The Human Side of Mergers and Acquisitions: Understanding and Managing Human Resource Integration Issues
Legare, Thomas L., Human Resource Planning
Understanding and Managing Human Resource Integration Issues
Mergers and acquisitions increased exponentially in the 1980s and are expected to continue at a strong pace in the 1990s and into the next century. Most mergers and acquisitions are premised on the belief that the combined company will have greater value than the two companies alone. According to Mirvis and Marks (1992), most companies executing acquisitions have done a reasonably good job sizing up the economic and financial characteristics of the takeover. Typically, the dealings are led by the two companies' top executives, some directors, investment bankers, lawyers, and third parties close to one or another of the firms. Their primary concerns are legal and financial - how much a company is worth, what terms to negotiate, how to structure the transaction, and how to get regulators to go along with it. Balance sheets are scrutinized, projections of demand and capacity are studied, and cost-cutting requirements are at the forefront of consideration. Most of the analysis concerns valuation and the financial contours of the deal.
Yet the ultimate success of the deal may depend on how well the acquirers manage the difficult organizational and human resource integration issues at their newly purchased company. For example, sometimes interpersonal conflict can emanate from the top of an organization when key executives cannot agree on a general corporate direction. More often, interpersonal conflict arises because corporate staff and division managers have differing perspectives on what their company wants (and needs) from a merger. If these human resource issues are not resolved, they can result in the turnover of key people, people refusing assignments, post-merger performance drops, and morale problems.
This paper describes an approach that can be used by human resource development professionals to understand and resolve interpersonal conflicts that are likely to crop up during mergers and acquisitions, as well as other major organizational changes. The acquisition of Apollo Computer by the Hewlett-Packard Company (HP) is used to discuss the application of this approach.
Hewlett-Packard Acquires Apollo Computer
Financial "Fit." On April 12, 1989, the Hewlett-Packard Company acquired Apollo Computer for $476 million. The Palo Alto, CA-based Hewlett-Packard company is one of the largest U.S. computer makers, with 1988 sales of $9.8 billion. The Chelmsford, MA-based Apollo Computer pioneered the technical workstation market, but lost its lead to Sun Microsystems Inc. of Mountain View, CA, the number one workstation maker, and Maynard, MA-based Digital, the second largest. The merger of number-three HP and number-four Apollo catapulted Hewlett-Packard past Digital and just slightly ahead of Sun in the $4.1 billion workstation market, the fastest-growing segment of the computer industry (Wilke, 1989).
The financial reason for the acquisition can be traced back to the mid-1980s, when HP found its customers favoring computer workstations over its computer products. Accordingly, HP did develop a line of workstations, but trailed pioneers Apollo and Sun Microsystems in technology leadership and market penetration. In early 1988, the Workstation Group in HP committed itself to a "must win" strategy to gain market share. Internal analysts reviewed research and development (R&D) capability and recommended investment in networking and graphics. Meanwhile, HP's head of Corporate Development looked into joint ventures and possible acquisitions (Mirvis & Marks, 1992).
During this period, Apollo was racked with profit problems. Undercapitalized, with R&D departments pulling in different directions, the company was at risk of losing customer confidence. Still, Apollo was very cool when first contacted by HP and other potential suitors. Undeterred, Corporate Development and Workstation management personnel formed an acquisition team to look closely at the financial and strategic implications of buying Apollo. …