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has occurred . The first was in the 1920s. The second 1967-9, the

Sandier and Rentoul, 1987; Grindley, 1986) and behaviourialan and Sayles, 1985; Jem ison, 1986; Hun t, 1990) have

financial asse ts. In this paper we wish to investigate why it is that therchers and why it is that the human resource function has been

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John W . Hunt and Stephen DowningMontgomery, 1962; Stewart et al., 1963) and much of the evidenanecdotal or unrelated to theory. Finally, the paper will identify actifor the HRM function in acquisitions.One explanation for the absenee of investigations into the eontribution to mergers and acquisitions is the researchers' interemaero rather than micro issues. Researchers locked into systems theocontingency approaches may be more interested in eontextual issues rthan the coping behaviours of the people involved. This resultsliterature in which the HRM function is excluded from aequisition ac(see Hunt etal., 1987; Buono and Bowditch, 1989). Yet ease analysesquite clearly that, in reality, while the HRM function may be excludthe early stages it is heavily involved post acquisition, often withpreparation. So reality and the bulk of the research appear to differ wThe involvement of the HRM function is a matter of a humanitconcern for absorbing grief among those people who were acquired. Tare compelling financial reasons for assisting in the integration procestransferring the acquired peoples' commitment to the firm's new owWithout their commitment it is difficult to achieve the operationastrategie objeetives of the aequisition. The need to win the commitmethose people acquired is supported by the new wave of strategic chliterature that argues that transitions are rooted in the cultural (i.e. hufabric of the organization (Joh nston, 1989; Turner, 1990; PetersWaterman, 1982) rather than in contextual variables interrelatingmacro level.Although anecdotal evidence implies considerable HRM activityrole of the HRM function has not been clarified. For example, therfew studies which include the personnel or human resource function early stages of collecting data on the potential target. Similarly thelittle research evidence that the HRM function is involved in preparinmerger document once the bid has been made. Indeed, most studiesfound that the human resource function is excluded during the iphases (see Hunt etal., 1987). In studies of success and failure the re isinterest in the contribution of the HRM function to either. Instead, are only broad categories of eombined variables which may lead to hsuccess rates. For example horizontal diversification as an objectimore likely to be successful than diversification into unknown industriinto concentric marketing.These broad conceptualizations and categories usually inelude

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Mergers, acquisitions and human resource managementre are no set rules about what makes a merger or acquisition successful'

Configurations of more and less successful tactics have been suggested,(1987 and 1988), Buono and Bowditeh (1989), McCann and G ilkeyHunt (1990) but these remain very broad and type determined.

anagers implies a very different set of post acquisition behaviours by the

Nevertheless, at a macro level, certain variables recur in the research

uirors (Ansoff 1965; Pritchett 1985; Haspeslagh and

et al., 1987; McCann and Gilkey, 1989), its relative size (Kitching,973; Hunt et al., 1987), the experience of the actors (Hunt et al., 1987;s to buy (MeCann and Gilkey, 1989). All of these variables have been

In contrast, the post aequisition or implementation phase has produced

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John W. Hunt and Stephen Downing(hos tile, friendly, contes ted) of the negotiations which appear to be seensignificant. Hence, the colourful categories of merging or integratisuggested by the Centre for Effective Organizations at the University Southern California - Pillage and Plunder. One Night Stands, Courtshand finally Love and Marriage where full consolidation of the two firmakes a single enterprise out of the two (see Buono and B owditch, p. 25A broader literature argues that the reactions of people post acquisitiare a continuation of a series of reactions that began with the bid and mcontinue for some years after the deal is finalized (Jemison, 1986). Tview of a behavioural process looks for expectations and attitudes thdevelop during the negotiating phase which subsequently colour trelationships between those buying and those being bought. This leadsthe conclusion that success and/or failure is the product of that behaviouprocess which extends over several years. As Buono and Bowditch 19comment: 'Much of the failure and subsequent divesture of merger aacquisition partners is due to ineffective management of the underlyiprocess' (p. 194). Integration and consolidation are part of a lengtprocess that can unfold over the course of several years and it is nalways clear where, when and how integration changes should be ma(Schweiger et al., 1987).

In summary, we find general success scenarios based on maccontextual variables or a sequential macro process and a preoccupatiwith post acquisition behaviours as an explanation of failure rather thsuccess. The personnel or human resource function's role is implied raththan specified. The most frequently cited causes of failure are the acquiricompany's inability to plan, or a failure of the acquired managers to tathe risks necessary to implement the necessary changes, and/or unclereporting systems, weak internal control systems, conflicting personnsystems, clashes of cultures or management styles and a failure to inducommitment from the acquired people (Hunt et al., 1987; Buono aBowditch, 1989; McCann and Gilkey, 1989).To test these findings from the literature, data from a study of forty Uacquisitions of public and private companies in the UK and the USA (Huet al., 1987) were analysed. First, to examine the contingency argumethat combinations of macro variables lead to success or failure and secoto help us understand the exclusion or covert role given the HRspecialists. Like most other studies this research has shown that of the for

cases 55 per cent w ere successful or very successful using the evaluations the managers of both buyer and seller firms 18 months after the closu

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Mergers, acquisitions and human resource managementsystems. In the unsuccessful cases the sellers staff did not understand thebuyers reporting systems and felt the buyer's staff demanded excessiveamounts of information. Buyers in successful cases did not imposeunilateral control systems (accounting, personnel) on the acquired firms.In 100 per cent of the unsuccessful cases they did.When we considered the HRM issues, which related to success andfailure, the relevant behaviours by the acquiror were much more specific.In the m ajority of the successful cases, the buyers predicted there would bepersonnel problems and acted quickly to resolve them, believing thatetting the acquired people committed to the new status was essential.hey invested time in explaining their personnel systems. In contrast, invery case of failure the behaviour of the buyers team, post acquisition,roused resentments about specific personnel questions. The clash ofultures or styles, which is the most frequently cited cause of failure in themplementation literature, was also supported by this study but this was alocal issue not a global conceptualization of culture. The acquiringanagers of very successful cases worked hard to deal with conflicting

Jemison (1988) examines post acquisition behaviour in terms of strategicelated businesses he concluded that integration is characterized by it being

erican cases. First, the cause-effect knowledge of benefits was clear tosuch that the people in both firms developed an understanding of

What this and our research indicates is that the behavioural processes

y sellers were asked in face-to-face interviews to be specific about the

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John W. Hunt and Stephen DowningDifferent fringe benefit systems.Different pension schemes including issues about retained surpluses.Different methods for evaluating individuals.Different incentives; share options, bonuses, payment on results.Different beliefs about the use of incentives to hold on to highperforming individuals.

What these responses indicate is that while researchers have beconcerned with the behavioural, long-term processes post acquisition in interactive sense, practitioners are more concerned about the short-terand immediate issues. This focus on the immediate issues reflects a desifor meaning, for explaining to oneself what has happened without conseThis necessity to explain to 'me' what has happened produces whJemison sees as a leadership dilemma. When senior m anagers, responsibfor im plementing the post acquisition strategy, do not invest in institution(i.e. visionary, symbolic), management, middle level managers waste timbuilding interpersonal relationships to fill the leadership vacuum instead devoting energy to making the acquisition work.This split between imm ediate issues and the process of the integration two social systems over time plus the preference of macro, contingenexplanations over micro personal questions of adjustment may heexplain the relatively m inor role provided by the HR M function in mostthe research . The assessment of organizational performance (profitabilimarket standing, etc.) especially short-term tends to push personnel issuinto the margins of research. However, the day to day reality of tmanagerial task, forces it into a focal role immediately the deal has beconcluded. W hat is clear from our research and that of others is the impliimportance rather than the recognized importance of the human resourfunction in mergers and acquisitions. This relegation to a 'behind tscene' activity does have some explanations in practice. Merger aacquisition planning teams are small, usually three peop le. The most seniline manager, the finance director and a link person who will remain aftthe acquisition is completed. Adding the HRM function to the team wouhave consequences for the dynamics of the team. Moreover the advice the HRM specialist can always be included in the team's analysis of tsituation.What is less clear, given that this is primarily a human process, is w

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Mergers, acquisitions and human resource managementrespondents to researchers appear to ignore this fact. So, if the HRMfunction is heavily involved, if not always centre stage, what does it do?One caveat, as Napier (1989) proposes, is that the types of humanresource policies and practices must be related to the type of merger. Armslength takeovers will have less paren t involvement than takeovers in whichfirms are to be merged on one site necessitating merging of personnelpolicies and people.

Exam ples of HRM involvement in acquisitionsIf for convenience we regard the acquisition process as falling into stageswe can see different HRM activities at each stage. From the HR Mperspective, the Targeting and Negotiating phases are mostly about detailsbut expectations are established in both the buyer's and the seller'semployees minds which will affect subsequent stages. The Implementationphase is about both detail and the interactive, longer term process ofintegration. What HRM activities occur, often covertly, at each phase?

TargetingOnce the acquisition team has focused on the seller firm, the HRMfunction may becom e involved in data search for de tail. What is it that thebuyer intends to buy in human terms. Possible activities are:

Hum an audit: num bers , levels, locations, pay levels, union affiliations,comm unity links.Human costs (obstacles to rationalization): local merger andemployment law, local norms and values about work.People quality: the key players, corporate culture (local, and nationalculture), age profile, skills inventory (especially core skills of thebusiness); investment in managem ent development and training,executive shareho ldings, ethnic mix.The structure: organ izational form (head office size and function; basisof segm en tatio n-SB U , divisionalized, matrix e tc.), age of the firm,history to d ate, fit with market-products, industry structure, competitiveadvantages disadvantages.

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John W. Hunt and Stephen DowningEmployee relations: history to date, unions, memberships, majorplayers in the unions, staff associations, ex patria tes.

Access to these data will vary with the type of bid. In a hostile bid thesedata are much more difficult to obtain, but not impossible through marketintelligence. The am icable bid between friendly rivals should m ake most ofthis information readily available.The importance of the HRM input is not only its relevance as facts butalso its affect on the negotiations stage. Provided the data collection phasehas been effective then the subsequent stages should not be burdened withsurprises (e.g. complex financial arrangements in pension funds; over-generous employment contracts, golden parachutes etc.). In the UK studyof forty acquisitions, every case of failure was characterized by subsequentsurprises about at least one major HRM issue. For example, in one case a6 million debt was found, after closure, in the acquired company'spension fund.

NegotiatingMost acquisition teams exclude the personnel professional from thenegotiating team. There are disadvantages and advantages in this practice.First, it excludes the professional who should have skills in negotiating.Conversely, it keeps the team small. However, if the size of the team is tobe small and the HRM specialist is excluded then his/her advice should notbe ignored.

The process: advice could be sought on the negotiations themselves,including the tactics of the sellers team.Merger document: and/or the Letter of Intent invariably involvesquestions about the staff. The avoidance of sloppy arrangements isimportant as is controlling wild, personnel gestures to clinch the deal asthe momentum builds.Advice on post acquisition dem ands: what will be required o fthe HRMfunction post acquisition. What numbers of people will be involved; whowill be retained, m ade redundant or retired?The use of external resources; acquisitions create demand for slackresources. These may be sought outside the firm and the H RM function

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Mergers, acquisitions and human resource managementcontracted valuable time had been lost in implementing the postacquisition strategy.ImplementationThere is a vast literature on this topic. If detail and data are the majorinterests of the HRM functions pre acquisition, then detail gives way toprocess post acquisition. Here the HRM function is usually centre stage.Frequently task forces are created to link the two administrations together.In human terms, this phase, is arguably, rich soil for human resourcemanagement. Individuals are more ready to accept and tolerate changenow than at any other time. They expect it and wait for it. In organizationalchange terminology the 'Unfreeze' will be effective if the changes areintroduced quickly and persuasively. This provides the buyer with anunequalled opportunity to win or lose the people acquired. The time frameof post acquisition integration is usually long (3 to 5 years), but action isneeded immediately as the sellers staff expect answers. Even where thebuyer is prepared to encourage the bought firm to maintain its ownpersonnel policies and practices there is a need for clarity and reassu rance .

The extent to which personnel issues will be harmonized will vary widelybut there are clues from research as to which issues are most sensitive andit is these that the HRM function might address. Buono and Bowditch(1989) believe there are five critical issues in managing the humanresources post acquisition. These are: the competing claims betweendifferent stakeholders; issues of secrecy versus deception; managementstyle questions of coercion versus participation, and finally, managing thesense of loss and respect for employees (pp. 249-63).A wider search of the literature suggests that these issues are reflected in

the following practical problems of integration: confusion about strategy;problems of corporate image, unclear reporting relationships, imposedcontrol systems, resistance to restructuring; personnel policy clashes;differences in culture and style; and finally in problems of motivation forthe acquired people.Jemison (1988) takes this analysis further by looking at the facilitatingfactors (already discussed) and the process constraints (determinism, cycleof confusion and frustration, unexpected events; value destruction). Allthese issues whether contextual or processural have a common theme,communication. For both the detail (what will happen to my pension) andthe general (where will we be going in the future) refer to the importance

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John W. Hunt and Stephen DowningJemison (1989) and Haspeslagh and Jemison (1987) confirm the truism thatacquisitions are a human proeess. As Haspeslagh and Jemison (1987)eomment:

The classic view of aequisitions focuses on creating econom ic value forthe shareholders. Ironically, acquisitions often destroy non economicvalue for those w ho are asked to create eeonomie value after thetransaction is made . Creating economic value requires the co operationand com mitment of operating level managers of both firms in order toeombine the skills, resources or knowledge of the two firms, (p. 55)Who are the communicators?In suecessful eases the chief negotiator of the buying firm is most frequentlythe foeal eommunieator. He or she is the 'face' of the intruder and it is hisor her skill in communicating which will affect the early stages of shoek andgrief.The second condition for communication in suecessful cases is that it iscentrally controlled; unilateral power is vested in one person to avoid aleadership vacuum. This is usually the chief negotiator but may be aspecially selected head of the implementation team. Practitioners havestrong views that the two teams should be different with a link membercommon to both (see Hunt et al.. 1987).The third condition is the control of task forces, created to harmonizefunctions and search for synergies. The number of task forces designed toinvestigate the need for integration in the human resource function willvary with size and complexity. U sually, functional task forces in pe rsonnel,production and marketing are established involving buyer and seller staff.Harmonization is an option. These task forces appear to have a life span ofup to six months. Communication from task forces is routed through thecentral power figure mentioned above.With whom do they com municate?The number of publics will vary greatly. Three suggested groups are: theemployees, external publics and the media. Internal communication willoccur for both the buyer and the seller's employees (the literature tends tostress the seller and ignore the fact that the aequisition also affeets thoseemployed by the buyer).

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Mergers, acquisitions and human resource management

In hostile bids (where the buyer may not know exactly what heght) the clarity re lates to providing a plan of what will be happening

The management team should be identified and publicized. Severances

The relationship between the structure and systems of the buyer and

What appears to be relevant in these early stages of implementation is

to comm unicate

ace com munications appear to be preferred over the use of letters ,

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John W. Hunt and Stephen Downingmay be the important ingredients of the medium. Explaining the buyejargon, social events, committee structure, etc. may be part of thinformation package.Jemison (1988) argues that top managem ent concentrating on imm ediatask details rather than the long term interactive process may dysfunctional. The more important the acquisition to the parent firm tmore likely the buyer's senior managers will become involved in detail help to ensure success, thereby hitting the leadership dilemma mentionabove. Jemison notes

Yet this very involvement belies the iterative, evolutionary nature of thintegration process and often reduces the chance that people in the twofirms can interact in such a way that the facilitating conditions ofstrategic capability transfer will be met. (1988: 22)

Establishing interpersonal relationships takes time and often time is short supply, especially if the acquisition is perceived by the seller's staff be a crisis. As Hamblin (1958) notes, group cohesion will increase conditions of crisis only if there is a shared view that an answer is possibWhere there is no answer group cohesion will collapse as individuals begto look after their individual interests. A seller's staff that regards thacquisition as a crisis without a solution leads to disintegration of the teaas individuals seek ways to exit. The effective hostile predator will use tthreat of crisis to introduce transformational change quickly. But his or hsolution should, when offered, be plausible. Without a persuasive visiothe acquired staff will begin to withdraw both psychologically anphysically. In the amicable bid, relationships need time to develop; withocrisis effort is required to reduce shock, to exorcize grief and to buirelationships for the future state.In summary, this detailed discussion of communications throughout thimplementation stage gives rise to a minimum set of human resource task

1, Explain the personne l policies and practices if harmonization isintended or no t. If there is to be integration then provide a timetableAddress the following issues quickly and clearly: reward systems,pensions, recruiting systems, assessment and development systems.2, Be prepared to maintain local terms and conditions of em ployment.Neatness is no guarantee of effectiveness. Often these localdifferences have long and important histories which relate very

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Mergers, acquisitions and human resource managementmanagem ent, car policy and other perks, share schemes, retirementages, performance criteria. Positions on private loans etc.

4. Ask the same task force to check redundancy policy and local law. Inimplementing redundancy choose the best scheme and allow peopleto leave with dignity. Act quickly, be generous, use ou t-placementconsultants. Avoid the double severance issues where local divisionsand head office of the acquired firm compete for the bestarrangements.5. Conduct a managem ent audit. Classify the high poten tial, short termpotential and 'really useful' actors. Identify the no potential people.Relate the m anagem ent audit to core skills and succession ques tions.6. Advise the implem entation team on comm unication practice shortand longer term as the basis for interactive integration.7. Assist in overcoming language barriers, linguistic differences,confusion about signals and symbols.8. Focus attention on jobs not rum our; encourage line managers to behonest and answer questions openly.9. Manage these processes through the line; ensure that the HRMfunction has a professional image.

e literature tends to ignore it. A survey of the literature suggests that

ooking to the processes of social interaction over time as an explanation

he HRM function as soon as the closure is completed.If we analyse successful cases of acquisition we find, contrary to theliterature that the personnel function has been busily involved from theutset. Cross sectional research of large samples is unlikely to expose thisimportant contribution. Indeed, cross sectional research (our own included)has probably contributed what it will to the debate because of the

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John W. Hunt and Stephen DowningThis has forced our research to concentrate on specific cases to unrathe HRM roles. From an analysis of forty cases a tentative checklist

involving the HRM function is proposed for the commonly cited stagestargeting to implementing post acquisition. This reveals a rich harveststrategic and practical activity in which the HRM function has a major rto play. However, contingency theory based, cross sectional research wlarge samples do not provide the sort of information we need about HRM role in acquisitions. Therefore, the next stage of this research isconcentrate on the socially constructed processes pre and post acquisitiby analysing 10 new cases in depth to establish more confidently the paplayed by the actors including those in the HRM function.Respectively Plowden Profeand Research Fellow, in Organizational BehavCentre for Organizational ReseLondon Business SchoUnited Kingd

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Mergers, acquisitions and human resource managementCapability Transfer". Unpublished paper Stanford University. (Forthcoming in Liebcop(ed.) Corporate Restricting Through Mergers, Acquisitions and Leveraged Buyouts.Greenwich: JAI Press.ison, D. B. (1988) 'Process Constraints on Strategic Capability Transfer DuringAcquisition Integration". The University of Texas, Austin, Department of ManagementWorking Paper, m.S9-5-\.988) T h e Economic Role of Mergers". London Business Schoot Journat,

(1967) 'Why do M ergers Miscarry?" Harvard Business Review, (Nov . -Dec) :84-101.Business Internationat. Geneva.Harvard Business Review. (March-A pril): 90-102.. and Montgom ery, (1962) Management Probtetns of Corporate Acquisiliotis.Cambridge: Harvard University Press.ann, and Gilkey, (1989) Joining Eorces: Crealitig and Managing Successfut Mergers atidAcquisitions. Prentice H all.(1990) (May/June) 24 (6).N. K. (1989) 'Mergers and A cquisitions, Human Resource Issues and Outcom es:A Review and Suggested Typology". Jourtiat of Management Studies, 26 (3): 271-89.NBER GeneratStudies. Princetown NJ: Princetown University Press. 66.In Search of Excettetice. Harper and Row.ter, (1980) Competitive Strategy. Free Press, New York.

{\9H5) After the Merger: Managitig itte Shockwaves. New York: Dow JonesIrwin. Acquisitiotis Montttty.(Sept.): 25-8.1983) 'Micro D eterminants of Conglomerate Mergers" in Craven, J. (ed.)Industriat Organisation and Pubtic Poticy. Boston: Unilever Mijhoff, pp. 207-41., D . M., Ivancevich, J. M. and Power, F. R. (1987) 'Executive Actions forManaging Human Resources Before and After Acquisition". Academy of ManagementExecutive. 1 (2): 127-38.., W ingate, P. and Smith, R. (1963) The Human Effects of Mergers. London: TheImpact on M anagers Action Society T rust.Organisationat Symbotistn. De Gruyter.The Rote of Mergers in ttie Growth of Large Eirms. Berkeley: University ofCalifornia Press.

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