Which factors impact the likelihood and extent of employee turnover after M&A transactions?
What measures can be taken during post-merger integration to retain key players?
This master thesis gathered and evaluated knowledge of experts in the field of M&A regarding employee turnover and employee retention.
The yearly number of worldwide M&A transactions increased from 1990 to 2019 by nearly five times. The yearly average increased steadily over the last decades. The 1990’s averaged about 20.500 deals, the 2000’s 37.000 deals and the 2010’s 46.500 deals per year. (Thomson Financial, Institute for Mergers, Acquisitions and Alliances [IMAA], 2020)
Smith (2002) analyzed 49 studies regarding the success rates of organizational change. Among them were also 9 studies concerning M&A transactions. The median success rates for these transactions stated at 33%, while the median success rate for all analyzed studies in different forms of organizational change, ranging from strategy deployment to general culture change or software implementation, also was 33%.
It should be mentioned that the measurements of success for most forms of organizational change are varying or sometimes not disclosed at all and therefore these results should be taken with caution. A valuable takeaway of Smith’s analysis though definitely should be the assumption that change in organizations is very often accompanied by a myriad of hurdles and challenges.
More recent academic work also backs that statement. Malmendier, Moretti, and Peters (2018) looked at stock performance of winning and losing bidders. They conclude that the entities that lost takeover bids on average outperform the winning bidders by 24 to 37% over the next 3 years.
King, Dalton, Daily, and Covin (2004) come to the conclusion that on average M&A activity does not lead to improvements of financial performance for the acquiring company. Instead, their results show either no or a slightly negative change in performance post-merger.
Table of Contents
1 Introduction
2 Problem Formulation
3 Literature Review
3.1 Distinctions Between and Definitions of Mergers, Acquisitions, and other Forms of Restructuring
3.1.1 Differentiation by Economical Background
3.1.2 Differentiation by Legal Background
3.1.3 Differentiation by Willingness of the Takeover Target
3.2 Due Diligence
3.2.1 Financial Due Diligence
3.2.2 Cultural Due Diligence
3.2.3 Human Resources Due Diligence
3.2.4 Organizational Structure Due Diligence
3.2.5 Management Due Diligence
3.2.6 Other Types of Due Diligence
3.2.7 Impact of Due Diligence on M&A Success
3.3 Employee Turnover after M&A – Studies & Reasons
3.4 Post-Merger Integration (PMI)
3.4.1 Integration Planning
3.4.2 Integration Execution
3.4.3 Integration Monitoring
3.5 Literature Review – Conclusion
4 Research Methodology
4.1.1 Qualitative & Quantitative Research: A Quick Overview
4.2 Choice of Research Method
4.2.1 Choice of Qualitative Data Collection Technique
4.2.2 Choice of Interview Method
4.3 Qualitative Content Analysis by Mayring
4.4 The Interview Guideline
4.5 Definition of Experts and Chosen Field
5 Interview Analysis
5.1 Interview Partners
5.2 Goal and Type of the M&A Transaction
5.3 Differentiation between Employees
5.4 Factors that Impact the Risk of Key Players Leaving
5.5 Retention Measures
5.6 Summary and Discussion
5.7 Limitations of this Research
6 Retention Guideline
7 Conclusion
8 References
Appendix A
Research Objectives and Themes
This thesis aims to investigate the factors that influence the likelihood and extent of voluntary employee turnover following M&A transactions, with a particular focus on key players. Furthermore, it seeks to develop a practical guideline to assist management in identifying turnover risks and implementing effective retention measures during the post-merger integration phase.
- The influence of M&A transactions on employee turnover and organizational performance.
- Methods for identifying "key players" within a target organization.
- Critical risk factors contributing to the departure of key talent.
- Effective retention strategies and communication during post-merger integration.
- Qualitative analysis of expert insights into M&A human capital management.
Excerpt from the Book
3.2.2.1 Definitions of Organisational Culture
From the beginnings of the use of the term “organizational culture” there have been many attempts of defining it. To begin, I would like to give a very informal “definition”: “the way we do things around here” - Deal and Kennedy (1982, p. 4). Albeit a very informal statement, it does imply many things. According to this statement organisational (or corporate) culture means how business is done. Organisational culture does not mean, what business a company is in or what “things” an organization does. It is the summary of the ways a company is choosing to do its business.
Now let us take a look at more formal attempts of definitions. Edgar Schein (2017, pp. 20–21) created a list of definitions found in literature and also tried to put these definitions into clusters. I have collected some here.
Observed behavioral regularities in interactions: “The language they use along with the regularities in the interaction such as “Thank you” followed by “Don’t mention it,” or “How is your day going so far,” “Just fine.” Observed interaction patterns, customs, and traditions become evident in all groups in a variety of situations.”
Proclaimed values: “The articulated, publicly announced principles and values that the group claims to be trying to achieve, such as “product quality,” “price leadership,” or “safety”. Many companies in Silicon Valley such as Google and Netflix announce their culture in terms of such values in all of their recruiting materials and in books about themselves.”
Chapter Summaries
1 Introduction: Provides background on the increase in M&A transactions and discusses the correlation between organizational change, management turnover, and lower-than-expected financial performance.
2 Problem Formulation: Outlines the negative financial impact of management and employee turnover and defines the core research questions regarding risk factors and retention measures.
3 Literature Review: Synthesizes existing academic research on M&A structures, the role of due diligence, theories of employee turnover, and various models for post-merger integration.
4 Research Methodology: Justifies the use of a qualitative research design, specifically semi-structured expert interviews, to explore the under-researched human factors in M&A.
5 Interview Analysis: Presents findings from six expert interviews, categorized into transaction goals, employee differentiation, risk factors for key players, and retention measures.
6 Retention Guideline: Proposes a structured 3-step practical framework for identifying key talent, analyzing risks, and implementing retention measures post-merger.
7 Conclusion: Summarizes the key finding that while general employee turnover is often seen as insignificant, the retention of key players is vital for success and requires proactive management.
Keywords
key player retention, retention measures, employee turnover, M&A transactions, organizational culture, post-merger integration, due diligence, human capital, management turnover, change management, business synergy, organizational health, leadership styles, corporate integration, qualitative research.
Frequently Asked Questions
What is the primary focus of this thesis?
The research focuses on the "human factor" in mergers and acquisitions, specifically examining how M&A transactions trigger voluntary employee turnover and identifying strategies to retain key players.
What is the central research question?
The study addresses two main questions: Which factors impact the likelihood and extent of employee turnover after M&A transactions, and what measures can be taken during post-merger integration to retain key players?
Which scientific method is applied in this work?
The author employs a qualitative research design, utilizing semi-structured expert interviews with six professionals from fields such as M&A consulting, finance, and human resources to gain practical, inductive insights.
What are the key thematic fields discussed?
The work covers M&A classifications, due diligence processes (financial, cultural, and HR), the psychological impact of change on employees, and strategies for effective post-merger integration.
What does the main body of the work cover?
It provides a comprehensive literature review followed by an empirical analysis of expert interviews, concluding with a practical 3-step retention guideline for managers involved in M&A.
Which keywords characterize the work?
Key terms include key player retention, M&A transactions, employee turnover, organizational culture, post-merger integration, and due diligence.
How are "key players" defined and identified in the study?
Key players are defined as individuals possessing unique know-how, leadership skills, or critical customer relationships. Identification methods include analyzing talent management data, reviewing key projects, and assessing revenue-generating departments.
What role does "culture" play in M&A success according to the experts?
While the literature emphasizes culture as a primary success factor, the interviewed experts suggest it is often overestimated or used as a "whitewash" for other integration deficiencies, emphasizing that its impact should be viewed through the lens of day-to-day work changes.
Why is the "Retention Guideline" in Chapter 6 significant?
It fills a gap in the literature by providing a actionable, practical framework that guides managers through identifying key talent, analyzing specific risk factors, and deploying tailored retention measures.
- Citar trabajo
- Florian Jung (Autor), 2021, Employee Turnover in the Context of Mergers and Acquisitions Transactions, Múnich, GRIN Verlag, https://www.grin.com/document/1152762
