all of the stakeholders in the context of a merger process. The importance of this study relates to the fundamental issue in any merger, which ultimately concerns effectiveness. An effective merger permits the combined organization to achieve synergy and enhanced productivity relatively quickly, with minimum stress and uncertainty for the organizational participants. By sharp contrast, ineffective mergers may result in long-term loss of productivity through alienation of employees and other key stakeholders, turnover of valuable employees, layoffs and lost jobs, and high levels of stress and uncertainty for those who remain. Although a number of pre-merger variables such as the relative health of the individual companies, and the degree of fit influence effectiveness, the strategies of merger, including the surrounding discourse, must also be considered (Fitzgibbon & Seeger, 2002 p. 40).
Companies are a collective means by which people assert their self-interests. To achieve their personal and organizational goals, owners and managers need employees and customers. Employees become involved with companies to assert their self-interest and to satisfy personal, economic, and social goals. Customers assert their self-interests as they select among products and services. In this sense, companies can be discussed "in terms of a set of organizational problems of different meaning and consequences for different organizational stakeholders. Problems are solved by sets of strategies and activities proceeding from different rationalities proposed by different stakeholder groups" (Fitzgibbon & Seeger, 2002 p. 6). This approach is also compatible with Putnam and Fairhursts' concept of "organizing as negotiation" (p. 251).
Because persons and companies all tend to act in ways that affect each other's interests, organizations can be defined as negotiated enactments of stakeholder interests. Emphasizing this point, Mumby (1988) concluded, "Organizations are not stable, fully integrated structures. Rather, they are the product of various groups with competing goals and interests. An organization services a group's interests to the extent that it is able to produce, maintain, and reproduce those organizational practices that sustain that group's needs" (p. 166).
Essential to this process are the individual decisions to seek, give, and hold stakes in the form of potential rewards or costs. The stakes, though, are negotiable and tend to affect the creation, maintenance, and dissolution of relationships. Timely stakeholder analyses provides researchers, managers and, in fact, affected stakeholders themselves, to see how organizational and individual behaviors enact self-interests and affect relationships (Heath, 1998).
Each company communicates with many stakeholders. How well it communicates is crucial. In this era of increasing regulatory constraint, managers need to understand how to position their company to take advantage of or remediate the constraints imposed by various stakeholders, whether internal or external. Some companies have become increasingly sensitive to the stakes their workers hold. Workers are able to assert their interests through legal and regulatory actions. They can sue if they believe they have been discriminated against or treated badly. They can "blow the whistle" if the company is violating laws, regulations, or contracts. They can leave and join another company (Heath, 1994).
Persons outside of organizations assert their self-interests by seeking and granting stakes. Neighbors in the locale of a company's plant may assert their self-interest by complaining about the health hazards it creates. How this self-interest is defined and asserted can impinge on the company's goals and operations. If the plant puts out pollutants that neighbors believe are harmful, they can exercise regulatory and legislative control of those emissions. In this regard, self-interests of neighbors are not simple -- not merely a matter of health, for instance. A plant in a community is a source of jobs -- a way its neighbors assert their self-interest. It can affect the tax base of the community and can be a matter of civic pride (Heath, 1994).
Overview of Study
This study employs an action research approach to examine the question of how to best management all stakeholders' interests prior to, during and following a merger or acquisition. A review of the relevant and scholarly literature in Chapter 2 is followed by a description of the methodology and study approach in Chapter 3. An analysis of the data is provided by Chapter 4, followed by a summary, conclusion and recommendations in Chapter 5.
Review of the Relevant Literature.
Background and Overview. According to Black's Law Dictionary, a merger is "the fusion or absorption of one thing or right into another; generally spoken of a case where one of the subjects is of less dignity or importance than the other. Here the less important ceases to have an independent existence" (1991 p. 988). When the merger occurs between two corporations, there is statutory guidance as to which one of the corporations survives…
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