Home / Companies / Company-results /  Staff engagement, cultural fit top HR factors in India: M&A study

Mumbai: Employee engagement and cultural alignment are the top human resource-related factors that Indian companies use to measure whether the purpose of an acquisition has been achieved, according to a study by consulting firm Aon Hewitt.

In this context, Indian companies significantly differ from their global counterparts who look at talent retention and enhanced productivity to measure deal success.

The study titled Making M&A Successful in India, which surveyed 42 companies that have made acquisitions in the recent past, revealed that 82% of Indian organizations ranked employee engagement and cultural alignment as the top people-related metrics used to measure deal success.

A global study on cultural integration published by Aon Hewitt in 2011 had found that cultural alignment and employee engagement were topmost people-centric priorities for companies for only 44% and 41% of respondents, respectively. This study also found that 50% of the 123 companies it surveyed failed to achieved the objectives they set out for acquiring a company—the main reason being lack of cultural alignment, which could lead to consequences like organizational distraction and loss of productivity.

For KEC International Ltd, a Harsh Goenka-led RPG Enterprises company, people of the target company and their knowledge of engineering design was the main attraction when it acquired a US-based tower firm, SAE Towers, in 2010. As a result, employee engagement became imperative; and since the company felt that employee engagement should start right at the top, it started by clarifying that it will not disturb the leadership structure of the acquired company.

“It was a US company serving customers in the US. We thought that we shouldn’t make it into an Indian company that serves US clients. We did our due diligence and found the existing management of SAE were the right people for the job. So we reposed faith in them," Yugesh Goutam, executive director, human resources—infrastructure sector, RPG Enterprises, said in an interview.

The next step was to address the anxieties of SAE’s employees, which KEC did at a meeting for which it prepared a list of questions that employees themselves may have felt embarrassed to ask, including whether they would have a job the next day. Will they have to report to an Indian boss?

“We had the meetings on the shop-floor in the middle of all the machinery, as employees have a sense of comfort in their own surroundings, which is absent in a hotel or the corporate office," Goutam explained. The two companies worked jointly to make a list of things to do in order to align the work flows of the two organizations, which not only meant the target company adopting practices followed by the acquirer, but the latter also implementing processes at SAE that were better than its own.

Language and culture is another factor that can act as a bridge or a barrier when it comes to two companies in different parts of the globe joining forces, as Vineet Sahni, former director (he quit the company in May after Mint had spoken to him) at Varroc Engineering Pvt. Ltd—one of India’s top three auto component makers that acquired US-based Visteon Corp.’s lighting systems business in 2012—found out.

Like KEC, Varroc also held an open house to address the concerns of the company it acquired and to make them feel at home. One of Visteon’s employees observed that the Indian management of Varroc would sometimes converse among themselves in Hindi and they didn’t like that.

“We were just talking among ourselves as we normally would and didn’t realize this implication. We apologized and immediately corrected it," Sahni said.

Even at KEC, the management hired a professional proficient in the languages spoken in Brazil and Mexico to hold a cultural education workshop to help its Indian, Brazilian and Mexican employees get acquainted with each other’s cultural nuances to enable better overall communication, according to Goutam.

Making employees of a target company feel important by communicating that they constitute an important part of the operations of the combined entity is another method of boosting their morale.

For instance, Sahni says that Visteon’s lighting division constituted only 8% of the overall revenues of the group so the employees felt that there wasn’t enough focus on them as a business unit. “We told them they were going to comprise 50% of our turnover and therefore they would be a vital part of our organization. We approved an investment of $63 million in three months after the acquisition, got in new business and the profitability at the acquired company has exceeded our expectations."

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