Merger Failure within the Integration Process & the Contributing Extent of Human Resources

Abstract: This thesis investigates the role of the Human Resource (HR) departments in the success or failure of the Merger or Acquisition (M&A) process. Through M&As, companies aim to gain strategic advantages by obtaining another company’s core competences, buying their biggest competitor or building a stronger organization by merging with another. In contrast of the high quantity of M&As conducted each year, the success rate for M&As is very low. Previous research has shown diverse factors contributing to either the success or failure of M&As but the majority of these factors are connected to human relations. Nonetheless, companies appear to neglect them. The researchers have done a literature review to investigate existing knowledge on this subject. Therefore this is a conceptual study which focuses further on these contributing factors but with an emphasis on the role of the HR department and what it can do to eliminate the negative impact of these human factors. Data collection was performed through semi-structured interviews with the HR department of a bank in Iceland as well as with researchers in the field of M&As to investigate the role of HR further. From the extensive literature review and interviews combined five themes emerged: lack of communication from executives to employees on how and what is to come, the need for acculturation of clashing organizational cultures, the inevitable turnover of workers, the mental stress and anxiety that M&As put on employees, and the resistance to change which can threaten the outcome of the whole process. Our hypothesis is: If HR departments take the significance of these factors seriously and address them all the likelihood of a successful M&A will increase significantly. We further suggest steps that HR departments can follow to help with that process, such as inter-organizational communication, stress management seminars, meet & greet events for employees of both companies, and team building workshops to target new composition of teams.