 Hi students, we are discussing mergers and acquisitions and in this topic we are going to discuss a case study of one merger Merger between Daimler-Benz and Kressler company this is one of the most famous mergers of the last century and We are going to discuss it from the perspective of human resource management How does effective human resource management affect the success of some mergers and acquisitions and what are the factors in human resource aspect that can be Consequential in the success of a merger or an acquisition So we are going to discuss it from the perspective of a case study Let's first introduce the two companies The first company is Daimler-Benz, which is a German company which was founded in 1926 The other company is Kressler. It is also a very famous American automobile company and it was founded in 1925 you must be knowing a very famous car known as Mercedes-Benz which was manufactured by which is still being manufactured by the Daimler-Benz company Both of these companies were automobile manufacturers one was in the European market one of the biggest companies in the European market and Kressler was the third biggest company in the American market Both of these companies they wanted to achieve synergies and economies of scale and integration between the two continents using and learning processes from both the sides of the world and That is the reason why this merger was initiated This merger took place in 1998 So it's about 30 years ago We are going to discuss this case from the perspective of human resource management We are not going to look at the other aspects like finance or marketing We are going to talk about the HR issues. So the main features of HR management in this merger Were that as you have already studied that there are four phases of a Of the evolution of a merger or an acquisition So in the pre-merger phase HR issues were not considered to be important even in the second phase the HR issues were They took the backseat To the extent that even the HR heads of the companies of both the companies They did not know that the merger is going to take place Until the third phase which was the integration planning phase in which the decision had been taken and In which the selection was made and in which the plans were all set out Until then the HR heads of both the companies They did not know because the whole thing was done very secretively and Then negotiations they were dominated by most of the legal and Financial aspects so they did not consider the HR issues or HR aspects of both the companies to be important enough to bring them to table while planning and Setting out for this particular initiative That is something which happened in the pre-merger and the second phase of This merger in the third phase the integration planning phase then HR issues and concerns were brought into Into discussion, but even then The only main important the most important issue of the merger was discussed with respect to Compensation that we have our managers go or our employees or work force go Compensate how to do after the particular merger has taken place So in that issue which was the most highlighted The top manager keep a is a more us may or German Germany may And they're both different stuff us top managers. They used to get a lot of Compensation a lot of pay whereas German managers keep a jothi top managers keep the high Naiti whereas on the other hand The lower at the lower levels the German managers and employees They were paid much better than the US managers and lower staff So you can well imagine that there was a lot of gap in a lot of distance and a lot of Segregation in the US Pay system and in the German pay system. It was more equitable. It was flatter There were lesser differences between the top managers and the lower managers And this is also something which is quite evident in the culture of European cultures and the American culture American culture is high in power distance and European culture is low in power distance So it was decided that those German managers, which were will be which will be given international responsibilities They will be Their pay will be raised to the US level That was one of the only major concerns which were raised in this merger of two huge multinational companies Then in the post merger integration phase The HR head of both the companies they were not even involved in the Chairman's Integration Council a chairman's integration council was made up of a number of top level managers of the company and they were supposed to you know to look after and to monitor and to effectively run the merger of the two companies and Within that a within that chairman's integration council the HR head of the both the companies They were not involved in that in that council. So you can well imagine how much importance the HR of Those companies was how much importance was given to them You can also see it from this fact that 1,000 projects of merger integration were initiated and only out of those projects 43 were related to the HR issues And and board member of HR was not part of the integration council so these were some of the mistakes or some of the shortcomings that were That took place in that merger from the perspective of HR HR was not given due importance it was not involved in the in the first two phases Then when it was involved even it was not given the due highlight and we have already studies Studied in one of the research studies that those organizations which involved the HR In the earlier phases of the merger and acquisition They are more successful in making the merger or acquisition more successful So although these were big huge companies from From two sides of the world Who were supposed to be well conversant with the requirements of management? they made this mistake from this perspective and That led to a lot of failures there there were other factors of The failure of this merger as well But one of the reasons could have been the HR issues which were not highlighted and which were not Taken into focus while the merger was planned and executed So by 2000 in 1998 the merger took place by 2000 there was a sharp decline in profitability and share price of this company. It was it fell by 20 percent Early on the company lost more than 20 top level executives. So people were not satisfied They were apprehensive. They were not happy with the way things who are Moving on so they left the company Within two years cultural issues they emerged a number of cultural issues were Such as inappropriate humor. People used to joke together. So they didn't understand each other political correctness You have two different cultures so you should understand the political views there. You should know how about them So political correctness was not there then there was perceived excessive formality by in from the perspective of the German managers It was considered to be It was considered to be excessively Informal from the perspective of the American managers. It was considered to be excessively Formal and then there were issues of sexual harassment and then there were private relationship issues in the company because there wasn't any formal policy of Controlling the behavior of people from both the continents so these kind of Weaknesses and these kind of blunders that led to huge financial losses in the coming years particularly on the Crustler side, which was the American side of the company particularly it was a failure for the on the on the US side They were not able to cope with this with this merger. They were not able to cope with the cultural issues They were not able to cope with With the political correctness that was required They were much more inflexible There are I mean There are instances in which it was told that the German managers they took special care to become less formal although they hadn't they had a Culture of formality, but they tried but on the other side the US managers were Inflexible in terms of changing their behaviors That led to a closure of several plants There was a cut down of 40,000 jobs in early years, but even then it was not successful and Merger that Took place. It was concluded it ended up in 2007 and the two companies they separated in 2007 so from this case We have learned that in order to make a merger successful It is very important to highlight the issues that are possible to be created In the in the HR aspect of of the companies because the company is going to be run by the people You need to understand the people's issues first of all in order to make the merger or acquisition work So this is a case study which Makes us understand and reminds us that HR is one of the most important functions of an organization and Particularly for mergers and acquisitions one has to be really careful about the HR policy of an organization And to manage it well is is what is required to make the merger or acquisition successful