A case study of the acquisition of the Jaguar and Land Rover by Tata Motors
Purpose – This research explores the key factors in the success of the integration and implementation process for creation of value through realization of synergy from the merger of firms. It also intends to study the managerial complexities associated with these key factors.
Method – A case study method approach has been adopted in this research from Tata Motors acquisition of Jaguar and Land Rover a British Automotive brand in mid of 2008. In-depth semi-structured interviews, with managers and executives, having experience on change management & integration of the firms, constitute as empirical source.
Findings & Discussion - The findings support that the internal factors involved in the integration and implementation phase are key to achieving success with the acquisition. Successful value creation activity can be undertaken by overcoming the challenges through an effective management of these key elements.
Research Limitations – Potentially one sided view of the managers during the integration process as the response could be partially motivated in favour of the management, neglecting the sensitive issues of human factor and limitations concerning generalization from a single case study approach.
Practical implications – Management of post-acquisition phase poses unique challenges and issues. So, this research would facilitate in developing an enhanced understanding of the key factors essential for creating value during the integration process. Further, given the growth in the Indian economy, this research would facilitate in highlighting the managerial complexities associated with the cross border M & A.
Key words – Merger & Acquisitions, Integration & Implementation, Change Management, Communication, Culture
Paper type – Case study
Chapter One – Introduction
Researchers have been studying the Mergers and Acquisitions (M & A) activity since early 1900 (Gaughan, 2002). However, they have been unable to solve the mysteries of M & A, regularly discovering new dimensions and encountering new issues, giving an unclear picture as to what destroys or enhances value. It therefore becomes important to examine the phenomenon of value creation process and develop strategies that mitigate the challenges associated with it.
In the 21st century, the global M & A activity has increased from $ 352 billion in 1992 (Weston & Weaver, 2001) to $ 3.79 trillion until 2006 (Berman, 2007), showing a phenomenon increase. This has largely been to acquire competitive advantage and achieve the long term objectives of the firms. Although, there has been a many folds increase in M & A activity in the last two decades, but it faces certain issues and challenges. It has been constantly bogged down by high failure rates, with several researchers having found that close to 80 % of the firms fail to realize their initial financial goals (Nahavandi and Malekzadeh, 1993), while 50 % of the M & A fails to create any value for the buyer (Schneider, 2003). Yet interestingly, the M & A activity has surged, due to the potential value which exists from undertaking such an activity.
For any M & A to be successful, value creation activity is regarded as the main goal through synergy realization, which exists between the similar related firms`. However, historically, M & A have been found to erode the acquiring firms` value after the merger (King et al, 2004). Mere existence of synergy does not create value. This is because; the value creation activity from the synergy is often faced with inherent challenges and issues, making it difficult to extract value out of the merger (Campbell and Luchs, 1992). This value can be generated by achieving success in the post acquisition phase (Yunker, 1983). And, it is the integration and the implementation process in the post-acquisition phase, which is the key to the success of the M & A activity (Haspelagh and Jemison, 1991). However, recent researchers have also paid attention to the human factor affecting the integration and implementation phase (Sudarsanam, 1995), which apparently causes high failure rate in the M & A activity. This Human factor plays an important aspect in the creation of value. And, by successfully overcoming the barriers which they create during the change process, wealth can be generated from the acquisition.
Although, both pre-acquisition and post-acquisition are important part of the M & A activity, but it finally comes down to the integration and implementation phase, where the value has to be generated from the realization of synergy in both the firms. However, majority of the acquisitions fail to realize value from the acquisition during the post merger integration & implementation phase (Simpson, 2000). This has been the case, largely, because firms` fail to manage the multiple elements which exists during the integration and Implementation phase (Jemison & Sitkin, 1986; Kitching, 1967). Successes with these factors are essential in order to create value from the M & A. This phase of Integration and implementation fails due to the inbuilt challenges and issues with respect to lack of communication (Nilsson, 2010), cultural clash between the firms (Pablo, 1994), managing of the change process (Ashkenas and Francis, 2000), to speed (Angwin, 2004) and extent (Saxton and Dollinger, 2004) of integration between the firms. Research shows that the failure tends to occur due to lack of success in overcoming the challenges and issues, which these elements produce during the post-acquisition phase. Studies have revealed that the success with these factors can generate high financial benefits for the acquiring firm (bertoncelj and Kovac, 2007; KPMG, 1999) during the post acquisition activity. So, appropriate measures needs to be taken by the management of the acquiring firm, in order to achieve success with these key elements. Otherwise, the acquisition can result in possible loss of value or failure in the overall M & A activity.
1.1 Aims of Research
Realizing synergy from the acquisition is often faced with several difficulties. From searching possible areas for synergy creation to integration and implementation of strategies, firms encounter numerous challenges, which hinder the prospect of creating value (Goold and Campbell, 1998). So, this research aims to look into this issues of value creation and of integration & implementation phase from an Indian firm`s perspective.
The research aims to examine the strategies adopted by Tata Motors in order to create value from the acquisition of Jaguar & Land Rover, through realization of synergy benefits in a cross border M & A. The research intents to study the issues & problems which the management faced during the Integration and Implementation phase, and thereby the strategies applied to overcome those problems & issues.
For this purpose, a case study approach has been adopted to explain the phenomenon. In this case study, Tata Motors acquired JLR in mid 2008, which was bleeding with heavy losses before the acquisition, but now the firm has witnessed a speedy turnaround in its fortunes with both the brands generating significant profits. Through the findings of the case study with successful value creation and in overcoming the issues concerned with the integration and the implementation phase, a generalization would be made for the potential Indian firms looking for cross border acquisition, in similar related business activities from various sectors.
1.2 Research Questions
Based on these above aims, following research questions have been framed for the study. Deep insights to the study would be generated based on the feedback from the participants.
- What are key challenges and issues during the post-acquisition phase, affecting the value creation activity in M & A?
- How do these elements affect the acquisition success?
- How can problems associated with these key elements be solved?
1.3 Scope of Research
Various researchers have explored the M & A activity in different fields and markets. However, limited research has been conducted in studying the key factors affecting the integration and implementation. This research intent`s to fill this existing gap in the current M & A literature. In this research, a value generation activity in similar related business entities would be examined, through creation of synergy in financial, operational and managerial activities. The problems & issues during Integration & Implementation phase which the Indian firm`s could possibly encounter in achieving the synergy objectives, would be brought forward through a case study approach.
1.4 Structure of the Dissertation
- The dissertation is divided into five different chapters. Chapter one has provided a short overview about the general topics discussed in the research.
- A critical literature review is presented in the chapter two, focusing on the recent literature In M & A field and the area of research, thereby facilitating in laying down of a strong foundation for the research findings and the discussion.
- In chapter three, Research Methodologies will be examined, explaining why the case study method has been adopted and its significance for this research.
- Chapter four provides findings and discussion of the research
- Chapter five provides a brief conclusions and limitations as well as recommendations for further research
Chapter Two – Literature Review
2.1 Theoretical Framework
The literature review in this chapter is divided in five parts. It starts with providing a brief overview about the general M & A strategies in chapter 2.1 thereby moving to the growth of M & A activity in the Indian Economy in chapter 2.2. Further, chapter 2.3 provides a critical review about the nature of acquisitions activity, while chapter 2.4 talks about the synergy and creation of value in M & A. The final chapter 2.5 talks about the challenges and issues during the integration and implementation process, in the post-merger phase.
2.2 General M & A strategies
Firms do recognize that they can`t succeed without making mergers and acquisitions (M & A) in present business environment (Harding and Rovit, 2004). Growth through organic mode is slow and time consuming and at times proves costly for the acquiring firm. So, M & A often act as a quick source for generating more value for the shareholders. Therefore, in current business environment where every firm wants to gain more and more business, it is inevitable for firms but to look out for M & A in order to achieve that.
M & A is a strategically motivated decision used by firms and top management to seek additional and new advantages in order to succeed (Sirower, 1997). These firms seek new and additional advantages in the form of scares and innovative resources, access to new market, improve market share, achieve economies of scale, and increase in profits. All these elements provide an opportunity to gain advantage in the highly competitive business environment. Setting up a new subsidiary or a new venture is not only time consuming but also expensive for the firm`s. So, rather than setting up a whole new operation from the scratch, M & A provides a clear advantage over the rivals, when the firm plans to grow inorganically (Hennart and Park, 1993). This apparently helps the acquiring firm to gain superior competitive advantage in a relatively short period of time.
The main motive behind M&A is to create synergy through combination of financial activities, operational activities and Managerial activities of both the firms, in order to generate value for the shareholder (Goold and Campbell, 1998). So here, although pre acquisition activity plays an important aspect in the overall acquisition process, it’s the Integration and Implementation phase where the main value for the acquirer is created from the synergy. Therefore, it becomes highly important for the acquirer firm to consider the integration and implementation phase for potential synergy gains, before going ahead with the M & A activity.
During the last two decades, M & A activity has evolved to a high level in newly emerging economies of the world, such as India.
2.3 Mergers and Acquisitions in India
Historically, Indian Companies had a very limited presence in the cross border M & A during the 1970`s and 1980`s (Prasad, 2007). But, a sudden upsurge was seen in the cross border M&A activity during the second half of the 1990`s, mainly due to the liberalization of the Indian economy in 1991 (Prasad, 2007). With this liberalization policy, the Indian Government opened up the local market to the foreign companies, providing them a greater access to Invest and trade. This liberalization policy of the Indian economy led to an upsurge in the presence of foreign companies in the Indian market, which increased competition and forced the local companies to undergo structural changes. This process of structural changes strengthened the roots of the Indian industries and facilitated them in generating great amount of wealth from the domestic market. Through this new found strength and the increase in purchasing power, the Indian companies started looking out for M&A in International market during the second half of 1990`s in order to gain competitive advantage through buyout of valuable resources and access to wider global market (Pradhan and Abhram, 2005). This interest of gaining competitive advantage led to the boom in M & A story in the Indian economy.
With massive economic growth in the Indian economy since 1990`s, it has brought about certain changes with the pattern of M & A activity. From limited presence during 1990`s with $166 million in M&A, it increased to $3 billion in 2000 (Business standard, 2007) and up to $50 billion in 2008 (Research and Markets, 2009). This phenomenal increase has been mainly been due to the fact of high economic growth in the Indian economy. The domestic firms started looking for acquisitions in cross border market in order to restructure their business activity, which led to an explosion in the M&A. And this M & A activity, is expected to increase by many folds in near future due to rapid increase in the Indian economy and larger ambitions of firms` to make a global presence.
In a study conducted by Boston Consulting Group (BCG, 2008) revealed that 20 companies out of the next 100 global challenging companies would emerge from India. So, this study highlights that the future for the Indian companies is favourable and they would be highly involved with the cross border M&A activity in order to diversify and expand their reach to become global giants. However, the Indian firms face severe challenges & issues, due to high M & A failure rate.
Although, there has been a phenomenon increase in the M & A activity, yet high numbers of M & A initiatives fail.
2.4 Acquisitions often fail
Majority of the studies argue, that M & A has proved to be harmful to the firm`s overall performance (Cartwright and Schoenberg, 2006). And to a large extent, it does prove to be damaging to the acquiring firm, with as many as 83% of the acquisitions failing to create shareholder value (KPMG, 1999). Very often, after the merger, acquiring firm experiences problems and issues in realizing synergy through operational, managerial and financial activity from where the value is generated for the shareholders, thus failing the overall acquisition motive. In this regard, in a study conducted by Michael Jensen (1988), a financial economist, reflected that the acquiring firm experiences a drop in the average returns, tending to be potentially damaging to the firms health, whereas the target firm shareholders often earn above average or high premium returns. Simultaneously, research conducted by the others also bring out the same results, where the acquiring sees a sharp drop in their profits and the target firm enjoys a high premium due to the fierce competition among the rivals in order to buy the target firm. Yet, increasingly the M & A activity has surged to new levels in the last two decades, due to potential benefits which exists from undertaking such an activity.
Companies are motivated to carry cross border M & A in order to create more value for the shareholders. However, studies in this field reflects that cross border M & A as a value generation strategy is not clear and decisive, very often producing mixed and inconclusive results at international level (Tuch & O`Sullivan, 2007). Here, at one end Markides & Ittner (1994) argues that the acquisition provides significant positive gains to the acquiring firm. Whereas, at the other end Agrawal et al (1992) argues that acquisitions provide zero or negative returns to the acquiring firm. So, although major majority of the acquisition tends to be a failure, it can be argued that they do provide the acquirer with ample opportunity for value generation through successful pre-acquisition and post-acquisition strategies.
It has can be often argued that the M & A at an international level is risky with failure rate being high in not delivering returns to shareholders due to inherent complexities which it includes. However, few researches on this indicate that it generates greater returns to the acquiring firm, when compared to acquisitions at a domestic level (Harris and Ravenscraft, 1991). So, although questions are raised against the cross border acquisition, it can be a highly profitable strategy for the acquiring firm if executed in a successful manner, thereby generating positive results and aiding to the long term health of the firm (Hitt, et al., 1998). One such successful example is the case of General Electric`s, which has grown inorganically through M & A, transforming the company into one of the world`s leading companies in different sectors (Ashkenas et Al., 1998). So, although M & A deals have high rate of failure, successful ones reap high profits and facilitate in achieving organizational objectives. However, care must be taken by the acquiring firm while undertaking cross border M & A, as the low success rate of M & A deals brings out a negative result with large number of failures.
It is important to consider the synergy creation during the acquisition process, as it is through active realization of synergy in different areas from which the value generation processes takes place in both the firms.
2.5 Synergy and Creation of Value through M & A
M & A take place with a motive to achieve synergy from the transaction, in due anticipation of achieving economic gains from the merging of both the firms (Berkovitch & Narayanan, 1993). So, the M & A should only take place when it provides sufficient gains to the stakeholders of the firm. As, the main objective of the firm during acquisitions is to gain extra return over and above earned before the acquisition through achieving synergy between the firms. However, often it has been argued that in a race to buy the target firm, the acquiring firm ignores the due diligence aspect and the potential areas for synergy benefits (Hakkinen and Himola, 2005), which often results in no value generation after the merger, as a result failing the overall objective of the acquisition. Therefore, if no or limited value generates from undertaking the M & A activity, the firm must not indulge in the acquisition process, in the greater interest of the shareholders.
In M & A, synergy is created when the combined value of the firm exceeds the sum of the two individual firms (Seth, 1990). This value is created through the combination of the resources between the two firms. If synergy benefit is achieved successfully, it is reflected through economic gains in the shareholder values of the acquiring firm. However, acquisition can be risky if high premium is paid to gain control of the firm. The risk is apparent with as much as two third of the M & A failing to achieve anticipated synergy benefits (Cools et al, 2007). So, it can have negative long term impact on the health of the acquiring firm, if it fails to generate synergy between them. And, the potential reasons for this failure can be unsuccessful management, poor post-merger integration & implementation and a clear lack of strategies between the firms. This clearly indicates that the objectives of creating synergies are not easily achieved, very often failing the overall acquisition motive. So, thorough research should be conducted by the acquiring firm to forecast the possibility of synergy creation from the M & A, else it holds limited or no value for the shareholder.
Hoffman (1998) argues that M & A allow smaller firms to gain superior competitive advantage through consolidation of firms. This facilitates acquiring firm to increase its presence through combination of critical elements necessary to generate synergy between them, thus potentially providing an upper edge against the rivals while competing in the global market. To an extent, it does provide them the opportunity to compete against the rivals at a national and international level by leveraging the combined resources of the firms. However, the potential benefits from sharing of resources are not automatically realized, and very often synergy initiatives fail to meet the set targets (Goold and Campbell, 1998). Here, it becomes critical to know that the degree of success is directly related to the capability of the senior leaders and management team to realise synergy benefits through combination of resource capabilities and successful integration & implementation processes (Hayward, 2002). So, although gains from synergy exist from a potential M & A, realizing that synergy is necessary in order to generate value for the shareholders.
In the history of M & A, across all industries and sectors studies have revealed that by and large acquisitions in which the firms from similar industries merge, tends to generate more synergy than the firms competing in unrelated businesses (Healy et al, 1997). This is mainly due to the fact that the resources in firms from the similar industries tends to combine easily as against the firms from different sectors, hence creating more value to the shareholders through a healthy synergy of the complementary assets. The firm generates higher value through improved operational efficiencies, financial synergy and managerial synergy from the combination of assets from both the firms (Goold and Campbell, 1998). Thus, merger across similar industries generates a competitive advantage for the firm against the rivals through an increase in overall efficiency and power. However, it must be noted that mere existence of synergy benefits does not always results in financial benefits (Mahajan and Wind, 1988). There are other key factors apart from the existence potential synergy, which facilitates in achieving those financial objectives. And, ignoring these factors can possibly result in loss of value or failure of the overall acquisition.
Although, pre-acquisition activity is utmost important activity, but it is the integration and implementation phase in M & A, where the synergy and thus the potential value for the shareholders are generated. So, it becomes highly essential for the acquiring firm to closely monitor this phase of M & A, as any issues concerning this activity can potentially destroy the value generation process.
2.6 Integration & Implementation in M & A
In M & A, Integration and implementation phase has a strategic importance in the overall success of the acquisition. Shrivastava (1986) found that one third of the acquisitions failed due to the integration problems, while hunt et al (1987) found that there is an 83 % correlation between a successful acquisition and implementation process. So, the core value for the firm is generated during this phase of integration and implementation. A successful integration and Implementation can generate high level of synergy benefit and thus high level of shareholder value, whereas unsuccessful ones can completely destroy potential value. So, it becomes important for the firm to successfully execute the post-acquisition strategies. However, increasingly firms fail to do so, with as much as 83% M & A failing to yield positive results (KPMG, 1999).
The importance of the post merger integration is now widely recognized as being an essential element in the overall success of the M & A (Child et al, 2001). Mergers are highly susceptible of being failure if not integrated with care and urgency (Haspelagh and Jemison, 1991). If synergy benefits exist with the merger, it can only be harnessed properly with appropriate post-acquisition integration plan (Simpson, 2000). So, it becomes necessary on the part of the management to think critically while formulating integration strategies for the merger. However, there are certain challenges and issues which do come in to picture during the integration process, which needs to be uncovered in order to create competitive advantage for the acquiring firm. These integration problems can occur while creating operational synergies, financial synergies and managerial synergies.
2.6.2 Implementation Process
This phase of implementation is highly crucial in the success of the merger (Ravenscraft and Scherer, 1987); as any problems during this phase can destroy the scope of potential synergy for the acquiring firm. So, it is essential for the acquiring firm to carefully formulate and execute the implementation strategies. On implementation strategies, Nayyar (1993) argues that often acquirers go ahead with the buyout of the firms without giving any serious consideration to the implementation process, thereby potentially destroying the value which can be generated through synergy. And, to an extent this is true as reflected by the acquisition success rate of 83% from proper implementation strategies (Hunt et al, 1987). So, it is important to think critically about it, as there is a high degree of direct correlation between implementation success and overall M & A success ranging from 83% (Hunt et al, 1987) to 53% (Habeck et al, 2000). So, sufficient time should be spent on formulation and execution of implementation strategies.
Within the Integration and Implementation activity, several factors needs to be considered for a successful M&A. Potential Issues with these factors can affect the success of the M & A objectives.
2.6.3 Speed & Level of Integration
A Number of consulting firms have published that the speed at which the acquired firm is integrated, plays a crucial role in the creation of value (Fujitsu Consulting, 2001; Pricewatercoopers, 2000). So, on the issue of speed, few researchers argue that the quicker Integration and implementation of the acquisition strategies is beneficial for the acquired firm, as it reduces the uncertainty and ambiguity among the members (Homburg & Bucerius, 2006). However, Ranft and Lord (2002) argue that slow integration process is also beneficial for the firms, as it facilitates to build a strong relationship with the employees in the both the firms; as they are ones who are likely to be affected the most during the merger process.
Further developing on this issue, Bragado (1992) argues that the speed of the integration not only depends upon certain prevailing conditions but, also on the level of Cultural fit between the two firms. As, possible cultural clash between the firms may arise, which can possible create challenges with the whole integration process. New findings suggest that issues due to extent of integration (Saxton and Dollinger, 2005) can also come forward. As, lower level of integration during the initial stages can facilitate in obtaining sufficient internal knowledge about the acquired firm, which later on, can be deeply integrated without any severe challenges. So, while integrating the firms, it’s essential to consider about the extent and the speed at which the firms are integrated, else potential issues can be encountered.
2.6.4 Managing the Change Process
M & A is carried out in order to generate value for the shareholders. However, the value is not just created with the completion of acquisition formalities. The whole process needs to be managed effectively right from the selection of an acquisition target until the integration and implementation phase in order to generate value out of the merger. For generating this value, it’s highly essential that the senior management of the acquiring firm gives high priority to the team managing the change process. Often, it has been found that the success rate of the merger increases with an experienced management, which is competent in managing and executing the post-acquisition strategies (Ashkenas & Francis, 2000). However, the benefit from the merger is not realized from relatedness but is generated when the merger is successfully managed. Also, it has been found that the integration and implementation is effectively realized if the management team has a prior local experience and knowledge about the national culture of the acquired firm (Li, 1995). This relatively helps in reducing the complexities during the merger phase. Managing the integration and implementation process successfully is evident from the very fact that there is an 83% correlation between implementation and acquisition success ratio (hunt et al, 1987). So, an effective management of the post-acquisition phase is highly beneficial in order to create the value.
2.6.5 Top Management Turnover
It is highly important to consider issues concerning the managerial area during the integration process. The acquiring should take the top management of the acquired firm into confidence and work together with them. Often, it is argued that the senior management of the acquired firm should not be removed immediately in order to gain corporate control, as it can directly affect the performance of the acquiring firm after the merger (Cannella and Hambrick, 1993). Such a move can potentially be harmful for the acquiring firm, as it can create a brain drain situation in the acquired firm and thus affect the overall business activity in the firm. However, simultaneously possibilities of the management being incompetent in operating the business activity may also exist, which otherwise may require a change.
Also, Haspeslagh and Jemison (1991) argue that after the acquisition, the management of the acquired firm is not given considerable amount of autonomy in the working of the firm. So, at times lack in autonomy can possibly demoralize the senior management & managers and result in loss of valuable assets for the firm due to increase in turnover. Therefore, management in the both the firms should work together and make the acquisition a success through cooperation. In one study Krishnan et al, (1997) found that performance and success in both the firms improved positively with greater cooperation and understanding between the management of the firms.
2.6.6 Cultural Issues
During the integration process, it becomes highly essential for the acquiring firm to pay close attention to the cultural differences between the firms. As Studies have revealed that failure to address cultural differences between the firms have been one of the main causes for acquisition failure (Mitchell and Holmes, 1996) in international M & A. However, few studies have revealed that a positive relationship exists due to lack of cultural fit between the acquiring firms (Morosini et al, 1998). So, it can be argued that the cultural fit is not the main cause of failure. So, these two contrasting views do raise questions whether the lack of cultural fit between the firms is a concern for the overall acquisition success or not.
However, if cultural issues exist, in such cases exposure to local experience (Li, 1995) can facilitate in addressing those concerns. It is important to think about the cultural aspects at times, as failure to address this cultural issues, can create a sense of wide spread panic and uncertainty among the members of the acquired firm, which potentially can result in an increase of employee turnover in the acquired firm. And with these increase in the employee turnover, the firm tends to lose the opportunity to generate value, as employees are the most valuable assets which a firm can possibly have. So, it becomes highly essential for the firm to address these cultural issues with care and any negligence on this area can result in failure of the acquisition objective.
2.6.7 Communicating the change process
Often, it is found that the employees from the acquired firm feel stressed and tensed due to the fear of losing their job during the merger process. And this fear is very much rationale as after the merger a wide scale restructuring is seen in the acquired firm in order to create value out of the acquisition. However, this is not always the case. Often, the restructuring in the firms is done at different levels which do not create any concerns for the employees. So during such times, it becomes a prime duty of the acquiring firm to properly communicate with the employees of just not with the acquired firms but also with their own, in order to create an environment of peace and reduction in ambiguity (Napier et al., 1989). Lack of information here may cause problems and issues concerning poor motivation, rumours of mass layoff and general discontent among the employees during the integration process (Mitchel and holmes, 1996). So, looking after these concerns, the firm should take appropriate measures in order to properly channelize the communication process effectively and efficiently, so that it does not impact the performance of the firm.
From the literature review, it can be seen that high numbers of M & A fails, due to lack of success with the key factors as mentioned above. Success with these factors is highly essential in order to create value from the acquisition. Failure to overcome with either of the factors can disturb the value creation process and possibly fail the whole acquisition. So, appropriate strategies needs to be framed in order to achieve success with all these factors. Indian firms which have limited exposure to cross border M & A, are potentially subject to higher failure rate. So, critical attention needs to be given in overcoming these inherent challenges during the post-acquisition process.
Chapter Three - Methodology
This chapter describes about the proposed methodology adopted for the research. The chapter 3.1 introduces with the method approached for the research, while chapter 3.2 provides a detail explanation about the case utilized. The Chapter 3.3 & 3.4 talks about the research design and research sample. Access, participation & data collection method along with ethical issues and limitations have been examined in chapter 3.5, 3.6 & 3.7, thereby providing a strong base for the research findings.
3.1 Case Study Method
The Choice of the research method employed largely depends upon the research problems and issues concerned in the study. Morgan and Smircich (1980) here argue that the application of a certain research method depends upon the nature of the phenomenon or the series of events which needs to be examined. And, in the social science domain, positivism and post-positivism are the two methodological traditional approaches for research, where positivism is concerned with the collection of facts, through study & explanation of chain of causality (Finch, 1986); while post-positivism is about the construction of social reality rather than determining it objectively (Easterby-Smith et al, 1991). So apparently, positivism which closely deals with the facts is largely a quantitative method of analysis, while post-positivism dealing with the social phenomena requires a qualitative method of analysis. And within the framework of qualitative research, there are instances when researchers need a deep insight, discovery and interpretation rather than testing hypothesis, in such areas a case study research method can play a vital role (Merriam, 1988) in providing great in depth view.
Case study Methodology is ideal when the researchers intents to gain an in-depth holistic view of a certain phenomenon or an event (Feagin, Orum & Sjoberg, 1991). Yin, 2003 states that case study approach allows the researcher to find answers for “How” and “why” questions, which this research also intends to do. Such an approach, allows the researcher to explore and understand the complex issues, within the social science domain, with a more focused approach on particular issues and features, rather than dealing with the whole organization. In this field of case study research methodology, two prominent writers Robert Yin and Robert Stakes have proposed two different methodologies. One proposed by Yin (2003) being Exploratory, Explanatory and Descriptive; whereas Intrinsic, Instrumental and Collective in the case of Stakes (1995). In all the above types, there can be a single or multi case study approach. The research methodology adopted in this research is descriptive in nature.
For the purpose of research, a single or multi case study approach can be adopted by the researchers. Yin (2003) argues that multi case study approach facilitates in predicting similarities and differences between the cases, whereas a single case study provides an in depth holistic picture of the unique case adopted for research thereby bringing out the critical elements within the research.
In this research, a single case study approach has been adopted based on the acquisition of Jaguar and Land Rover by Tata Motors. This approach of single case study facilitates, in focusing and developing upon this unique case with a more focused approach. Thereby, bringing out the minute detail which exists in this research, and presenting them in a holistic manner for a wider application in the Indian firm`s scenario.
This approach of case study method is useful in validating the findings of this research due to the inherent strengths possessed by it. This method explores and examines the research field through variety of lenses rather than just relying on single source of evidence. It gives a multi facet dimension for validating the findings and confirming those through the different sources of evidence like documents, interviews, transcripts, etc (Patton, 1990). Here, Yin (1994) suggests using multiple sources of evidence in order to strengthen the findings of the research and validate it. The current study uses multiple sources of evidence like semi-interviews, informal discussions, available documents in order to validate the findings more strongly.
Case study is useful from the very fact that it tends to generate triangulating results, occurring with data, theories and even with methodologies (Feagin, Orum, & Sjoberg, 1991). This method allows for ensuring more reliability and accuracy while continuing with the qualitative research (Byman and Bell, 2003). Triangulation is essential in order to ensure the ethical concerns that may arise, while validating the processes in case studies and this can be done by utilising multiple sources of evidence (Yin, 1994) which are rich in information. Multiple sources also allow the researcher to minimize the potential of being bias with the results.
Case studies have often been used for generalization (Yin, 1994). In this research, the applied case study would facilitate in generalization through the results obtained from the research findings. On this, Yin (2003) states that strategically selected cases allow for an effective generalization from the results obtained. Here, in this research generalization is done on the basis of firms which compete or exists in the similar related business activities.
3.2 Case study utilized
Tata Motors is an Indian Automotive Giant having domestic operations in commercial and mass passenger segment. It started its operations into passenger segment in the year 1991. And, it`s first cross border M & A was of Daewoo Motors commercial of south Korea in 2004 and next being JLR in 2008. The firm has close to 23,000 employees in automotive sector in Indian operations.
The case study utilised in this research is based on the acquisition of Jaguar and Land Rover (JLR) by Tata Motors in the mid of 2008. Tata Motors acquired JLR for $2.3 billion from Ford Motors. The case selected here is unique from the fact that the acquisition occurred during the worst financial crisis after the great depressions of 1930`s. And also, that it creates certain managerial complications, which would be highly important in the success of JLR. So, it is interesting to study this case of Land Rover and Jaguar because both the brands witnessed a wide scale slump in their product demand and faced severe pressure due to mounting losses from number of years. Here, Land Rover managed to be marginally profitable or at break-even but Jaguar witnessed high losses and declining demand for the product with huge excess capacity.
It would require a strategic turnaround and shift in the management strategy to achieve success with these two British brands. With such huge challenges and failure to generate value from these brands before the acquisition, makes them unique & interesting to study in this research.
After the takeover, performance of both the brands continuously improved, which reflects from the profits of £89 million and £234 million during the initial two quarters of 2010 (Birmingham post, 2010), showing a turnaround after loss of £383 million during the initial six months of 2008 and much more before that (The Times, 2008). So, this strategic turnaround of both the brands is remarkable and required a major shift from the previous strategies. Here, combination of Tata Motors and JLR assets resulted in creation of value through synergy generation. However, this value creation activity did faced issues during the Integration and Implementation phase, which was successfully dealt by Tata motors.
So here, from this case, learning can be gained by the Indian firms, who plan to make cross border M & A in near future. This learning can be in the form of value creation activity through synergy realization and from the success of the management in dealing with the challenges and issues during the merger phase.
3.3 Research Design
As the interview was the primary data gathering method for the research, selective semi-structured interviews were conducted with the managers from Tata Motors and Jaguar & Land Rover. For this purpose, questions were carefully designed to meet the requirements of the research. This method allows for greater interaction and flexibility as compared to structured interviews, thereby allowing the researcher to probe further in exploring rich valuable information (Hines, 2000).
Secondary data has also been utilized to strengthen the research findings. This type of data facilitates in overcoming the potential issues of collecting the primary data which the researchers tends to face (Liedtka, 1992). Hakim, (1982) recommends using secondary data rather than gathering primary data, as they can act complementary to primary data. Also, it provides larger and higher quality which otherwise would be impossible for the researcher to gather. Here, the use of secondary data allowed in verifying and quantifying the available information, thereby generating robust findings.
3.4 Research Sample
The list of the research samples were obtained through the personal contacts and referrals. The participants included current managers and executives working in Tata Motors and Land Rover & Jaguar. The sample size for research was low as the information required was strategically motivated, which could be extracted from a small sample. This was because of the similar nature of the results obtained, so a large sample of participants would have provided a replicable data. And for any in-depth study, small sample size is adequate to answer the research questions (Marshall, 1996). Also, in-depth analysis of large quantity of data would be difficult due to the researcher’s inability to effectively analyze the large sum of data (Wilmot, 2005).
3.5 Data collection, Access and Participation
Access for the research was taken through personal contacts and referrals, where the respondents had the right to decide whether to participate or not. Initially, several of the respondents were reluctant to become part of the research, as it was concerned with the internal strategy of the firm, which generally tends to be confidential. So, gathering potential participants was a major challenge during the initial stage.
So, in order to overcome this issue, research aims & objectives were floated to the proposed participants to gather their consent along with all the details about the concerned research and ethical assurances. Also, data collection method through individual semi-structured interview was explained to them. These all was necessary in order to ensure that the confidentiality of the participants was taken care of and also to build trust with them (Kvale, 1996). Four Participants confirmed after several negotiations concerning issues of trust and confidentiality. The individual interviews were held in private. And the Participants were selected in such a way that all the data concerning the research is gathered.
After the first personal interview in Mumbai, India with one participant which lasted for 30 to 45 minutes, several changes were made to the interview questionnaire, so as to gather the correct response from the next group of interviewees. Later on, two more personal interviews were conducted in Mumbai lasting for approximately 30 minutes each and one Telephonic interview in UK for 20 minutes. Here, focus was given to gather the right data that would enrich the research outcomes. The interview process lasted from mid April to July, as it was conducted according to the interviewee`s availability and schedule (Feagin, Orum and Sjoberg, 1991). No additional follow up was performed after this.
3.6 Ethical Issues
Social research involves ethical issues as it deals with collection of data from and about the people (Punch, 2005). Therefore, it is essential to address these ethical issues, as failure to do so can ruin the research aims & objectives (Batchelor and Briggs, 1994). So, during the research, major emphasis was given to avoid causing any ethical issues, which otherwise directly or indirectly could harm the participants involved in the research.
The Participants interviewed were fully informed about the research aims and objectives (Capron, 1989). And, considering the fact that this research deals with some of the confidential details about the firm`s internal strategy, care was taken to maintain the confidentiality and anonymity of the participants (Punch, 2005).
3.7 Methodology Limitations
Concerns with respect to the limitations of the research methodology have been identified:
3.7.1 Generalization on a single case study
The finding of the research is applicable to firms from similar related industries, who intent to make cross border M & A in future. However, case study approach has been criticized due to lack of scientific acceptability and reliability and also they fail to address the issues concerned with generalizability (Johnson, 1994). Bryman and Bell (2003) goes against generalization beyond the case applied in the research, as criticism is made by Denzin (1983) against it. Therefore, limitations possessed by a case study approach do not allow for generalization at a wider scale. Thus, the result is limited to the case applied. However, Yin (2003) argues that critically/unique applied case studies can facilitate in generalization and application in other cases too. Therefore, it is hoped that the results obtained would add to the current M & A literature for the benefit of Indian firms.
Chapter Four – Findings & Discussion
From the semi structured interviews with managers and executives of Tata Motors and Jaguar & Land Rover (JLR), several interesting dimensions about the post acquisition phase were brought forward. All the discussions during the interviews were written down on notes, as tape recording was denied by the interviewees due to issues concerning confidentiality about the area of topic.
The interview questions to the participants were intent to correspond to the research aims & objectives. And, in order to understand the creation of value through realization of synergy, several questions were framed to understand the synergy objectives from the acquisition. And, questions were also raised to understand the challenges and issues affecting the post acquisition phase and the strategies adopted to overcome them.
The acquisition motive was largely influenced by the opportunity to gain entry in niche car segment and also to gain access into the lucrative European and American markets, where Tata motors had limited or no operational presence. This $2.3 billion acquisition of JLR operations in Britain provided Tata the right opportunity to enter these markets easily. Apart from these benefits, Tata also gained significant synergy benefits at operational, financial and managerial Level from the acquisition.
4.2 Integration & Implementation Strategies
The integration and the Implementation phase confronted with several challenges right from mounting losses from number of years, lack of motivation among employees, communication gap, losing business, high competition to rising costs after the acquisition. Strategies were framed to counter these challenges and Issues. However, during the initial stages of the integration framework, several managers favoured “not to” integrate JLR with Tata Motors. They believed that it would “compromise” with both of these JLR & existing Tata brands. However, it was inevitable as the JLR brands were “weakening”, requiring a change.
Comment favouring change as quoted by the participants
- 2nd Interviewee: “We want a viable business model, it was inevitable but a change was highly required”
- 4th Interviewee: “We still have a great future; nothing can take away from this company the tremendous assets, the brands, and the passion of the people”
To overcome all above challenges, a team comprising of management “experts” from both Tata & JLR framed the integration and implementation plan. The selection of managing team was essential to achieve success with those plans. The managerial team consisted of “top performers” from both Tata Motors and JLR, who had exposure to integration process and knowledge about the JLR culture. This team was empowered with clear “decision making rights”. Such a team, with background experience and a clear decision making power facilitated in a smooth change program. Tata Motors exposure from previous acquisitions also played a significant role in the formation of team and in the planning & execution of the integration strategies. The managing team was selected based on strengths of the team members, which would facilitate in increasing the success rate of the integration & implementation process. Few of the managers quoted on selection of the team as
- 1st Interviewee: “We have the right people, right set of skills, sufficient management knowledge, and exposure to different cultures and working environments”
- 2nd Interview: “We have a highly experienced set of management people to make this process of integration & implementation a success”
4.3 Speed & Level of Integration
While creating synergy strategies from the combination of assets, several challenges and issues relating to integration were experienced at Tata Motors & JLR. Few of the participants raised the issue of the level of integration between Tata & JLR. Views of the interviewees are quoted as follows
- 2nd Interviewee: “Deciding How much to integrate? What to integrate? And when to integrate? Create challenges during the merger phase”
- 3rd Interviewee: “Positive integration creates value, whereas negative integration destroys value”
The above quote suggests that the management had concerns relating to the scope of integration. Considering the opportunities and the viability due to external volatility, limited integration was adopted at some of the functional areas, otherwise by and large allowing JLR to work as an “independent” unit. This was essentially to allow both Land Rover and Jaguar brands to operate as separate entities. So, as to avoid a “clash” of brand recognition or “mixing” of the brand with Tata motors, which has operations in mass segment businesses, whereas JLR operates in the Niche segment. This differentiation was necessary so as to avoid “customer`s perception” about JLR being associated with Tata Motors; which otherwise could possibly lose its appeal with the customers who view it as a status symbol.
All the integration opportunities were initiated within a short span of time after the completion of acquisition formalities. Delay in the speed of integration, could have resulted in a possible “loss of value” during synergy realization. Further challenges erupted due to the ongoing “recession” phase altering the integration plan, which the senior management at JLR believed to last end of 2011, with predominantly low demand going forward.
After the acquisitions, the management induced confidence building measures with the management of the JLR. Although, the senior management of JLR preferred Tata Motors for the being the preferred buyer, but fears existed of restructuring within the management. However, this was carefully looked after by Tata Management through provisions of organizational “autonomy” and the “strategic independence” for functional activities. Although later on, few voluntary turnover took place in the management but, by and large management was bullish and confident about JLR operations and also about Tata`s long term “commitment” to the JLR business.
The managing team framed shared norms in order to minimize the trust deficit between the subordinates, as possible misinterpretation could have resulted in diminishing the overall objectives of the change process. These steps of empowering and confidence building measures were adopted, in order to increase the performance of the JLR and for building a strong base for corporate culture between Tata and JLR operations.
Tata`s also infused learning`s, gained from previous acquisitions & working culture, which facilitated in dealing with the area of concern. There was clear existence of “leadership” for managing the proposed change plan of integrating JLR with Tata motors. The leader had a clear “vision & plan” about the change process. Frequent communication was initiated by the leader during the change program with affected employees and staff members, in order to ease their concerns. This was essential so as to facilitate a smooth transition of the change program. One of the manager commented on the role of leadership as quoted
- 4th Interviewee: “Who is driving the change? Is very important as a leader can create value or destroy value”
It is also interesting to know the fact that while creating value through integration and implementation plan. Managers undertook several cost cutting measures to create “shareholder value” after the acquisition and simultaneously initiated strategies to develop a “strong culture” in JLR. Both the activities of value creation and cultural development were initiated together to improve the performance and productivity in JLR, citing long term benefit.
Interviewees expressed that Communication was an “important aspect” for which the management had a high priority. The managing team believed that it was necessary to avoid any resistance from the stakeholders affected by the change. Since the start of the acquisition senior management of Tata motors, “framed plans” and “reached out” regularly to communicated with the JLR management, staff, employees and suppliers to assure them and build confidence. All the stakeholders were regularly communicated about the new developments & future plans and also about the challenges, which affected the firm.
However, as the fact remains that during a change process “people are likely to affected”, businesses won`t be conducted as usual, same was the scenario in JLR. More than 2500 employees became “jobless” from the total strength of 15000 employees (the sun, 2009), due to the restructuring process through shutdown of manufacturing capacity, in order “to improve efficiency”. The people who were largely affected remained to be the manufacturing employees, so unrest among them was evident. Although, before the acquisition the management seemed to reiterate that the “workforce wouldn`t be affected” after the post-acquisition, largely remained a dream. Apart from them, several other people in different departments were also affected by the change plan, which did created challenges for the management. On the topic of initial commitment made to the employees about “job security” and no “layoff” after the acquisitions, feedback from one interviewee was as such
- 1st Interviewee: “it`s difficult to predict the future and the market itself is just too volatile for any stable decision, we need to cut expenses but we have little room for any options”
So, to overcome this difficult phase for the employees and the management, several “confidence building” initiatives were undertaken by the management. For this, the union members of JLR were regularly ensured about the security and the future of stakeholders by Tata motors. All the members of JLR were taken into confidence through measures such as “promises” of job security and “no shutdown” in the manufacturing capacity. Members were communicated about the “worsening condition” of JLR, and were “motivated” to work collectively so as to achieve success and turnaround the fortunes of the firm.
Although, it was inevitable for the management to part away from the fact that the capacity was “highly underutilised” and the ratio of the workers was considerably higher than potentially viable. Therefore, soon after the completion of the acquisition employees were laid off due to mounting pressure from the economic crisis and financial viability, so several hundreds of employees lost jobs on a “gradual basis”, which did created some resistance from the employees. However, the employees were communicated that it was inevitable for JLR to operate with excess man power as it was creating huge “financial liability” on the firm, which otherwise would have severely “comprised the future” of the brands as a viable business unit. So, some tough measures were adopted by the management in that respect. Although, it resulted in a “confrontation” between the employees and the management but the firm had limited scope for any improvement. Several assurances were again given to the Union members & employees about their commitment towards JLR operations. Comments of participants on this issue were as follows
- 4th Interviewee: “Times are tough, hard decisions need to be taken, we have little choice, we are taking all the necessary steps essential for our future survival and we`ll take all the necessary steps for our employees` future safety”
- 1st Interviewee: “I think that it is inevitable, we have done our best to hold on to keep a proportionate change in employment levels with production”
Accordingly, new channels were formed to deliver the message to the affected members in order to spread the message quickly. Limited hierarchy was seen so that the affected members could easily communicate with the managers. Also, members were educated about the change program and its necessity in order to overcome their resistance for the greater benefit of JLR operations.
It was discovered that the firm had initiated communication with the stakeholders during the initial stages. However, this gradually decreased due to the inherent challenges which the senior management faced. Such an approach can be harmful for the firm. Also, it was discovered that the short term wins were not communicated and celebrated promptly, which is often necessary during a change program to motivate the members.
4.6 Cultural Challenges & Issues
The managing team believed that for any change to succeed; issues and challenges arising due to the “cultural clash” between the firms must be looked after or negative results can be experienced. This was essential as often problems after the acquisitions tend to generate which can possibly destroy the acquisition objectives. So, before the acquisition, Tata Motors gained a significant exposure to assess whether both the cultural values were compatible or could mutually co-exist. The fact that Tata Motors had significant presence in the British business environment provided a cushion against any possible cultural challenges & issues. On cultural issue one interviewee respondent as
- 2nd Interviewee: “For any business to succeed, people and culture are on top of the priority list”
So, Tata accounted for both of this factor as success of the acquisitions largely depends upon its people.
However, when any change initiative is undertaken, people affected by it are bound to resist against it. As a transition takes place from known to known area, which is a natural process. So, in order to overcome these concerns of all the affected stakeholders, Tata motors engaged in a “continuous dialogue” process to address their concerns and explain the implications of the change program on JLR and employees. All the affected employees were informed about the realities of JLR, which was making high losses with excess capacity.
During the change program, the management planned for a “gradual” and “slow change” in the culture of JLR, which would be strong and productive in a long term. And, they made it sure that the cultural values of the firm were not diluted right after the acquisition, as it could have resulted in a wide spread “panic” and a “sense of uneasiness” among the JLR members. And, considering the fact that the firm was caught up in the global crisis, a change initiative program could have devastated the morale of the employees, which otherwise could have affected the firm severely. So, by and large, the same culture was induced by the management to avoid any confusion or panic among the employees but simultaneously opened a gate to allow for a gradual change over a period of time. So, the entire change initiative program was framed in such a way that it would strengthen the roots and drive long term results for JLR.
From the findings, it was discovered that the factors studied in this research were highly essential for the firm to achieve success. Any letdown to overcome the issues with any of the factor could have possibly resulted in a loss of value or failure of the total acquisition. One important principle visible from the research is that the management has a very important role to play during the integration & implementation phase. Lack of managerial capability or inefficient management of this phase can completely destroy the potential benefits from the synergy of the firms.
The findings from the interviews, provides an opportunity to create a further discussion based on the issues and challenges studied in this research. The team managing the change initiative undertook several key steps to create value, by actively confronting the key factors essential for making an acquisition a success, during the post merger integration phase.
One of the highlights of change initiative approached adopted to create value, was that both restructuring and cultural development initiative program were approached together by the managing team. On which, Beer and Nohria (2000) states that such a step is highly beneficial in creating both short term and long term value for the firm through creation of competitive advantage. However, it must be noted that such an approach is difficult to realize as, it involves high complexities, often resulting in failure. They further argue that just following one approach from either value restructuring and cultural development is not a healthy strategy as both tends to create challenges & issues in future. The strategy adopted by the management team would not only facilitate in reducing the overall cost burden but also develop a culture which would be productive and greatly improve the performance from the current levels.
Consistent with the argument presented in the literature, it was found that the speed & level of the integration and implementation of strategies was a key success factor in the acquisition process, which otherwise could destroy potential value if not integrated timely. The success of speed & level of integration is affected by the external and internal relatedness of the firms. A changing dynamics, in the external environment to an extent affected the speed and level of integration in the research findings.
Findings in the research are consistent with the literature that communication facilitates the change programme for a smooth transition from know to an unknown area. The challenge was experienced at finding appropriate channels for delivering of correct messages to the members affected by the change process. The strategies adopted by the management team were consistent with the available change literature which greatly facilitated in overcoming the employee resistance against the change initiative and also in developing confidence building measures. However, there should be no two different circulation of communicated messages like “You say something, but you something else”. This may reduce employee confidence in the management and the firm.
It was found that the experienced management team facilitated in making the post acquisitions process a success, as supported by the literature. Challenges were encountered by the managing team during the initial stages of the post-acquisition, however, experience from the previous acquisitions facilitated in overcoming those challenges and issues. Also, the exposure to the local culture played a significant role in overcoming the initial jolts and resistance of the organizational members. Familiar faces in the managing team helped in easing the concerns of the employees, as unknown managers can create distress and anxiety among the members (Mirvis and Marks, 1992) and as such it becomes difficult to realize the synergy benefits which exists between the firms. The early strategy of building a management hierarchy and an appropriate control structure also paved the way for building success during the integration process.
Although, learning`s from the past experience can be utilized. However, those learning`s are limited to an extent. This is because merger strategies tend to differ from company to company as no two companies and mergers are the same (Sudarsanam, 1995).
As supported by the available literature on leadership, a clear leader was visible with decision making powers facilitate in driving the change programme smoothly. The leader actively initiated in promoting communication and dialogue with the affected members after the acquisition. Jick (1991) supports that a leader plays a critical role during a transition process and a strong and effective leader can drive the change to a success.
The management took active initiatives in order to address the concerns arising from the culture clash of both the firms, as supported by the literature. Cultural due diligence was undertaken by the firm to find the cultural compatibility. As according to Angwin (2001), large number of firms don`t assess the culture & values of the both the firms which tends to create failure of the acquisition during the merger phase. And, during the cross border M & A, domestic culture of the acquired firm tends to come into the picture after the acquisition, which must be avoided during the initial stages. As it can severely damage the morale of the organizational members and disturb the value creation activity.
Highlights of the change model framed by Kotter (1995) were also seen with the change method applied by the managing team. This model provides the set of eight steps which can act as a guideline during a change initiative program thereby facilitating in achieving success to an extent. Five steps were seen to be followed by the management team, during the change process. Steps such as: creating a sense of urgency, powerful management team, clear vision, communicating appropriately and removal of obstacles against the change program (Kotter, 1995). Further three steps could also be followed by the management team for a successful merger by systematically celebrating short term wins, Not declaring victory too soon and providing a anchor for change in the organization.
In summary, this chapter has provided the findings which are consistent with the literature presented in the research. It highlights that the transition during the integration is faced with multiple tasks, which needs to be managed effectively to achieve success. Challenges tend to multiply due to internal and external volatility and increases the complexities associated with the change process. Only, an effective and efficient management can achieve success with such huge challenges associated with change process.
Chapter Five – Conclusion
The overall purpose of the study undertaken is to explain the importance of the key factors examined in the research, which are important to achieve success in order to create value from the synergy between the firms. The findings of the research agree to the notion that the critical elements presented in this research are essential for a firm to achieve success, during the post-merger integration phase. From the case study of Tata Motors, several internal issues and challenges were encountered which could have resulted in failure of the acquisition. But, systematically confronting them with appropriate strategies facilitated in achieving success for the firm.
The value creation process is full of challenges right from the selection of the target to pre-acquisitions and finally to post-acquisition phase. And these challenges especially expand during the integration and the implementation phase. It is because as human factors are deeply involved during the integration process which makes it even more difficult to manage. As sudarsanam (1995) states that during the integration and implementation phase, human factor is the key element in the overall success of the acquisition objective. It requires a sacrifice from the human capital of the acquired firm to make a change to an unknown area, which possibly can be an uncomfortable journey. And, success in this area can vastly improve the chance of creation of value in the overall M & A activity. However, often such transitions from a known to an unknown area tend to be very difficult, which needs to be effectively managed.
The success of the post-acquisition process relies solely on the firms` ability to effectively manage the different elements which exists during the integration and implementation process (Larsson and Finketstein, 1999). It tends to get out of control, if no pre-planning is undertaken to manage the different factors involved, thereby often resulting in a failure. These key factors create such complex challenges and issues for the management, that it becomes difficult to manage them effectively. So, proper planning considering both the top and the lower level human concerns needs to be undertaken to achieve success, which forms to be a key responsibility of the senior leaders.
In a move to create value quickly management often overlooks these important elements during the integration and implementation, which needs to be effectively monitored. All the key factors discussed in this research along with other important M & A elements must be aligned together, so to generate maximum value from the acquisition.
So, from studying this case the Indian firms should take appropriate measures in order to effectively control the post-acquisition integration phase and manage the key factors to enhance the success of the acquisition. All the learning`s from the previous acquisitions need to be applied in order to enhance the value creation process. Utmost care must be taken during the cultural issues as they tend to create complex challenges for firms from different nations, if they lack prior exposure to cross border M & A.
5. 1 Limitations for the research
In addition, to the limitations already mentioned in chapter 3.7, others include selection of the research questions asked to the participants, which may not have been able to gather the correct information as required for the research. The semi-structured interview conducted for research can often deviate from the main topic of research and reach to some other discussion, which can be time consuming and inadequate for the research. As such important information could be missed out by the researcher during the semi-structured interviews.
The research sample could have possibly included the employees if it had not been for time constraints. The inclusion of the employees in the research could have improved the findings and provided a more robust result for the research. As, it can be argued that the managers could have been partial with their replies to the questions asked and provided an unreal view in favour of the employees and the management. While these findings could have gained more support if it had been reiterated by the employees with the same confidence. Further research can be conducted considering all the limitations mentioned in chapter 3.7 and chapter 5.1.
5 .2 Recommendations for future research
The research has been useful in studying the key elements necessary for success during the post-acquisition phase. It has facilitated in making a judgement that overcoming issues concerning the involvement of human factor is highly essential in order to realize the synergy which exists between the firms`.
Future research could be conducted on the Indian firms, focusing solely on the cultural challenges which the firms encounter. Cultural issues tend to be lot more complex especially during the cross border M & A. And, Indian firms unlike US and UK firms, lacks the exposure to global cross border M & A. So, further research can be explored on the cultural issues on the cultural issues for the Indian firms, considering the cross border M & A phenomenon. The research could focus on studying the experiences of the management and the organizational members during the cultural clash between the firms. The views of both the management and the organizational members would facilitate in building a broader perspective, which could be deduced at arriving to a clear outcome about the challenges and solutions of such cultural challenges for the Indian firms`.
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