Project #45630 - Human Resource Mgmt: Mergers and Acquisitions’ Failing Grade

Mergers and Acquisitions’ Failing Grade

It is estimated that over half of mergers and acquisitions fail. (Edge, 2007, p. 8) On a test, a failing grade usually results from one of two things: an inadequate preparation plan by the student or a failure by the student to execute the plan. In the world of M&As, who is to blame for this failing grade? Do top executives continually choose bad organizations to partner with or acquire? Are failures the result of inaccurate predictions by the finance department? Have HR departments been causing these failures from unsuccessful integration methods?

The reality of this situation is that M&As do not usually fail due to one department, person, or problem. In fact, M&As are so complex that many experts have begun to identify and reflect upon a variety of disparate factors that consistently contribute to failure. How might future HR professionals help lower the percentage of failures? Furthermore, how can you use this eye-opening statistic along with lessons learned to educate top management on M&A best practices?

In this Discussion, you explore a classic example of two prominent companies that failed to come together as one new entity. You first examine the synopsis provided below on the Time Warner and America Online merger. You then conduct further research to find a new example of an M&A that was successful. Finally, you compare the results of these two real-life examples to better analyze the process of M&As. When working through this week’s Discussion, be sure to identify the factors that contribute to both M&A failures and successes.

Synopsis

In January 2000, Time Warner and America Online (AOL) attempted to launch the largest merger at that time. By combining the capabilities of both companies, they aimed to transform the media industry’s past practice of analog broadcasting into the rapidly evolving world of online media. Time Warner had hoped to harness the power of AOL to bring its products into the homes of consumers at a faster rate than any of its competitors. AOL had hoped to capitalize on Time Warner’s brand name and assets. Executives of both companies thought this merger would create a company of “the future.” As discussions solidified into agreements, both companies stated that they were to remain equals after the merger, although the emerging potential of the web seemed to make America Online the more significant of the two.

As the merger became a reality, many employees watched as two very different cultures were thrown together as one. AOL worked in a fast paced culture that was driven by the day-to-day business possibilities of the web. Time Warner still held on to its policies and practices, using the old media model. AOL was new money, while Time Warner had financially established itself long before the meteoric rise of the Internet. Middle- and lower-level employees were not the only ones who felt this clash of cultures. Dissonance among the executives was also evident as they did not agree on many decisions that affected organizational operations. Time Warner began to view AOL as a snobby enemy with whom they did not care to work. The cultural climate failed to synergize and productivity decreased as employees shied away from integration.

Soon after the merger finalized, the aftermath of this M&A deal reached its boiling point. First, AOL’s revenue began to decrease as new ways to connect to the internet began to gain user acceptance. This occurred alongside the wane of society’s dot-com fever, resulting in huge losses for AOL’s marketing share. Shortly after, AOL’s stock and general worth paralleled this decline, making financial earnings plummet lower than originally projected. To make matters worse, further investigation by Time Warner found that AOL had also unlawfully boosted its earnings during the initial due diligence process of the merger. As details began to surface of AOL and Time Warner’s struggle, employees in each company began to seek alternative employment before this “new age” company’s failed synergies brought them down to an all-time low.  

Provide a cohesive and scholarly response based on your readings and research this week that addresses the following: (Remember to use APA Style formatting and include references. The paper should be 1-2 pages.)

·         Analyze the process of mergers and acquisitions from an HR perspective. Analyze the process of mergers and acquisitions from an HR perspective.

o    Using the AOL/Time Warner merger as a guide, describe how either the established process of M&A dealings or the actual execution of M&A dealings makes it likely for merged or acquiring organizations to fail.   

o    What two ways can HR help to prevent a failed M&A? Justify your answer by citing real-world strategies as presented in this week’s Learning Resources as well as your own additional research or experience.

·         Compare the results of two mergers.

o    Conduct additional research to find an exemplar of a successful mega-merger. (A mega-merger consists of two organizations that are equal in size and net worth.)

§  Briefly describe the two companies involved in the M&A exemplar that you have chosen.

§  Cite at least one common element your exemplar has with the AOL/Time Warner merger. Likewise, cite at least one element that portrays how they differ.

§  Why was your exemplar a success, and why AOL/Time Warner was not?

 

References: 
Arango, T. (2010, January 10). How the AOL-Time Warner merger went so wrong. The New York Times. Retrieved from
http://www.nytimes.com/2010/01/11/business/media/11merger.html?pagewanted=all

Subject Business
Due By (Pacific Time) 10/31/2014 12:00 pm
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