Merger - An Attempt to Attain Technical Economies - Research Paper Example

Merger - An Attempt еo Attain Technical Economies Chapter Three Research Methodology The research of the issue under examination has been based on a series of statistical data revealed through similar studies. On the other hand, the interviews of three employers of the organizations involved (the pre-merger autonomous organizations, i.e. the Prime Focus Regeneration Group and the Keynote Housing Group) are going also to be used in order to lead to a secure result regarding the consequences of merger to the organizational context, as they have been observed in the field of the theoretical and empirical research. In the above context, a first research that can be proved useful towards the investigation of the effects of merger on the organizational operations is that of Amiot et al. (2006). The above researchers tried to measure the employment adjustment as it has been developed during a merger process. For this reason, ‘two hundred and twenty employees completed both questionnaires (Time 1: 3 months after merger implementation; Time 2: 2 years later)’ (Amiot et al., 2006, 552). The above research revealed a series of interesting findings regarding the potential effects of merger on the operational framework of an organization. More specifically, the relevant study showed that ‘positive event characteristics predicted greater appraisals of self-efficacy and less stress at Time 1; self-efficacy, in turn, predicted greater use of problem-focused coping at Time 2, whereas stress predicted a greater use of problem-focused and avoidance coping; finally, problem-focused coping predicted higher levels of job satisfaction and identification with the merged organization (Time 2), whereas avoidance coping predicted lower identification’ (Amiot et al., 2006, 552). In other words, the behaviour of employees within an organization can be strongly affected by the merger of the specific organization with another firm of similar or different market orientations. Moreover, it has been proved in the above research that employees can have a significant importance in the successful completion of a merger procedure while their role is usually differentiated during the particular stages of this procedure. Indeed, the role of merger to the development of employees’ behaviour within a specific workplace has been accepted extensively in the literature. Regarding this issue Buono (1992, 19) accepted that ‘most human resource (HR) researchers, and practitioners involved in the merger and acquisition (M/A) process readily agree that the personal, interpersonal, group, and intergroup dynamics that follow the combination of two firms are significant determinants of merger success or failure’. In other words, the role of personal attitudes to the success of the relevant procedure is being considered as crucial. However, there are times that because of the lack of appropriate training of the people participated that the merger fails to be completed successfully. Then it is an issue of interpretation, who will carry the responsibility of the relevant outcome. However, Buono (1992, 19) states that ‘a merger or acquisition can sufficiently transform the structures, cultures, and employment prospects of one or both of the firms such that they cause organizational members to feel stressed, angry, disoriented, frustrated, confused, and even frightened; for the individuals involved, these feelings can lead to a sense of loss, psychosomatic difficulties, and marital as well as personal discord’. Therefore, in accordance with the above researcher, at the final stage the success of the merger is not depended on the capabilities of the people involved but it is rather an issue of appropriate preparation and application of the particular corporate plan. The success of the merger and its consequences on the operations of the organization in other words are the result of the effective strategic planning applying through the professionals that have the relevant competencies. On the other hand, the responses of employees towards a potential merger have been identified and evaluated by Terry et al. (2001, 267) who conducted a research among 465 employees of a newly merged airline company. Their study showed that ‘the negative effects of the merger were most marked for employees of the low-status pre-merger organization while the perception of permeable intergroup boundaries in the new organization was associated positively with identification with the new organization and both job-related and person-related outcomes among employees of the low-status pre-merger organization but negatively with person-related outcomes among employees of the high-status pre-merger organization; there was also some evidence that the main and interactive effects involving status, perceived permeability, and intergroup contact on employee adjustment were mediated through strength of identification with the new organization’ (Terry et al., 2001, 267). The reasons that have led to the above findings cannot be completely explicated. Although it could be expected that the company with the higher financial performance would have the main role in the completion procedure, it is proved through the study of the above researchers that the intervention of both companies participated in a merger is based on specific elements other from their financial performance. In this context, the ability of a company to organize its network of operations and to monitor with accuracy all its activities may be proved to be a valuable characteristic regarding its role in a potential merger. On the contrary, even if a company has a significant financial performance which can be considered as higher regarding its ‘partner’ in a potential merger, its lack of ability to proceed to effective plans and monitor thoroughly all its departments may be proved to be a major disadvantage during a potential merger. From another side of view, Dackert et al. (2003, 705) tried to investigate the role the differences ‘in the meanings that employees attach to the organizations involved and their expectations of the new merged organization, nine months prior to the merger’. The particular study referred to the merger of the two head offices of two public service organizations in Sweden. In accordance with the results of the above study ‘both groups expected one of them to be dominant after the merger; members of this organization expected to change very little, while employees in the non-dominant group felt themselves to be threatened by the prospect of merger and this led them to emphasize their own distinctiveness; the success of the integration process after a merger is critically dependent on how employees of merger partners perceive the culture of the organizations involved and the expectations they have of the new organization’ (Dackert e t al., 2003, 705). The above research has led to similar results with the one conducted by Covin et al. (1996, 125) who tried ‘to explore post-acquisition attitudes and behaviours and the impact of merger satisfaction on attitudinal and behavioural outcome variables using samples from 2,845 employees in a particular manufacturing company’. The research of Covin et al. (1996) should be considered as valuable because it reveals a series of interesting findings regarding the role of employees in the successful completion of a merger process. More specifically, in the above research it has been proved that there are ‘not significant differences in merger satisfaction both within and between acquiring firm and acquired firm employees; level of individual satisfaction with a merger was also found to be strongly associated with several key attitudinal and demographic variables, including satisfaction with supervision, satisfaction with career future and company identification, communication with top management, agreement with the acquiring company's mission statement, turnover intent, and union status’ (Covin et al., 1996, 125). The role of employees to the success of a merger is proved to be, in accordance with the studies presented above, crucial. However, often the attitudes of employees or their critical views and competencies are not taken into thorough consideration when examining the parameters regarding the feasibility of a potential merger between two or more particular companies. In fact, in a specific organization employees are often left without the appropriate support throughout the whole procedure and are usually informed afterwards regarding crucial issues of a potential merger of the organization involved. The above issues are of particular importance if we take into consideration the frequency of mergers around the world. In this context, the study of Pryor (2001, 825) has proved that ‘the capstone of the worldwide merger activities of the 1990s occurred within the first five weeks of 2000 with the announced $165 billion planned purchase of Time-Warner by America Online and the $183 billion takeover of Mannesmann by Vodaphone AirTouch; three other mega-mergers brought the total volume of merger activity in the same five weeks to more than half a trillion dollars’. The above study presents just a particular part of the merger – related corporate activities around the world. In fact the number of mergers taking place in both the developed and the developing countries is significant. However, the appropriate procedures are not always followed and as a result the parties involved have often to face severe difficulties in order to complete the relevant procedure. An interested research made by Harvey et al. (1998, 17) showed that ‘the current probability of a successful "corporate marriage" through acquisition or merger is only about 50% while the American Management Association estimates that of the 7,500 annual mergers and acquisitions: a) Nearly 25% of these transactions confronted declining productivity within 12 months; b) Nearly one of every six companies established through merger or acquisition lost market share; c) One of every four had significant management turnover creating management instability; d) Nearly 50% had lower profits than projected prior to the transaction’. The above percentages prove that the success of mergers should not be considered as guaranteed. The reasons for the high rates of failures could be identified in the lack of appropriate experience or knowledge of the persons involved or the lack of the sufficient support (financial, technological etc.) by the firms participated. The position of Interviewees regarding the potential for success of the merger attempted by the two companies (i.e. the Prime Focus Regeneration Group and the Keynote Housing Group) should be considered as valuable regarding the particular initiative. At a first stage, all employees participated in the Interviews agree that the merger has offered to their company a greater chance to success within its market. On the other hand, all agree that the relevant effort can hide many risks for both companies. One of the most important issues that need to be taken into consideration is the fact that the two companies had a different level of operational activities which can cause differentiations in the hierarchy of powers distributed among the employees of the two companies (who will now participate in the newly merged company). The future of the employees in the new company is also an issue taken into account mostly by the employees of the lower positions in the hierarchy (the relevant issue is mentioned only to the interview of the employee working in the administrative department of the second firm). The particular position of the employees is going to be presented in the section that follows (Data Analysis) however in accordance with a general view over their responses it seems that the merger has helped both companies to improve their position in the market while the effects on the position and the role of employees have been minimized – at least until now. The prospects for the future are slightly mentioned by the employees who seem to be interested more in the current operating conditions of Midland Heart, rather its performance on a long term basis. It should also be noticed that all employees seem to avoid referring to specific details on the merger involved, perhaps because of the relevant short time period that has passed from the completion of the procedure. There is also the issue of the uncertainty regarding their position and their role in the newly merged firm, that create to them an extra source of anxiety. However, it could be stated that the relevant procedure as presented by the employees participated in the interviews seems to be an integrate one, with no particular obstacles or hidden risks, which is of great importance for its successful development in the future. As for the level of profitability of the company ‘resulted’ by the merger, this is an issue that has not been much discussed by employees perhaps because it will be judged in the short future. Chapter Four Data Analysis In order to explain the success of the merger as a crucial corporate procedure, it is necessary to present primarily its definition as it has been formulated in the field of theoretical research. In this context, Weisbord (1994, 35) refers to the definition of Lubatkin (1983) who suggests that ‘merger can be understood as an attempt to attain technical economies (economies of scale), pecuniary economies (increased market power), and diversification economies (reduced risk)’. On the other hand it is supported that ‘mergers take place as a result of the advantages of size for organizational managers; other, more intangible advantages of size such as status and prestige also accrue to members of large organizations’ (Weisbord, 1994, 350). However, it could be argued that mergers take place between firms of all sized no matter their size or their financial strength. There is also the case that the targets set by mergers to be differentiated from the traditional ones (i.e. from the development of the financial performance of the participated companies). In this context, mergers can have a ‘pure’ strategic target, to improve the ‘image’ of a company in its market or to offer the necessary ‘coverage’ for other corporate activities (usually in cases that these activities would have to be hidden from the shareholders, i.e. investments in joint ventures under risky conditions etc.). Towards this direction, it has been supported by Wahid (1995, 89) that ‘merger is one means through which two or more firms can augment their business power, add to their product lines, expand their market reach and achieve various economies of scale’. However, it seems that ‘for assessing the impact of mergers on industrial concentration, the size of the merger makes a considerable difference; if, for instance, small companies merge with each other, competition may be strengthened; if large companies merge with each other, the reverse may occur; the median and average sizes of the merger transactions provide an important clue about what is happening in this regard’ (Pryor, 2001, 825). In other words, the identification and the evaluation of the stages of a merger can be a challenging task. For this reason, a specific methodological approach has to be used in order to present appropriately the tasks and the initiatives taken place during a merger. For this reason, it has been highlighted by Marks et al. (1986, 37) that ‘at first, the job of merging the companies seems overwhelming and top executives make decisions in a fragmented, chaotic way; then they develop a crisis-management approach, closeting themselves away from the chaos; they formulate strategies for protecting their company's interests in the merger and start to feel on top of the situation’. The above study which refers specifically to the role and the responsibilities of managers and other professionals participated in a merger can be really valuable towards the design of an appropriate plan of action regarding a potential merger. On the other hand, it should be taken into account that the reactions of the particular managers can be differentiated in accordance with the specific circumstance of each merger attempted. In this context, Marks et al. (1986, 37) noticed that ‘crisis management gives executives the illusion that they are in control; the truth is that early merger strategies are usually simplistic and one-sided; when the merger actually occurs, and these plans meet up with the other company's merger plans, often equally one-sided, the illusion of control is shattered and a destructive fight for control begins’. In other words, if all appropriate measures have been taken by the firms’ executives, the potential merger of two companies can be easily put under risk if there is no alternative plan of action in case of emergency – the proposed above crisis management can be differentiated in each particular firm in accordance with the level of knowledge and experience of the staff participated as well as the provisions of the strategic plan regarding the specific issue. The development of an appropriate plan of action regarding a potential merger is a necessary requirement for its success as it has been proved by the studies presented above. In the case of Midland Heart, the success of the merger has been based on a series of particular criteria according to the statements of the employees participated in the relevant empirical research. More specifically, in accordance with Interviewee 1 the preparation period of the specific merger was approximately 5 months – a period that can be considered as satisfactory if taking into account the area of activation of the companies involved. On the other hand, Interviewee 1 supports that ‘there was no point of the relevant agreement left without the appropriate examination and evaluation; the corporate strategy regarding this procedure has been proved to be absolutely effective; even regarding some unexpected issues of the ‘last minute’ (like the use of part of machinery, distribution of secondary duties (cleaning of firm’s offices, use of temp staff etc.)) there was appropriate handling by the firm’s side without any problem to be left unresolved’. The above views are in accordance with that of Interviewee 2 who also supported that his company had taken all the appropriate measures for the success of the attempted measure. In accordance with the above Interviewee – who is also the managerial accountant of the first of the companies – the success of the relevant merger has been proved in practice through the improvement of the financial performance of Prime Focus Regeneration Group (as the increase in the firm’s performance can be measured through a comparative research over the figures included in the company’s financial statements and those referred to the reports of Midland Heart – even a bit premature ones). On the other hand, Interviewee 1 states that ‘there were no particular changes in the firm’s operations; the company continued to operate as normally; however, the firm’s name changed (previously Prime Focus regeneration Group), an issue that caused particular anxiety in the firm’s stakeholders’. Another issue that needs to be discussed is the position of the company, which participates in a merger attempt, after the completion of the relevant procedure. More specifically, in the case of PFR Group, its entrance in this merger led to the limitation of the power of opinion of its strategic managers. In accordance with Interviewee 2 – which was a managerial accountant in PFR Group – ‘the percentage of its participation in the decision making process of the newly merged firm is however limited regarding the other part of the agreement. PFR Group participates with a percentage of 40% in the board of Midland Heart instead of 60% of the other part of the agreement’. Interviewee 2 refers to its company and the limitation of the power of decision of its members. On the other hand, Interviewee 3 reveals that the operation schemes of both companies have not been transformed yet due to a relevant term of the agreement. More specifically, in accordance with Interviewee 3 ‘both companies continue their operations as normally may because there is a relevant term in the merge agreement that the whole attempt will be reviewed 6 months after the signing of the agreement; until then both companies will have the right to keep their autonomy at the level they wish’. However, merger was an unavoidable solution for PFR Group. More specifically, as admitted by the firm’s managerial accountant – Interviewee 1 – ‘because of the limited operational centres across the country (just 4) the service provided to customers was too slow, even of extremely high quality; this delay has led to a further delay of the payments made to the company and as a result the latter was obligated to proceed to an increase of its operational capabilities even through a merger’. In other words, PFR Group had to proceed to the strategic solution of a merger even if the terms involved would be considered as partially unfair for the company. Indeed, merger proved to be the appropriate solution for the development of PFR Group’s financial performance. Both its employees interviewed seemed to agree with the above assumption. More specifically, Interviewee 1 stated that ‘the financial growth of the company can be estimated to a 10% comparing last year; the company now has a network of approximately 15 offices across UK instead of 4; in any case, from the aspect of organizational expansion the merger should be considered as a positive step for the corporate activities’. On the other hand, Interviewee 2 also supported that ‘the share of the company has increased up to 3.5% immediately after the announcement of the merger while after the completion of the procedure this increase reached the 5.6%, a unique phenomenon regarding the performance of the firm’s shares under normal conditions’. Regarding the above issues, Interviewee 3 referred to its company’s performance since the merger as following: ‘Keynote Housing Group was already a powerful competitor in its market; after the merger, it has become a leader having the most centres of operations in the country comparing to its competitors’. In other words, the creation of the newly merged company, Midland Heart seems to offer to the participated companies all necessary requirements for a stable and continuous development. The problem is that the particular tasks and initiatives have to be reviewed often in order to ensure the application of the terms of the relevant agreement as they have been identified and evaluated towards the promotion of interests of both companies participated in the relevant organizational ‘scheme’. Of course, both companies could have chosen another ‘strategic method’ for the development of their performance. As it has been noticed by Kay (2005, 4) ‘clearly, linkages may be important in the context of whether the firm should expand the scope of its activities; there is also the issue of how the firm should expand, and this adds a further dimension to the expansion issue; in principle, there are a variety of ways (or modes) that a firm or firms may decide to create and/or exploit potential linkages between business units; these include internal expansion, merger, acquisition, joint venture, licensing and franchising; each mode may have its particular advantages and disadvantages in a particular case’. Towards this direction, Pfeffer (1972, 382) seems to agree that ‘merger is one possible strategy for an organization to employ in managing environmental interdependence; three types of merger are identified-those which (1) reduce symbiotic interdependence; (2) reduce commensalistic or competitive interdependence; and (3) diversify and avoid previous interdependencies; in an examination of patterns of industrial merger behaviour, a strong association between patterns of resource exchange and patterns of merger activity is apparent; competitive mergers and diversification are also considered; an analysis of merger activity also permits an explanation of variations in the profitability of acquired firms prior to acquisition’. On the other hand, an empirical research made by Clark et al. (1994, 541) showed that ‘the takeovers of distressed firms are more likely to involve firms in the same industry and less likely to be hostile takeovers than are acquisitions in general’. In order to investigate more thoroughly the above issue Clark et al. (1994, 541) used ‘five different measures to evaluate post-merger performance of the combined bidder and target firms’. Their research showed that ‘bidders are unable to successfully restructure targets while the market demonstrates an ability to forecast the success of restructuring; restructuring success is negatively related to the size of premium paid by the bidder for the target and positively related to the financial distress of the target’. All the above findings are verified by the results of the study of Shan (1990). More specifically, the research made by Shan (1990, 129) showed that ‘the propensity to cooperate is positively correlated with the distance of firms' competitive position in relation to their rivals; the follower is more likely to seek cooperative relationships than the leader in commercializing new products; however, the competitive pressure impacts firms in different ways, depending on their internal capabilities to commercialize a new product; firm size is negatively correlated with the use of cooperative arrangements’. Moreover, to a study that compared ‘a sample of distressed firms that merged to a sample of distressed firms that entered bankruptcy’ it was proved that ‘theory suggests that the owners of distressed firms should prefer merger; the managers, however, may feel that their interests are better served through bankruptcy; the distressed firms that merge have lower financial leverage and are larger than firms that enter bankruptcy; distressed firms with high ownership concentration (or owner control) show an increased tendency to merge rather than to declare bankruptcy while the self interest of managers, rather than just the interests of shareholders and creditors, seems to help motivate the merger/bankruptcy choice’ (Pastena et al., 1986, 288). In the same context, it has been found by Anand (1998, 99) that ‘the resource-based perspective suggests that firms are bundles of assets, some of which are fungible in nature; to the extent that some resources are fungible, firms should be able to redeploy them to enter new markets when their existing businesses decline; on the other hand, perspectives that emphasize the business-specific nature of routines or managerial skills point to inherent risks in organizational transformation; in a declining market, resources can be redeployed within the firm through diversification-oriented acquisitions, or they can be redeployed through market mechanisms through consolidation-oriented acquisitions’. However, the choice of merger as a solution towards the increase of performance of both the firms involved can lead to a series of assumptions: a) merger could have been considered as the least costly option (Interviewee 2 avoids refer to the level of the cost involved), b) there was no appropriate experience for the use of another similar strategic tool or c) there was no time available for the necessary research in order to use an alternate business solution. The future position of the employees in both companies involved seems to be one of the most significant issues related with this merger. More specifically, in accordance with Interviewee 3 ‘its employees are really anxious regarding their future in the newly merged firm; although they were all involved actively in the procedure, there is a fear that after a short period many of the employees of the former Keynote Housing Group are going to become redundant’. However, Interviewee 1 and 2 do not refer to the particular issue. Generally, it could be stated that the merger in case of Midland Heart was focused on the development of both companies’ position in their market. The above target is in accordance with the view of Hitt et al. (1996, 1084) who tried to investigate the ‘strategies for participating in the market for corporate control (acquisitions and divestitures) affect internal control mechanisms and, together, influence internal and external innovation’. The results of their study showed that ‘firms engaging in acquisitions and divestitures emphasize financial controls, deemphasize strategic controls, and thereby produce less internal innovation; these firms are likely to seek external innovation to gain short-term benefits in competitive advantage; engaging in the market for corporate control strongly affects the context in which innovation is framed, the control mechanisms employed, and the design and process of innovation’. In other words, in order for a company to develop its position in the market it is necessary to proceed to all the appropriate strategic measures as these they can be identified and evaluated through the thorough examination of all firm’s operational activities. References Anand, J., Singh, H. (1998). Asset Redeployment, acquisitions and corporate strategy in declining industries. Strategic Management Journal, 18(1): 99-118 Amiot, C., Terry, D., Jimmieson, N., Callan, V. (2006) A Longitudinal Investigation of Coping Processes During a Merger: Implications for Job Satisfaction and Organizational Identification. Journal of Management, 32(4): 552-574 Buono, A. (1992). Intervening in the Middle: Coping Strategies in Mergers and Acquisitions. Human Resource Planning, 15(2: 19-22 Clark, K., Ofek, E. (1994). Mergers as a Means of Restructuring Distressed Firms: An Empirical Investigation. The Journal of Financial and Quantitative Analysis, 29(4): 541-565 Covin, T., Sightler, K., Kolenko, T., Tudor, R. (1996). An Investigation of Post-Acquisition Satisfaction with the Merger. The Journal of Applied Behavioral Science, 32(2): 125-142 Ducker, I., Jackson, P., Brenner, S., Johansson, C. (2003). Eliciting and Analysing Employees’ Expectations of a Merger. Human Relations, 56(6): 705-725 Harvey, M., Lusch, R., Price, M. (1998). Beyond Traditional Due Diligence for Mergers an Acquisitions in the 21st Century. Review of Business, 19(3): 17-25 Hitt, M., Hoskisson, R., Johnson, R., Moesel, D. (1996) The Market for Corporate Control and Firm Innovation. The Academy of Management Journal, 39(5): 1084-1119 Kay, M. (2005) The evolution of co-operation, available at http://www.brocher.com/Academic/The%20Evolution%20of%20Co-operation.pdf Marks, M., Mirvis, P. (1986). The Merger Syndrome; When Companies Combine, a Clash of Cultures Can Turn Potentially Good Business Alliances into Financial Disasters. Psychology Today, 20: 36 Pastena, V., Ruland, W. (1986). The Merger/Bankruptcy Alternative. The Accounting Review. 61(2): 288-301 Pfeffer, J. (1972) Merger as a Response to Organizational Interdependence. Administrative Science Quarterly, 17(3): 382-394 Pryor, F. (2001). Dimensions of the Worldwide Merger Boom. Journal of Economic Issues, 35(4): 825-837 Shan, W. (1990). An Empirical Analysis of Organizational Strategies by Entrepreneurial High-Technology Firms. Strategic Management Journal, 11(2): 129-139 Terry, D., Carey, C., Callan, V. (2001). Employee Adjustment to an Organizational Merger: An Intergroup Perspective. Personality and Social Psychology Bullentin, 27(3): 267-280 Wahid, A. (1995). Effects of Industrial Merger on Productivity and Profitability: A Review. Journal of Entrepreneurship, 4(1): 89-102 Weisbord, E. (1994) Growth Strategy in Corporate Law Firms: Internal Influences and Performance Outcomes. Journal of Managerial Issues, 6(3): 350-359 Empirical Research - Interviews Current research has been based on the literature review and the data revealed through the interviews of three employees of the specific firm. These employees are the operations manager, the managerial accountant and a member of the firm’s administration department. These employees have been asked to provide answers on specific questions related with the effects of merger on Midland Heart (the company has created as a result of the merger of Prime Focus Regeneration Group and Keynote Housing Group). The interviews are presented below. The questions made to the employees are summarized in short titles. It should be noticed that 2 of 3 Interviewees were working previously in Prime Focus Regeneration Group while the one left was working in Keynote Housing Group. Interviewee 1 – Operations Manager (Prime Focus Regeneration Group) Effects of merger on company’s performance The merger was a positive step for the firm’s performance. Within a relatively short period the company managed to overcome all the obstacles related with the merger and continue to operate in its market from an ‘upgraded’ position. Generally, the financial growth of the company can be estimated to a 10% comparing last year. On the other hand, the company now has a network of approximately 15 offices across UK instead of 4. In any case, from the aspect of organizational expansion the merger should be considered as a positive step for the corporate activities. Duration of preparation period The preparation period lasted about 5 months. In the operations management department our main target during all this time was to prepare analytical reports related with the firm’s operations across the country trying to highlight any possible adverse result to the corporate activities. Changes requested as a result of the merger to the company’s daily operations In fact there were no particular changes in the firm’s operations. The company continued to operate as normally. However, the firm’s name changed (previously Prime Focus regeneration Group), an issue that caused particular anxiety in the firm’s stakeholders. According to the relevant agreement the company (Prime Focus) will be autonomous regarding all its operating activities even within a common organizational environment with Keynote Housing. However, the firm’s (Prime Focus) strategic plans will have to be reviewed by the Midland Heart’s strategic department (constituted by members working previously for Keynote Housing). Effect of merger on firm’s competitive advantage As stated before, the company has now 15 stores across UK which is a significant improvement of the firm’s operational capabilities comparing to the past. However, because the needs for restructuring had been many (mostly of financial management issues) the merger until now has not led to the targeted results. Until now, the effect of the merger (which was completed about 3 months ago) is not clear. Reasons that have led to the merger The merger has been the result of the firm’s incompetence to respond to its customers’ demands. More specifically, because of the limited operational centres across the country (just 4) the service provided to customers was too slow, even of extremely high quality. This delay has led to a further delay of the payments made to the company and as a result the latter was obligated to proceed to an increase of its operational capabilities even through a merger. Effectiveness of corporate strategy regarding the merger completed As always stated above, the preparation for the merger started approximately 5 months before the sign of the relevant agreement. I think that the other side also had a similar period of preparation. In any case, there was no point of the relevant agreement left without the appropriate examination and evaluation. The corporate strategy regarding this procedure has been proved to be absolutely effective. Even regarding some unexpected issues of the ‘last minute’ (like the use of part of machinery, distribution of secondary duties (cleaning of firm’s offices, use of temp staff etc.)) there was appropriate handling by the firm’s side without any problem to be left unresolved. Interviewee 2 – Managerial Accountant (Prime Focus Regeneration Group) Effects of merger on company’s performance Because of the merger, the growth and the profitability of my company (Prime Focus Regeneration Group) have been increased. Overall, the profits of the company have been increased in a percentage of a 10% regarding the same period of last year. Duration of preparation period The preparation period was about 5-6 months. All company’s previews financial statements were reviewed in order to retrieve any pitfall that would influence the signing of the relevant agreement. The other company’s statements were also studied in order to obtain a general view of the future ‘partner’. Changes requested as a result of the merger to the company’s daily operations No particular change has been made. The company operates as usual with a difference only to its name. The costs have been increased as a consequence to the merger, however these are going to be ‘covered’ from the profits of next year – at least this is the forecast made recently (just before the merger). Effect of merger on firm’s competitive advantage The company is now a major competitor in its market. The percentage of its participation in the decision making process of the newly merged firm is however limited regarding the other part of the agreement. PFR Group participates with a percentage of 40% in the board of Midland Heart instead of 60% of the other part of the agreement. It has to be noticed that the share of the company has increased up to 3.5% immediately after the announcement of the merger while after the completion of the procedure this increase reached the 5.6%, a unique phenomenon regarding the performance of the firm’s shares under normal conditions. Reasons that have led to the merger Mainly financial reasons. The company was proved unable to compete the other companies in its market. Effectiveness of corporate strategy regarding the merger completed I think that the corporate strategy has been proved to be successful. The merger finished relatively quickly while there were no sign of failure (administrative or of other nature) during the whole procedure. Interviewee 3 – Administrative assistant (Keynote Housing Group) Effects of merger on company’s performance The performance of Keynote Housing was improved in general. However, its employees are really anxious regarding their future in the newly merged firm. Although they were all involved actively in the procedure, there is a fear that after a short period many of the employees of the former Keynote Housing Group are going to become redundant. Duration of preparation period Our company started to prepare for this merge about 4 months before the agreement. The relevant proposal was made by PFR Group about 6 months before the merge. Changes requested as a result of the merger to the company’s daily operations No particular changes have been made. Both companies continue their operations as normally may because there is a relevant term in the merge agreement that the whole attempt will be reviewed 6 months after the signing of the agreement. Until then both companies will have the right to keep their autonomy at the level they wish. Effect of merger on firm’s competitive advantage Keynote Housing Group was already a powerful competitor in its market. After the merger, it has become a leader having the most centres of operations in the country comparing to its competitors. Reasons that have led to the merger Temporary financial difficulties caused by the turbulences in the market and the extended borrowings. Effectiveness of corporate strategy regarding the merger completed Corporate strategy was proved absolutely effective regarding the specific merger. All the appropriate measures have been taken in order to avoid any potential failure. Read More