Balm for mergers

Centurion Bank of Punjab "� a merger between Centurion Bank and Bank of Punjab "� faced a typical dilemma that is associated with mergers.

Some employees continued to draw a higher pay package than those belonging to the same grade from the acquired bank. The bank found a solution.

Once the deal was completed, it created a common compensation system. It was decided that all employees would continue to draw salaries at the same level but in addition to their current salaries they were also entitled to target-linked bonuses.

Similarly, when Crompton Greaves acquired an overseas company, it had to change the leadership and yet ensure smooth sailing.

"We said the Canadian leadership would change but not the Belgium leadership," says SM Trehan, Chairman and Managing Director, Crompton Greaves.

Similarly, to communicate fairness and objectivity, the company did not send its Indian employees into the offices of the foreign company that was acquired.

These are but cases in point. HR practitioners are evolving alternatives to ensure there is no chaos when redundant jobs are slashed after mergers and acquisitons (M&A).

"A widely-practised approach is to give out the resumes of the senior people who are going to be weeded out, to an outplacement consultant, and ensure that the person has a job elsewhere," says Ronald Sequeira, vice-president HR, Tata Power. In such cases, the company bears the cost burden of relocating the person in another organisation.

Another approach is to provide training so that the employee acquires skills to find a job in another company. Taking snap hard decisions is yet another approach.

Centurion Bank of Punjab, for instance, ensured it did not delay employee-related matters (so that employees do not go by the rumour-mills that become active after a merger).

"We took tough decisions fast and the senior management then communicated with all the employees on the me-issues," says MD, Shailendra Bhandari. The me-issues included employees wondering whether they would lose their jobs; What would happen to their careers? Who would they report to?

"In Japan, it is important to have a redunancy strategy in place while doing an M&A. It takes at least two to three years in slashing all the redundant jobs," says Naohiro Nishiguchi, business leader, M&A practice, Asia Pacific, and Managing Director of Mercer Japan.

"When there are two good employees and the company needs only one, the other employee is asked to go but he is also handed out a handsome severance package so that his competence is acknowledged even if the company is kicking out that individual," says Sequeira.

At times, companies also decide they should not downsize right after the M&A. This is because the panic it creates can have far more implications than the costs that companies save due to the downsizing. A prominent firm in the heavy engineering industry did just the same. It tried to integrate the workforce into the organisation.

Says S K Dutt, Head, HR, Talent management and Branding, Heavy Engineering Division (HED), L&T: "Don't throw away people. There is a benefit of having them to stay for some period of time."

URGE TO MERGE

Around 52 per cent of the total M&As that took place in recent times were Indian M&As. In 2005 alone, there were around 467 such deals of which 300 of them were corporate M&As and rest were private equity deals. A 190 of these deals were "in-out" deals.

Some of the prominent acquisitions that took place in the whole of last year include Nicholas Piramal acquiring a 17 per cent stake in Biosyntech, a Canadian pharma packaging company, Torrent's acquisition of Heumann Pharma (a generic drug ompany).

Important aquisitions where foreign companies bought domestic firms included West Bridge Capital Partners acquiring a 26 per cent stake in Dr Lal Path Lab and Standard and Poor's increasing its holding in Crisil to 58.5 per cent.