In 2008, the Board of Directors and shareholders of Anheuser Busch agreed to be

Question

In 2008, the Board of Directors and shareholders of Anheuser Busch agreed to be acquired by a Belgian Brewer (InBev). Prior to the merger, InBev made many pledges to AB regarding how the company would operate after the merger, how its employees would be treated, and so on.  With some stipulations, the U.S. Government agreed to allow the merger.

Since the merger, InBev has laid off a significant number of Anheuser Busch employees, most of  whom worked at the St. Louis headquarters. Where the merger created duplication of job duties, those being terminated have to-date been from AB, not InBev. There is a great deal of speculation and trepidation around the St. Louis area about the long-term fate of the remaining employees, as well as worry about how the new company will view the many and varied civic contributions the company has made to St. Louis and the many other U.S. areas in which it has operations.

View 1 - AB acted as a well-managed business that takes the actions necessary to remain competitive in a very competitive market. If AB had not approved the merger, its profits and stock price would have fallen, and investment capital would have fled the company. As difficult as the decision was, AB operates in a very competitive environment and owes its stockholders the best return it can provide.

View 2 - The decision to sell the company was both short-sighted and, ultimately, a bad business decision. Any short term benefits AB stockholders reaped from the merger will be more than offset by U.S. job losses, lower tax revenues for States and the U.S. Government, and damage to the U.S. communities in which the company operates. Employees whose employers are loyal to them during difficult times repay that loyalty to the company through hard work. Employees who view themselves as economic pawns to be added or discarded as needed will feel only a marginal commitment to the new AB and their work performance will reflect the negative opinion they hold of their employer.

Let's hear your thoughts. Don't just tell us what you think personally, but bring Managerial Economic theory to bear on this issue.

Explanation / Answer

Merger is a process of integrating two or more companies into a single one. Objective is not to do any harm to any of the company under its perview. Usually merger should provide extra benefit to all parties involved in it. Main point you have to keep in mind that merger is desirable only when it can do better without harming the existing status. It should not worse off any parties involved in it. It may be existing stock holders, employess or customer. A suceesful merger should do better to the society and add some value.

In order to make it possible merger should be well structured and planned. It is essential to diligently follow understated points:

1. There should be a better understanding between buyer and seller concern. They should know each others position properly before initiating any thoughts on merger.

2. Before deciding on the merger existing position should be properly analysed. Experts on financial analysis system should analyze them thoroughly to identify areas of weakness and stong zone of both firms. It will help them to understand how merger can be profitable for both company. If required assistence of outside experts on financial analysis should be taken.

3. Most important step is the negotiation process. Before negotiation you should have clear idea about areas of improvment possible and target market where they are sold. In deciding on the conditions of merger agreement you have to remember that stock holders and employees of the two firms should not suffer adversly after merger. If extra revenue is earned through such arrangement then only go for such negotiation.

4. Main person looking after the merger process should be a person with cool head and laborious. He should not be a busy executive. He should be capable of clearly analyzing legal and financial deals. He has a strong leadership quality. He can assign specific responsibility on others so that process can be implemented thoroughly and metculously. Overall integration is a must to make it successful.

5. Agreement should provide adequate protection of the existing status of employees and other stakeholders. It should clearly indicate financing sources of the merged company.

6. Estimate properly the net worth of common stock holders of the selling company. The payment to them in the merger process should not reduce their actual premerger net worth. Terms of payment should be clear and unambiguous. It should not be variable and linked with the post performance. In that situation agreement will be confusing and disputes will crop up after merger has been made. Result will be reflected negatively on the post merged performance.

7. A merger is successful only when management of buying company can get adequate suport and confidence of management team and employees of selling firm. Human resource team has to work hard to build faith on merged maagement team efforts. Employees of two separate concern are coming from two different environments. They are to be successfully integrated into a single unity. Employees need to be protected. They should be provided adequate impetus and incentives for better performance.

8. Post merger team should be carefully formed. It should consists of workforce of both companies. They should start integrating products, production process, technology, management information system, incentive schemes and employees benefits in a well planned manner. It will help in resolving disputes and achieving target turnover, productivity and revenues.

9. Most complex merger is observed in cross border arrangements. Here companies are established in different countries. They have different culture, accounting standard, labor laws work culture and environment. Integrating all such variations sucessfully is a very challenging one.

If above steps are metculously followed then merger is bound to be successful. In this problem these points may not been followed metculously. It has created doubt in buyers employees. They are not feeling safe and protected. Under this situation merger cannot provide ling run effective result. It will give temporary benefit. But ultimately it will fail in the long run. So post merger management team should give a second thought to restore condfidence and loyalty of employees of seller firm.

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