Submitted To: Mr. Shyamtanu Pal
(Asst. Lecturer)
Submitted By: Sagar ChandrakarB.A. LL.B(Hons.), Semester-VII
Roll No: 121
Section- C

Merger is a restructuring tool available to Indian conglomerates aiming to expand and diversify their businesses for various reasons whether it is to gain competitive advantage, reduce costs or unlock values. In commercial parlance, merger essentially means an arrangement whereby one or more existing companies merge their identity into another existing company or form a distinct new entity. Company law in India is undergoing a complete overhaul and a new law was finally passed in 2013. However, provisions relating to mergers covered in Sections 230 to 240 are yet to be notified. Until then, this court driven process will continue to be governed by Section 391-396A of the Companies Act, 1956 and the Companies (Court) Rules, 1959 (collectively referred to as “1956 Act”).

In a dynamic business environment, banks are facing unprecedented turmoil in market as brutal competition, technological up gradation; recession in global economy, stock market volatility and increasing interest rates has increased the dilemma for bankers to deliver better performance. In response to these market challenges, banks around the world are significantly restructuring their assets, operations and contractual relationships with their shareholders, creditors and other financial stakeholders. Corporate restructuring has facilitated many organizations to re-establish their sustainable competitive advantage, respond more swiftly and effectively to new opportunities, threats and unforeseen challenges of the marketplace. Growth opportunities come in a variety of ways and if an industrialist does not respond on time than great amount of energy and resources may be shattered. M&As offer grand opportunity for companies to grow and add value to shareholders’ wealth. In recent times, we have seen many examples of M;As in banking industry. Apart from financial issues, there are certain issues which are under considered. When a merger takes place one firm has to dissolve itself into another firm, but it’s not just the transfer of assets and liabilities but the lives of respective employees are also associated with it. Organizational changes affect the performance of the employees during the course of a merger. Cultures of one of the firm determine the level of stress among employees. It is quite obvious that when a merger is announced respective employees of the firm may feel stressed, disoriented, frustrated, confused and even frightened. At a personal level, these feelings can lead to a sense of loss, psychosomatic difficulties, and marital discord as well. At this juncture, it is quite possible that it may augment the level of stress among employees and that is not good on any part.

Lots of M&A are taking place in today’s era so as to avoid the gross consequences of loss and recession. Companies are absorbing, blending, combining so that it can survive and face the increasing rate of competition in global market. In this rush the personnel indulged in these activities the usually forget to consider and they try to overlook the conditions of employees and their rights and liabilities post merger. This results in labour turnover which in turn makes the very reason of adopting mode of M;A useless. Human forms the main part of company and are the best resources with their own intellect so it’s better to think about them as well and then take decisions regarding anything. We assume that today there are pros and cons of each aspect and so does of M&A. so not only they are facing problems but also there are lots of benefits that they will be gaining out of these schemes. Whole project is dedicated to this particular area only regarding gains and losses faced by the employees of a particular firm or company before, during and after the process of Mergers and Amalgamations and the solutions to cure the problems arising out of differences.

Moreover, members of the smaller pre-merger partner experiencing a greater amount of negative changes imposed on them in terms, for example, status loss, autonomy at work, job control, etc. in relation to the ones from the larger pre-merger partner, are likely to exhibit heightened post-merger stress and poorer physical and psychological health
Although evidence regarding the effects of pre-merger status on stress seems rather conflicting, on theoretical grounds we hypothesized that employees of the high status pre-merger organization would show lower post-merger stress in comparison with employees of the low status pre-merger organization and thereby, poorer physical and psychological health post-merger. On the whole, there seems to be no definite evidence regarding the effects of merger integration pattern on job stress. As some evidence indicates increased stress for employees of the dominated pre-merger partner in absorb pattern and greater insecurity experienced in hostile as opposed to a friendly acquisition (Cartwright & Cooper, 1993; Guerrero, 2008), we can expect that perceived loss of job control (Karasek, 1979; Karasek & Theorell, 1990) and feelings of job insecurity would be more evident in the absorb than the transformation pattern, resulting in higher post-merger stress.

It is hypothesized, thus, that pre-merger status (high vs low) would have a negative effect on post-merger stress, i.e. employees of the high status pre-merger organization would
show lower post-merger stress in comparison with employees of the low status pre-merger organization and therefore, higher levels of physical and psychological health. In addition, merger pattern (absorb vs transformation) would have a similar effect, i.e. employees in transformation would show lower post-merger stress and therefore, higher levels of physical and psychological health in relation to the absorb.

Research methodology
This research is descriptive and analytical in nature. The matter of this project had collected largely from secondary Sources of information or doctrine method had been adopted and work has also been done for the collection of information, such as, websites, books, dictionaries etc.

Review of literature
Schweiger and Ivancevich (1985) studied the human factor in merger and acquisition and identified some common merger stressors, which include uncertainty, insecurity, and fears concerning job loss, job changes, compensation changes, and changes in power, status, and prestige.
Schweiger and Weber (1989) suggested that Mergers and acquisitions (M&As) are corporate events that have the potential to create severe personal trauma and stress which can result in psychological, behavioural, health, performance, and survival problems for both the individuals and companies involved. With the increasing size and number of M&As transacted and the number of employees affected, it is essential that executives and human resource professionals pay greater attention to understanding the sequence of actions and reactions associated with the process.

Cartwright and Cooper (1993) studied the human aspects of merger and acquisition and the impact of such a major change event has on employee health and well being which has received relatively little research attention.They found that Post-merger measures of mental health to be a stressful life event, even when there is a high degree of cultural compatibility between the partnering organizations
Research Questions
What is the effect of mergers and amalgamation on employees?
What are the differences in status and liabilities of employees in Pre and Post Merger period?
What are the solutions to lower down the turnover of employees after M&A?
To analyze employees conditions in pre and post merger periods.

To identify the differences in status and liabilities of employees in the said periods.

To mention the solutions to curb the problem of labour turnover.

Research Methodology04
Review of Literature05
Research Questions05
Scope & Objective05
Chapter 1: Meaning of mergers and amalgamations08
Chapter 2: Status Differences and Merger Patterns in Organizational Mergers16
Chapter 3: Threats for employees from Social Identity Approach21
Chapter 4: Positive and negatives for employees23
Chapter 5: Solutions in favour of employees25
Chapter 6: Stages of mergers that affects employees27
Chapter 7: Conclusion30
Chapter 8: Bibliography31

First and foremost, I would like to thank my Faculty of Corporate Law, Mr. Shyamtanu Sir for offering this subject, “PROVIDANCE OF EMPLOYEES DURING M&A: REACH AND POSSIBILITIES WITH SPECIAL REFERENCE TO STATUS AND LIABILITIES” and for his valuable guidance and advice. He inspired me greatly to work in this project. He also helped me in improving the perception regarding to the study of the topic in its vast resources and in a broader way. Clearing all the doubts and uncertainty towards this project. Therefore, I want to thank him for all his efforts and cooperation which he conferred me.
I also owe my gratitude towards University Administration for providing me all kinds of required facilities with good Library and IT lab. Which helps me in making the project and completing it. My special thank to Library Staff and IT staff for equipping me with the necessary data and websites from the internet.

I would also like to thank my dear colleagues who had helped me a lot creating this project with their ideas and thoughts over the topic. They act as a motivating and guiding force to me during the making of this project.

ROLL NO. 121
Chapter 1: Meaning of mergers and amalgamations
The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock. A merger is a combination of two companies to form a new company. The combination of one or more companies into a new entity. An amalgamation is distinct from a merger because neither of the combining companies survives as a legal entity. Rather, a completely new entity is formed to house the combined assets and liabilities of both companies.

Chapter XV (Section 230 to 240) of Companies Act, 2013(the Act) contains provisions on ‘Compromises, Arrangements and Amalgamations’, that covers compromise or arrangements, mergers and amalgamations, Corporate Debt Restructuring, demergers, fast track mergers for small companies/holding subsidiary companies, cross border mergers, takeovers, amalgamation of companies in public interest etc.,. The procedural aspects involved such as format of application to be made to National Company Law Tribunal (the Tribunal), form of notice and the procedural aspects involved with respect to the substantive law are covered under the Rules made under Chapter XV of the Act.

The scheme of Chapter XV goes as follows.

1. Section 230-231 deals with compromise or arrangements.

2. Section 232 deals with mergers and amalgamation including demergers.

3. Section 233 deals with amalgamation of small companies (also called fast track mergers)
4. Section 234 deals with amalgamation with foreign company (also called cross border mergers)
5. Section 235 deals acquisition of shares of dissenting shareholders.

6. Section 236 deals with purchase of minority shareholding.

7. Section 237 deals with power of central government to provide for amalgamation of companies in public interest.

8. Section 238 deals with registration of offer of schemes involving transfer of shares.

9. Section 239 deals with preservation of books and papers of amalgamated companies.

10. Section 240 deals with liability of officers in respect of offences committed prior to merger, amalgamation etc.,Section 232: Merger and amalgamation of companies.

1.     Where an application is made to the Tribunal under section 230 for the sanctioning of a compromise or an arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the Tribunal—
that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of the company or companies involving merger or the amalgamation of any two or more companies; and
that under the scheme, the whole or any part of the undertaking, property or liabilities of any company (hereinafter referred to as the transferor company) is required to be transferred to another company (hereinafter referred to as the transferee company), or is proposed to be divided among and transferred to two or more companies, the Tribunal may on such application, order a meeting of the creditors or class of creditors or the members or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal may direct and the provisions of sub-sections (3) to (6) of section 230 shall apply mutatis mutandis.

2.     Where an order has been made by the Tribunal under sub-section (1), merging companies or the companies in respect of which a division is proposed, shall also be required to circulate the following for the meeting so ordered by the Tribunal, namely:—
the draft of the proposed terms of the scheme drawn up and adopted by the directors of the merging company;
confirmation that a copy of the draft scheme has been filed with the Registrar;
a report adopted by the directors of the merging companies explaining effect of compromise on each class of shareholders, key managerial personnel, promotors and non-promoter shareholders laying out in particular the share exchange ratio, specifying any special valuation difficulties;
the report of the expert with regard to valuation, if any;
a supplementary accounting statement if the last annual accounts of any of the merging company relate to a financial year ending more than six months before the first meeting of the company summoned for the purposes of approving the scheme.

3.     The Tribunal, after satisfying itself that the procedure specified in sub-sections (1) and (2) has been complied with, may, by order, sanction the compromise or arrangement or by a subsequent order, make provision for the following matters, namely:—
the transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of the transferor company from a date to be determined by the parties unless the Tribunal, for reasons to be recorded by it in writing, decides otherwise;
the allotment or appropriation by the transferee company of any shares, debentures, policies or other like instruments in the company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person:
Provided that a transferee company shall not, as a result of the compromise or arrangement, hold any shares in its own name or in the name of any trust whether on its behalf or on behalf of any of its subsidiary or associate companies and any such shares shall be cancelled or extinguished;
the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company on the date of transfer;
dissolution, without winding-up, of any transferor company;
the provision to be made for any persons who, within such time and in such manner as the Tribunal directs, dissent from the compromise or arrangement;
where share capital is held by any non-resident shareholder under the foreign direct investment norms or guidelines specified by the Central Government or in accordance with any law for the time being in force, the allotment of shares of the transferee company to such shareholder shall be in the manner specified in the order;
the transfer of the employees of the transferor company to the transferee company;
where the transferor company is a listed company and the transferee company is an unlisted company,—
A.    the transferee company shall remain an unlisted company until it becomes a listed company;
B.    if shareholders of the transferor company decide to opt out of the transferee company, provision shall be made for payment of the value of shares held by them and other benefits in accordance with a pre-determined price formula or after a valuation is made, and the arrangements under this provision may be made by the Tribunal:
Provided that the amount of payment or valuation under this clause for any share shall not be less than what has been specified by the Securities and Exchange Board under any regulations framed by it;
where the transferor company is dissolved, the fee, if any, paid by the transferor company on its authorised capital shall be set-off against any fees payable by the transferee company on its authorised capital subsequent to the amalgamation; and
j)such incidental, consequential and supplemental matters as are deemed necessary to secure that the merger or amalgamation is fully and effectively carried out:
Provided that no compromise or arrangement shall be sanctioned by the Tribunal unless a certificate by the company’s auditor has been filed with the Tribunal to the effect that the accounting treatment, if any, proposed in the scheme of compromise or arrangement is in conformity with the accounting standards prescribed under section 133.

4.     Where an order under this section provides for the transfer of any property or liabilities, then, by virtue of the order, that property shall be transferred to the transferee company and the liabilities shall be transferred to and become the liabilities of the transferee company and any property may, if the order so directs, be freed from any charge which shall by virtue of the compromise or arrangement, cease to have effect.

5.     Every company in relation to which the order is made shall cause a certified copy of the order to be filed with the Registrar for registration within thirty days of the receipt of certified copy of the order.

6.     The scheme under this section shall clearly indicate an appointed date from which it shall be effective and the scheme shall be deemed to be effective from such date and not at a date subsequent to the appointed date.

7.     Every company in relation to which the order is made shall, until the completion of the scheme, file a statement in such form and within such time as may be prescribed with the Registrar every year duly certified by a chartered accountant or a cost accountant or a company secretary in practice indicating whether the scheme is being complied with in accordance with the orders of the Tribunal or not.

8.     If a transferor company or a transferee company contravenes the provisions of this section, the transferor company or the transferee company, as the case may be, shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officer of such transferor or transferee company who is in default, shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees but which may extend to three lakh rupees, or with both.

Explanation.—For the purposes of this section,—
              i.        in a scheme involving a merger, where under the scheme the undertaking, property and liabilities of one or more companies, including the company in respect of which the compromise or arrangement is proposed, are to be transferred to another existing company, it is a merger by absorption, or where the undertaking, property and liabilities of two or more companies, including the company in respect of which the compromise or arrangement is proposed, are to be transferred to a new company, whether or not a public company, it is a merger by formation of a new company;
             ii.        references to merging companies are in relation to a merger by absorption, to the transferor and transferee companies, and, in relation to a merger by formation of a new company, to the transferor companies;
            iii.        a scheme involves a division, where under the scheme the undertaking, property and liabilities of the company in respect of which the compromise or arrangement is proposed are to be divided among and transferred to two or more companies each of which is either an existing company or a new company; and
            iv.        property includes assets, rights and interests of every description and liabilities include debts and obligations of every description.

Section 233 prescribes simplified procedure for Merger or amalgamation of
two or more small companies or
between a holding company and its wholly-owned subsidiary company or
such other class or classes of companies as may be prescribed;
What is a holding company?
As per Section 2(46) “holding company”, in relation to one or more other companies, means a company of which such companies are subsidiary companies;
What is a small company?
As per section 2(85) ”small company” means a company, other than a public company,—
(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than five crore rupees; or
(ii) turnover of which as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty crore rupees:
Provided that nothing in this clause shall apply to—
(A) a holding company or a subsidiary company;
(B) a company registered under section 8; or
(C) a company or body corporate governed by any special Act;
What is a subsidiary company?
As per 2(87) “subsidiary company” or “subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company—
controls the composition of the Board of Directors; or
exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies:
Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.

Explanation.—For the purposes of this clause,—
(a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company;
(b) the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors;
(c) the expression “company” includes any body corporate;
(d) “layer” in relation to a holding company means its subsidiary or subsidiaries;
Section 234: Merger or amalgamation of a Company with a foreign company
Section 234(2) Subject to the provisions of any other law for the time being in force, a foreign company, may with the prior approval of the Reserve Bank of India, merge into a company registered under this Act or vice versa and the terms and conditions of the scheme of merger may provide, among other things, for the payment of consideration to the shareholders of the merging company in cash, or in Depository Receipts, or partly in cash and partly in Depository Receipts, as the case may be, as per the scheme to be drawn up for the purpose.
For the purposes of sub-section (2), the expression “foreign company” means any company or body corporate incorporated outside India whether having a place of business in India or not.

Section 234. (1) states that the provisions of this Chapter unless otherwise provided under any other law for the time being in force, shall apply mutatis mutandis to schemes of mergers and amalgamations between companies registered under this Act and companies incorporated in the jurisdictions of such countries as may be notified from time to time by the Central Government. The Central Government may make rules, in consultation with the Reserve Bank of India, in connection with mergers and amalgamations provided under this section.

Effect of the Scheme:
majority of persons representing three – fourth in value of the creditors or class of creditors or members or class of members agree to compromise or arrangement and
sanctioned by the Tribunal by an order; the scheme shall be binding on the company; all creditors or class of creditors or members or class of members or in case of a company being wound up, on the liquidator and the contributories of the company.

If a transferor company or a transferee company contravenes the provisions of this section, the transferor company or the transferee company, as the case may be, shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officer of such transferor or transferee company who is in default, shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees but which may extend to three lakh rupees, or with both.

Existing Section 396 empowers Central Government to order amalgamation of two or more companies in public interest. It has been suggested that these provisions should be reviewed. It is felt that amalgamation should be allowed only through a process overseen by the Courts/Tribunals. Therefore, instead of existing provisions of Section 396, provision should be made to empower Central Government to approach the Court/Tribunal for approval for amalgamation of two or more companies.

Chapter 2: Status Differences and Merger Patterns in Organizational Mergers
In practice, most organizational mergers are not mergers of equals. Status differences between merger partners usually originate in comparison dimensions before merger (i.e., economic success and size of the organizations involved). In most mergers, the dominant partner, i.e., that dictating the merged organization is the higher status pre-merger organization, but status and dominance should not necessarily be equated, since they can be independent in some cases.

Organizational dominance is defined by another important merger characteristic: the way merger partners integrate their cultures identified three merger patterns: absorb (the acquired/dominated organization’s culture is assimilated into the culture of the acquiring/dominant organization); blend (both pre-merger organizations – still retaining their distinct features – are integrated into one post-merger organization); finally, combine (both pre-merger organizations’ transformation into a totally new merged organization). Schweiger and Weber’s (1989) study indicates that 50% of mergers follow the absorb, about 30% the blend and only 8% the combine pattern.

Marks ; Mirvis (1998; 2001) proposed another typology of integration outcomes based on degree of (cultural) change in the acquiring and the acquired organization (high vs low). Absorption (low change in acquiring – high change in the acquired organization) represents cultural assimilation of the acquired organization equivalent to absorb pattern proposed by Schoennauer (1967). Transformation (high change in both organizations) represents cultural transformation equivalent to Schoennauer’s combine pattern. Best of Both (moderate change in both organizations) equivalent to Schoennauer’s blend pattern, represents cultural integration. Finally, in Reverse Merger representing only 9% of mergers the acquiring is culturally assimilated by the acquired organization, while in Preservation (low change in both organizations), the acquired company retains its cultural autonomy.

In mergers, two previously distinct groups form a new superordinate group, thus changing employees’ organizational membership and identity. Organizational membership’s shift from the pre- to the post-merger organization, requires employees to abandon/change their pre-merger identity and adopt the new superordinate identity of the merged organization, affecting their sense of continuity. If merger is perceived as failing to provide employees with a positive organizational identity, they are likely to react negatively to it, thus compromising merger success. Dominant partner employees experience a stronger sense of continuity, in other words, organizational dominance fostering a sense of continuity, is an important determinant of post-merger organizational identification. Lower status pre-merger organization and/or the dominated organization employees, are most likely to experience a sense of discontinuity, threatening their organizational identity, and react negatively to the merger.

Organizational identification: Terry et al. (2001) in their absorb merger study, found that high status pre-merger organization employees identified more strongly with and were more committed to the post-merger organization, compared to low status pre-merger organization ones. Fischer et al. (2007) experimentally manipulated pre-merger group status, high vs low, (in simulated absorb) vs equal (in simulated blend merger pattern) and reported that high status groups members identified more strongly with the merger than low and equal status groups. Boen, Vanbeselaere, Brebels, Huybens, ; Millet (2007), who experimentally manipulated pre-merger group status – high/low – in simulated transformation merger fashion with merged organization described as high status, found no significant effect of pre-merger status on post-merger identification. Hence, discontinuity experienced by members of low status groups post-merger, can be alleviated if merged organization is perceived as high status, offering them a satisfactory organizational identity. Mottola et al. (1997) experimentally manipulated merger pattern (absorb, blend, combine) and pre-merger group membership (acquiring, acquired, equal status); participants in the absorb showed lower organizational commitment than those in blend or combine patterns, but pre-merger group membership had no significant effect on organizational commitment. These results suggest that absorb represents a greater threat for employees’ organizational identity than blend or combine patterns, irrespective of their pre-merger group membership, as it is probably perceived as less legitimate integration pattern by both pre-merger groups
Job satisfaction: Pre-merger status effects on job satisfaction seem to be rather inconsistent; Terry, Callan, & Sartori (1996) in an absorb merger study found that low-status pre-merger organization employees exhibited higher job satisfaction than the high-status pre-merger organization ones. In a similar study, Panchal & Cartwright (2001) reported results in line with Terry et al.’s (1996) findings, contrary to their predictions which were based on past research (Covin, Sightler, Kolenko, ; Tudor, 1996). However, Terry et al. (2001) found that low-status pre-merger organization employees showed lower job satisfaction than high-status pre-merger organization ones. Evidence from the longitudinal study of this merger (Amiot, Terry, ; Callan, 2007) shows that job satisfaction significantly decreased between time 1 (three months post-merger) and time 2 (two years post-merger) for low-status pre-merger organization employees, but increased for high-status pre-merger organization employees. According to Amiot et al. (2007), low status pre-merger organization employees may initially perceive the merger as a chance for joining a high status superordinate organization offering more job-related opportunities, while high status pre-merger organization ones, may perceive the merger as a threat to their superior identity by association with a lower status group; two years post-merger, when status differentials consolidate, lower status pre-merger group employees, failing to see their hopes materialize, feel less job-satisfied than high status pre-merger organization counterparts, who have secured their advantageous position within post-merger organization. Merger pattern effects on job satisfaction indicate that participants in absorb reported lower perceived organizational support and unity than in blend or combine patterns, but pre-merger group membership had no significant effect on these aspects of job satisfaction (Mottola et al, 1997).

Attitudes towards the merger: Relevant research has rarely examined attitudes towards the merger per se, i.e. affective evaluations of merger experience, but rather related issues. For example, Fischer et al. (2007) assessed satisfaction with the merger and reported that high status groups’ members were more merger-satisfied than low and equal status groups’ members. Organizational dominance also affects satisfaction with the merger, with employees of the dominated (or acquired) organization being less satisfied with the merger than employees of the dominant (or acquiring) organization (Covin et al., 1996). Finally, Giessner et al. (2006) found that high status group members supported the absorption/assimilation pattern more than low status group ones, while low status group members supported the transformation pattern more than high status group ones. These findings suggest that both pre-merger status and merger pattern may influence attitudes towards merger.

Stress: Pre-merger status effects on work stress, seems rather inconsistent. For example, Terry et al. (1996) found that shortly after the merger, low-status pre-merger organization employees exhibited lower stress and better adjustment/psychological well-being than high-status pre-merger organization ones. Conversely, Terry et al. (2001) two years after this merger, reported no significant effects of pre-merger status on employees’ emotional well-being. Findings from this merger’s longitudinal study (Amiot et al., 2007), however, seems to resolve this inconsistency; stress perceptions (referred to as “threat perceptions”) significantly decreased for high-status pre-merger organization employees, but increased (although non significantly) for low-status pre-merger organization ones. For high status pre-merger organization employees, it could be argued that their initial fear of privileges’ loss dissipates as their advantageous position consolidates and thus experience lower stress, than low status pre-merger organization employees, when merger is fully implemented.

Overall, there is no conclusive evidence concerning merger pattern effects on work stress. Cartwright & Cooper (1993) reported that the absorb merger they studied was stressful for all employees, but especially those of the dominated partner. However, Cartwright et al. (2007) found no significant differences on all asset subscales between dominant and dominated merger partners’ employees, except for perceived commitment of organization to employee, which was higher for employees of the dominated merger partner.

Turnover intentions: Post-acquisition dysfunctional executive turnover can be as high as 75% (Cartwright ; Cooper, 1995). Hambrick ; Cannella (1993) explained acquired executives’ turnover in terms of perceived loss of status and autonomy, while Lubatkin, Schweiger, & Webber (1999), found that relative status predicts executive turnover in a “friendly” merger. To the best of our knowledge, there is no direct evidence of pre-merger organizational status and merger pattern impact on employees’ post-merger turnover intentions. Griffeth, Hom, ; Gaertner’s (2000) meta-analysis of employee turnover antecedents and correlates, concluded that organizational commitment, and job satisfaction are negatively related to turnover and the former is a better predictor of turnover than the latter. Evidence on the negative relationship between turnover intentions and organizational identification as well as job satisfaction comes from both non-merged (Randsley de Moura et al., 2009) and merged organizations (van Dick, Wagner, & Lemmer, 2004b). Conversely, organizational identification and job satisfaction are positively related in both merger (van Dick et al., 2006) and non-merger studies (Abrams & Randsley de Moura, 2001). Attitude towards the merger has been negatively related to turnover intentions and positively to job satisfaction (Covin et al., 1996). Finally, stress is negatively related to job satisfaction in both merged (Terry et al., 1996) and non-merged organizations (Sullivan & Bhagat, 1992).

Chapter 3: Threats for employees from Social Identity Approach
Within Social Identity Approach (SIA), relationships between groups are normally assessed in terms of group status rather than organizational dominance or power (cf. Gleibs, Mummendey & Noack, 2008 p. 1097) with high-status groups likely to be more dominant (see van Knippenberg et al., 2002). Status differences between merger partners are mainly based on comparison dimensions before merger.

From a SIA-perspective, there are two motives why mergers constitute a threat for employees’ organisational identification.
The first is related to the perceived status of the merger group. SIA assumes that individuals strive to belong to high status groups, i.e., groups that are positively differentiated from relevant comparison groups on relevant comparison dimensions. Only if this is the case, group membership would contribute to a positive social identity, and consequently to a more positive self-concept. In a series of laboratory experiments, Ellemers and colleagues showed that participants identified more with a high status ingroup than with a low status ingroup (for an overview, see Ellemers,1993). Similarly, Smidts, Pruyn, and van Riel (2001) reported that the perceived external prestige (or status) of an organisation is positively related to employees’ organisational identification. It can thus be expected that when two organisations merge, employees are likely to be concerned about the implications of this merger for the status of their new ingroup. For example, members of a pre-merger high status group might fear that merging with a lower status pre-merger outgroup results in an overall lower ingroup status after the merger. Indirect evidence for this assumption was obtained by Haunschild, Moreland, and Murell (1994). In their experiment, undergraduate students had to work in dyads on a survival problem, and were later merged with another dyad. It turned out that successful dyads were less enthusiastic to merge because they feared that they would be less successful after merging with an unsuccessful dyad.

The second motive why mergers are challenging from a SIA perspective concerns the fact that mergers require that individuals’ pre-merger social identity is transformed into a new post-merger identity. The more individuals value this pre-merger identity, the harder this will be. On the other hand, merger groups usually retain at least some characteristics of the pre-merger groups. This implies that a merger group will often be perceived as a partial continuation of the pre-merger group. Van Knippenberg and van Leeuwen (2002) developed a social identity model of post-merger identification in which they propose that the more the merger group is perceived as a continuation of the pre-merger ingroup, the more group members will identify with the new merger group. Van Leeuwen, van Knippenberg, and Ellemers (2003) demonstrated the importance of perceived ingroup continuity by developing a new experimental procedure in which they manipulated the relative representation of the pre-merger ingroup in the new merger group. Van Leeuwen et al. found that when the pre-merger ingroup was strongly or equally represented in the merger group, pre- and post-merger identification were positively and strongly related. However, when the ingroup was only weakly represented in the merger group, pre- and post-merger identification were only modestly related. Survey-studies by van Knippenberg, van Knippenberg, Monden, and de Lima (2002) support these experimental results: Pre- and post-merger identification were strongly and positively related for members of pre-merger organisations that were strongly represented in the new merger group. By contrast, no significant relationship emerged for members of weakly represented pre-merger organisations.

Chapter 4: Positive and negatives for employees
Only some benefits of mergers require integration.
First, there may be economies of scale, which generates efficiencies, some of which may reduce headcount or wages. To the extent such efficiencies are the motive, a merger may be a negative experience for many employees. This would not have many implications for the workforces, beyond possibly reducing headcount.
Second, the acquiring firm may have purchased the target in order to improve operations. In this case, we would expect the merged firm to be led mostly by the acquiring firm’s management. We would also expect those with key knowledge – high-skill workers, such as those in R&D – to be likely to stay after merger, and mix and share knowledge and methods across firms. Improving target operations would tend to disproportionately cause turnover among target workers.

Third, there may be gains from knowledge sharing between the firms. These can arise in several ways, including economies of scope in product design, synergies in production, cross-selling to customers from the other firm, sharing technology, and improving production methods. If knowledge sharing is important, certain employees from both firms may benefit by playing a key role in a merger; e.g., possessing knowledge the merged firm wants to share, working in a position that can benefit from new knowledge, or facilitating the exchange of ideas. Therefore, we expect that when merging for synergies, high-skill workers will benefit more from merger than low-skill workers. This implies that workers with less firm-specific human capital, education, and tenure may be more likely to leave the merged firm. We would also expect that managers will be disproportionately from the acquiring firm.

We turn now to integration costs. Integration is likely to create several types of costs: the difficulty of changing formal and informal policies; the negative effects of those changes on productivity; and the possibility of factions and favoritism between the two workforces.

First, it is likely to be costly to change explicit structures and policies, for at least one firm and possibly for both. Business units, geographical locations, hierarchies, functions, reporting relationships, and job titles must be reconciled. Compensation systems and HR policies must be made consistent. This process may favor the acquiring firm, assuming they tend to retain their policies. Turnover arising from dissatisfaction would then tend to be larger for target workers.
Second, implicit policies and intangible assets must also be reconciled. The two firms will differ in hiring criteria and corporate culture. Crémer, Garicano and Prat (2007) view culture as a specialized code; i.e., language or jargon, between employees that facilitates coordination. They argue that a firm’s ability to broaden its scope (e.g., through unrelated merger) is limited by the need for a common code across the workforces. That code can be developed, but takes time and possibly turnover and training of a new workforce. Employees have implicit contracts with their original firm, on the basis of which they provide effort, invest in skills, and have expectations about career prospects. Productivity also arises in part from firm-specific human capital, including social networks with colleagues to aid problem solving and learning (Garicano 2000, Ichniowski and Shaw 2009). When a merger occurs, the value of these intangible worker assets may change, and turnover may increase if such capital becomes less valuable. This effect may differ by acquiring or target status; one can easily imagine acquiring workers’ firm-specific human capital being relatively more valuable than that of target workers after merger. This analysis also suggests that merged firms may prefer new hires to integrating incumbent employees, despite losses in specific human capital.

Third, integration might generate conflict between the workforces. The merged firm must choose how much to weight each side’s policies in the new organization. The side whose policies are favored loses less, as its human capital, authority, and networks are more intact. Each workforce has an incentive to use its power to implement its own policies, and to act with favouritism towards its own members
Chapter 5: Solutions in favour of employees
Development of a Merged Team
Stage Team Activity Possible Change Management (CM) Response
Forming • Confusion
• Uncertainty
• Assessing Situation
• Testing Ground Rules
•Defining Goals ; Establishing Rules • Need to clearly define roles and responsibility in the new company/function
• Need to define key customers for the team and begin to agree on new ground rules for how the team will work together
• Discuss team background in terms of previous structures, processes and culture
Storming • Disagreement over priorities
• Struggle for leadership
• Tension ; Hostility
• Clique Formation • Need to conduct joint workshops/ discussion sessions to openly resolve the issues relating to structure, processes and culture
• Clarity on direction and purpose of the team
Norming• Consensus
• Leadership Accepted
• Trust Established
• Standards Set • Need to develop a decision making process
• Maintaining flexibility by reviewing goals and processes
Performing • Successful Performance
• Flexible task roles
• Openness and helpfulness • Need to encourage delegation more frequently
• Need to encourage innovation
Stages of Merger and Individual Employee Experiences
Stage of M;A Employee Experience Possible Change Management (CM) Response
Merger is announced • Shock, disbelief and relief that rumours are confirmed • Need to provide full and early communication of reasons behind, and aim of the merger between
Specific plan are announced • Denial: Its not really happening
• Mixture of excitement and anxiety
• Anger and Blame: “This is all about greed” etc. • Need to discuss the implication of merger with individuals and team
• Giving employees timescale for clarification of the new structure and when they will know what their role will be in the new company
Changes start to happen- new boss, new colleagues, new customers etc. • Depression: Finally letting go of two companies, and accepting the new company
• Acceptance • Need to acknowledge and communicate the end of an era
• Hold a wake for the old company and keep one or two bits of memorabilia (photos, T-Shirts)
• Forster development of the merged team and delegate new responsibilities to the team
• Need to coach in new skills and behaviours
New organization begins to take shape • Trying new things out
• Finding new meaning
• Optimism
• New Energy • Need to foster communication at all levels between the two parties
• Need to induct the employees of both the companies to the new ways to doing business
• Need to review and consolidate the changes since the beginning
• Need to celebrate success as a group
Chapter 6: Stages of mergers that affects employees
Stage 1: Pre-merger
The pre-merger stage is a time of internal assessment and consideration of which other agencies might be viable merging partners. There are many factors identified in this review that are associated with the pre-merger stage. They can be grouped into four categories:
Financial soundness of the merging organizations
Many nonprofits explore mergers to improve their financial standing for short-term survival or long-term viability. However, organizations need a certain level of financial stability prior to a merger in order to be a successful merger partner. Experts warn that it may be too late for organizations to consider a merger if they are in a desperate financial crisis. In addition, agencies and boards need to be aware of the monetary costs of considering and implementing a merger.

External conditions
External conditions, including environmental changes (e.g., the current unstable economic environment) and increased competition for resources, change the operating environment so nonprofits favor restructuring or choose merger for stability or survival under pressure or encouragement to consolidate or merge is also a factor within this stage.

Organizational structure
Factors related to organizational structure include physical characteristics such as size, budget, and life span. It is important to be aware of factors related to compatible values in terms of mission, strategy, and culture. The mergers will be more successful when there is a positive pre-merger relationship among executive leadership of the organizations.

One factor associated with leadership during the pre-merger stage is the presence of strong and committed leadership who can visualize and articulate the importance of merging. Another factor is absence or turnover in leadership.

Stage 2: Merging process
The merging process focuses on how and under what conditions an organization might work with another and which organizational characteristics they wish to preserve. There are some factors identified in this review that are associated with the merging process stage. They can be grouped into four categories:
Key stakeholder involvement
Key stakeholder involvement begins with an executive staff champion committed to the merger’s success. Research indicates board commitment, possibly through a joint merger committee, is important and lack of board involvement can be detrimental to the process. Also, organizations should consider how clients, consumers, and funders can be involved.
Role of staff in merger process
Because the success of the daily operations of a nonprofit organization is so dependent on the work of the front-line staff, it is logical that staff involvement in planning can increase the likelihood of a successful merger. Likewise, communication with staff throughout the process can build buy-in and good will and help diminish staff’s negative perceptions of the effects of the merger.
Integrating formal and informal structures
As organizations engage in the merging process they often consider factors related to cultural integration-how the merging organizations will bring together operational philosophies-which can be divergent. Similarly, board and mission integration is important to consider for moving forward.
Providing due diligence to the process
A clear decision-making process and a clear and realistic time frame provide due diligence to the merger process. They help all parties involved gain a clear picture of the legal and financial status or each organization. An independent, unbiased consultant can add leadership to the decision making process by helping to develop a plan and identifying issues to be addressed
Stage 3: Post-merger
During the post-merger stage, the merged entity begins to operate independently. Because nonprofit merger studies often end at the actual merger, there is limited information about the post-merger process and the effect that merger has on services provided by organizations. The factors identified in this review that are associated with the post-merger stage. They can be grouped into four categories:
Funding and support
Once the merger has taken place, the focus turns to the financial stability of the newly-formed organization. Research is contradictory about whether the financial status of an organization improves post-merger. Another focus of post-merger is whether the organization improves its image, reputation, or public support.
Two factors relevant to the post-merger phase related to services are the preservation of services, or the expansion of service types or service areas. Another consideration is whether the merger has improved the quality of existing services, either through more effective service delivery, more comprehensive services, or both.
Climate and culture
There are two distinct post-merger organizational culture and climate factors. The first is post-merger organizational identification which describes how the staff and stakeholders relate to the merged organization. A second is the conflict and morale issues organizations experience following a merger.
Organizational capacity and structure
Following a merger, organizations need to consider whether they have increased operational efficiencies and economies of scale including reducing overhead expenses or employing higher-skilled employees in more efficient ways. Another consideration is whether they better support the mission because of structural changes within staffing, management, and governance.

Chapter 7: Conclusion
While several noteworthy changes have been proposed, corporations could perceive the need to get multiple approvals from different regulators as onerous. However, the thirty days time limit imposed on the regulators will, hopefully, ensure that they respond in a time bound manner. On the face of it, the 2013 Act offers comprehensive and better transparency ensuring protection of stakeholders’ interest, while simultaneously avoiding frivolous objections. The exact time frame that the entire merger process would involve will be known once it is tested and which will happen after the Tribunal is constituted and the rules implemented. It would be fair to say that the 2013 Act seeks to streamline and make M&A more smooth and transparent. For employees of the new separate entity, there is a publicly traded stock to motivate and reward them. Stock options in the parent often provide little incentive to subsidiary managers, especially because their efforts are buried in the firm’s overall performance. The new provisions should make it easier for corporations proposing mergers as it spears to have a good system of checks ; balances to prevent abuse of these provisions. Whole project is dedicated to this particular area only regarding gains and losses faced by the employees of a particular firm or company before, during and after the process of Mergers and Amalgamations and the solutions to cure the problems arising out of differences. The main pillar of company consists of employees because it’s them who will be making company a better one and due to mergers and amalgamations there are problems which are faced by the employees and to solve them there are many solutions which have been pointed out here so as to keep the things going on in a smooth way. As every employee knows, mergers tend to mean job losses. Consider all the money saved from reducing the number of staff members from accounting, marketing and other departments. Job cuts will also include the former CEO, who typically leaves with a compensation package.

Chapter 8: Bibliography
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