Final Exam: This final case study exam is worth $50$ points. Use the additional resources to further understand this case in details. You can also use other resources such as the book, peer review and scholarly articles to answer the discussion questions of this case study

THE ACQUISITION AND THE ROLE OF HUMAN RESOURCES

Objectives

Learn the critical role that Human Resources plays in the process of due diligence while considering an acquisition.

Understand the sequence of actions and reactions that typically take place from employees before, during and after an acquisition.

Describe the do$$s and don$$ts for Human Resources if they are not involved in the merger or acquisition of another organization.

Learn how Human Resources can assist in evaluating and assisting with the strategic fit between the combining organizations.

Understand that Human Resources must assert itself as a business partner when adding value to the process of acquiring or merging with another organization.

INTRODUCTION

A strategic imperative underlying a merger or acquisition is to create $$synergy;$$ a strategic and operational advantage that neither firm can achieve on its own $($Schweiger & Weber, $1989).$ During the $1980$s$,$ acquisitions and mergers became a major part of American business as evidenced by the $12,000$ companies that changed hands during that decade $($Lubatkin$,1988).$Merger mania$($Geber$,1987)$ was often used by business researchers to describe the landscape of sheer volume of activity that permeated all parts of the economy, from defense, to food services, to automotive, to insurance $($Ulrich$,$ Cody, LaFasto & Rucci, $1989).$ As daunting as it may be$,$ mergers and acquisitions continued at a frenzied pace with the first half of $1998$ ringing up more than $$1\mathrm{.}3$ trillion in merger activity worldwide $($ Solomon, $1998).$ Unfortunately, statistics have shown that, overall, acquirers have less than a $50-50$ chance of being successful in a merger or acquisition $($Pappanastos$,1987)$; Although estimates vary, up to one$-$third fail within five years and as many as $75\%$ are financial failures long$-$term $($Marks$,1988).$

Experts cite many reasons for the high rate of failure ranging from the wrong partners chosen, to the wrong price, to bad timing. A merger or an acquisition is a corporate event that also has the potential to create severe personal trauma and stress which can result in employees feeling psychological, behavioral, health, and survival problems leading ultimately to performance issues $($Ivancevich$,$ Schweiger & Power, $1987).$ An increasing number of newly merged organizations experience dysfunctional changes in employee behavior, lost productivity, leadership struggles, and various other human $($employee$)$ problems $($Manzini & Gridley, $1986).$ One of the key reasons for these problems, and also the loss of value a new acquisition experiences, is the fact that senior executives tend to underestimate the difficulties involved in integrating the organizations $($Solomon$,1998).$

Top management usually does not bring Human Resources into the process until it is too late.

By so doing the due diligence process may fail to identify any additional problems not evident to those untrained in Human Resources and its many tentacles. A skilled team, a well$-$defined process, and a focused integration plan can help ensure the overall success of an acquisition $($Douglas$,1999).$ Successful mergers or acquisition have shown that $(1)$ there was a pre$-$merger evaluation of the potential association from the human resource perspective, $(2)$ a specific human resources strategy for the merged or acquired company was an element in the integration process, and $(3)$ effective and accurate employee communications programs were conducted both during and after the deal $($Schuster & Zingheim, $1990.$ A positive management style, good solid leadership, work rules and processes, training, constant communications, consistent compensation, benefits and incentive programs all lend themselves to a more mature blending of talents and continued successful growth. Human Resources can help employees move past stress and resistance to change resulting from an acquisition or merger in addition to minimizing any post$-$deal damage if they are involved in pre$-$deal due diligence. As Marks $(1988)$ reports from a senior executive recently having gone through an acquisition;

$$what will make or break this acquisition$$s financial success will be how people are treated, not the business decisions. Business losses can be recouped, but if you treat someone poorly early in the game you can never change the feelings that result.$$

PROFILES

Peter Wolfe has been the CEO and major stockholder of Scorecard, Inc., a privately owned company for $35$ years. Having taken the reins from his father, Peter has kept the legacy alive for the family. Peter is a conservative and risk adverse leader but has also been able to realize nearly $5\%$ growth each year sin