sing HR Approaches in M&A

8/6/2019 sing HR Approaches in M&A

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- U SE RS G UI DE

M&A: Thriving during Chaos !





³ Mallya iam from

Go



S o, why is such news always a big deal?!

y It has an impact- visual and real, much beyond itsintended space!

y

It affects, organisations, individuals- at an emotionaland rational level; although its objective is essentially at a rational level

y Therefore, it makes headlines«..



H ow can you work for such a company?--anecdote



W hat¶s in the M&A?

y Business Context of M&A y People Context of M&A y Emotional Element of a Merger/ Acquistiony Rational Element of a Merger/ Acquisitiony W here the Twain shall meet?y Financial Dimensions

accruals, profitability, market share, segmentationy S ofter (or H arder?) Dimensions

- Culture, Designations, Logos, H eritage, H istory,



S ervice Industry M&A activity in recent times..



10 Top $Bn Deals

y Tata S teel¶s mega takeover of European steel major Corus for $ 12 .2 billion. The biggestever for an Indian company. This is the first big thing which marked the arrival of IndiaInc on the global stage.

y Vodafone¶s purchase of 5 2% stake in H utch Essar for about $ 10 billion. Essar group stillholds 3 2% in the Joint venture.

y H indalco of Aditya Birla group¶s acquisition of Novellis for $6 billion.y Ranbaxy¶s sale to Japan¶s Daiichi for $4.5 billion. S ing brothers sold the company to

Daiichi and since then there is no real good news coming out of Ranbaxy.y ONGC acquisition of Russia based Imperial Energy for $ 2 .8 billion. This marked the turn

around of India¶s hunt for natural reserves to compete with China.y NTT DoCoMo- Tata Tele services deal for $ 2 .7 billion. The second biggest telecom deal

after the Vodafone. Reliance MTN deal if went through would have been a good additionto the list.

y H DFC Bank acquisition of Centurion Bank of Punjab for $ 2 .4 billion.y

Tata Motors acquisition of luxury car maker Jaguar Land Rover for $ 2 .3 billion. Thiscould probably the most ambitious deal after the Ranbaxy one. It certainly landed TataMotors into lot of trouble.

y W ind Energy premier S uzlon Energy¶s acquistion of RePower for $ 1.7 billion.y Reliance Industries taking over Reliance Petroleum Limited (RPL) for 85 00 crores or

$ 1.6 billion



K nown Impact of M&A

y K ingfisher acquired Deccan for InternationalRoute Permits

y H P & Compact (& Digital) for consolidation of S ervices businesses; subseqent merger of ED S (that has acquired Mphasis)- to compete withIBM«

W hat¶s beneath theIceberg?



Life Cycle of a (M/A) case?

y Discussion

S takeholdersLife Cycle S tages



M&A Impact

Target ResidualBusiness

Target Clients

External Media Target Vendors/ suppliers

BuyerManagement

TargetµsEmployees

Buyerµs Managers Regulatory Agencies

Buyerµs employees Applicants

W hile the H eadline statement talks of synergies, there are a number of under-surface stakeholders to the process



y S trategic Intent & Directiony Due Diligence

Merchant Banks (Data Rooms, S eller & Buyer Presentations)NDAs

Operational (Audit Visits, Additional Data Room elements, Follow up Calls , Discussions)y S ale Decision & Announcement

External, Internal and S takeholder Communications Announcements, Reharsals, ³S ynergy´

y IntegrationRole Mappings, Redisgnations, Process ControlsCommunicationsConsolidation of Vendors, Contracts (eg: even lease agreements)Tax duties/clawbacks



Mergers and Acquisitions Laws: the Indian PerspectiveIndian competition law grants a maximum time period of 210 days for thedetermination of the combination, which comprises acquisitions, mergers,

amalgamations and the like. One needs to take note of the fact that this statedtime frame is clearly distinct from the minimum compulsory wait period forapplicants. As per the law , the compulsory period of waiting for applicants can either be 210 days starting from the day of notice filing or receipt of the Commission's order, whichever occurs earlier.The threshold limits for firms entering business combinations are substantially high under the Indian law. The threshold limits are set either in terms of the asset value or or in terms the firm's turnover. Indian threshold limits are greater thanthose for the EU. They are twice as high when compared with U K .The Indian law also provides for the modern day phenomenon of merger andacquisitions, which are cross border in nature. As per the law domestic nexus is apre-requisite for notification on this type of combinations.It can be noted that Competition Act, 2002 has undergone a recent amendment.This has replaced the the voluntary notification regime with a mandatory regime.Of the total number of 10 6 countries, which possess competition laws only 9 arethought to be credited with a voluntary notification regime. Voluntary notificationregimes are generally associated with business uncertainties.Post-combination, if firms are seen to be involved in anti-competitive practices de-merger shows the way out.

Mergers and Acquisitions Laws: the Indian PerspectiveIndian competition law grants a maximum time period of 210 days for thedetermination of the combination, which comprises acquisitions, mergers,

amalgamations and the like. One needs to take note of the fact that this statedtime frame is clearly distinct from the minimum compulsory wait period forapplicants. As per the law , the compulsory period of waiting for applicants can either be 210 days starting from the day of notice filing or receipt of the Commission's order, whichever occurs earlier.The threshold limits for firms entering business combinations are substantially high under the Indian law. The threshold limits are set either in terms of the asset value or or in terms the firm's turnover. Indian threshold limits are greater thanthose for the EU. They are twice as high when compared with U K .The Indian law also provides for the modern day phenomenon of merger andacquisitions, which are cross border in nature. As per the law domestic nexus is apre-requisite for notification on this type of combinations.It can be noted that Competition Act, 2002 has undergone a recent amendment.This has replaced the the voluntary notification regime with a mandatory regime.Of the total number of 10 6 countries, which possess competition laws only 9 arethought to be credited with a voluntary notification regime. Voluntary notificationregimes are generally associated with business uncertainties.Post-combination, if firms are seen to be involved in anti-competitive practices de-merger shows the way out.



S ome Norms«

y Data Rooms (typically midnight opening for the bidders)

y Top Management Compensation is masked till the

final two/three bidders are decidedy Management Presentations (extreme example of

negotiation skills)- who is the host? (anecdote of thecompany in an airport hotel for 12 hours«. Andtipping points in negotiations)

y People Process negotiations- flavoured with Finance



15

Creating the Merger Framework j Community Initiatives led by employeesj Any initiatives that the Unit is now doing but

needs to Disengege

j CRM Touch Pointsj R &R , Leadership Awards

j Mix,j Cost,j S kill S ets,j BG and Onboarding

j Pre process, product andprocess training

j Domain Training across key businesses

j K nowledge Management

Diversity

EngagementBusiness

Training

Recruitment &Staffing

j Job Mobility ± IJP Process -j S pecialist Career pathsj X% of top 1,2 rating retainedj S ynchronise the annual process

j W hat are the unique strategies thatneed to be retained- how much willcome from Buyer?

j S ignature Progreamsj S peacial Certificationsj Continuing Education

Co mpensati o nand Benefits

Learning &Devel o pment

Co mmunicati o nC areer

Management

Fixed Pay with Flexi PlanS tructuring

Variable Pay linked toPerformance (Proportion skillset based)

Attractive Benefits



The People Related Decisions (emotional) willhave to be balanced with Realism (rational)

RightMessaging toS takeholders

FinancialConsidertions



Output

y Level Mapping/ Designationsy Benefit Mapping ( H ygiene Factors)y S ynchronise Annual Calenders (Training,

Performance Management, Financial Year Closing)-all of which have financial and budget impact (Eg: what happens if the Perf Mgt cycle is broughtforward by 3 months- (Eg: 150 K US D on a 10 Mnsalary base with 6 % increase!!)



Example of a Transition Document content

1 Definition and Interpretation2 Performance of Services

3 Third Party Suppliers

4 Price and Payment

5 Warranties and Obligations

6 Term and Termination

7 Migration

8 Liability

9 Contract Management

10 Changes

11 Dispute Resolution

12 Intellectual Property Rights

13 Data Protection

14 Confidentiality

15 Force Majeure

16 Sub-Contractors

17 Other ProvisionsSchedule 1 Services And ChargesSchedule 2 Change Control





Maslow in M&A?

Copyright: David Tuffley/ Griffith Univ



Nothing really changes«.?



R E T E N T I O N B O N U S

Deep Dive Activity



Retention

y Retention on People (Affects Business Continuity and S ervice Delivery)

y Retention of µ K ey¶ People (Could Affect Valuation-Impacts Morale)

y Retention of Customers (Eg: Mahindra S atyam)

Retention Bonuses are typically built around the priorities for the above.



F I N A N C I A L P L A N N I N GL E G A L F R A M E W O R K

H R / P E O P L E D I M E N S I O N

Building Retention Plans



Background & Objective2 5

Identify key resources for Leading and Transition of DELTA and where possible create segmentation or Tier-wise listing

Smooth Transition of Project; Prioritise budgetfor Retention

Put Monetary Attractions for tenure during transition(starting May?) and valid for 12 months thereafter.

Retention of KeyIndividual

Build in Critera for early exit (from Business Side) if reorganisation so demands.

Flexibility for Business;Individual is covered inevent of Redundancy

Decide Amounts

Decide / Clarify/ Communicate Stock Optiontreatment post DELTA

Better understanding of transfer/exit for Individual

Pr o p o sed Acti o n Desired Output

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sing HR Approaches in M&A