Module 7 Case Analysis

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Southern New Hampshire University *

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MBA 699

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Business

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Feb 20, 2024

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Post merger Integration 1 SOUTHERN NEW HAMPSHIRE UNIVERSITY | MBA 699 7-1 CASE ANALYSIS FRANKS, SHIRA 2024
2 Contents Overview .......................................................................................................................................... 2 Key Issues ........................................................................................................................................ 3 Post merger Integration .................................................................................................................... 4 Recommendations ............................................................................................................................ 5 References ........................................................................................................................................ 6
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3 Overview Change management strategies refer to the specific approaches that companies use to address changes in processes, goals, or technology within different areas of their business. These strategies are crucial as they help minimize any negative impacts of change and ensure that the focus remains on the project at hand. To better understand the potential risks and challenges associated with an upcoming acquisition, we will analyze other organizations that have undergone similar processes. By identifying similarities, we can better prepare for our own change management strategy. In the case study "Bumpy Road Ahead: The automotive Interiors merger that wasn't," we learn about the challenges faced by Smith Automotive, an interior automotive company, when they acquired Barcelona Brand Auto (BBA), a smaller foreign startup specializing in luxury automotive customized parts. Both companies shared similarities in terms of their specialization in interior automotive parts, annual gross revenue of over $200 million, and global outreach with sales in multiple countries. They also had common customers, such as Jaguar and Mercedes, and shared the goal of becoming a comprehensive provider of automotive interior parts and customizable options. Despite their similarities, the two organizations differed significantly in their nature. BBA focused on offering customizable options tailored to individual customer demands and requests, fostering a creative and innovative work environment. Its workforce comprised energetic individuals driven by a shared vision to excel in the market and develop cutting-edge products. BBA, being privately held and financially strong, allowed the owner to have complete control over the company's direction and management.
4 On the other hand, Smith Automotive operated as a publicly held organization with CEOs and a board of shareholders. It followed a formal and professional corporate culture, adhering to strict rules and precedents. Smith Automotive produced standardized products without any customization options, relying on numerous manufacturers and distributors for production and distribution. Additionally, they aimed to expand into a new market to gain a competitive edge over their rivals. Key Issues When going into a merger it is imperative that one take an in-depth analysis not only of the financials but of the organizational processes, corporate culture and structural components to ensure that both organizations have synergies and that there are little operational differences. Failure to properly analyze the challenges and risks of the merger will result in issues that can disrupt operations, cause issues in productions and sales, which will result in revenue loss and damage to the brand. The failure to properly analyze and anticipate challenges in integrating organizational cultures and business structures led to catastrophic losses for both organizations in the case study. The sales structures of the entities differed significantly due to variations in their product offerings. While the deal allowed for the sales teams to maintain their individual identities, Smith Automotive chose to integrate the department, disregarding the differing sales mentalities required to cater to their respective customer bases. As a result, there was a significant decrease in productivity and morale within the newly merged organization. The failure to properly address these cultural differences and integrate the business structures led to a breakdown in communication and collaboration between teams, hindering the overall success of the merger.
5 The lack of proper analysis and anticipation of challenges also led to financial losses for both organizations. The differing sales mentalities and approaches between Smith Automotive and BBA resulted in a disjointed sales strategy, leading to missed opportunities and decreased revenue. Furthermore, Smith Automotive failed to recognize that acquiring BBA would create conflicts of interest with some of its suppliers and vendors who were direct competitors with BBA, resulting in the dissolution of relationships. Additionally, the merger highlighted stark differences in corporate culture, with BBA being more energetic and focused on innovation, while Smiths Automotive had a more laid-back and numbers-driven culture. The lack of interaction between management and employees at Smiths Automotive, coupled with a lack of shared vision and motivation, resulted in minimal employee engagement, affected productivity and hindered the ability to retain top talent within the organization. Post merger Integration Due to the merger challenges, Smith Automotive took crucial actions to sustain the operations of both entities and tried to salvage the deteriorating situation. To mitigate the sharp decline in capital, the decision makers at Smith Automotive strategically decided to cut costs by initiating a round of layoffs, which unfortunately did little to improve the overall morale among the workforces. Instead of delving into the root causes and finding solutions, management opted to attribute the issues solely to the state of the economy. “Smiths, however, blamed the new company’s failures on the world’s softening economy, which by 2008 was reaching disastrous proportions” (Sousa, M., & Comiteau, L., 2015). The merger faced challenges because management failed to accurately identify and address the differences in company cultures, ideas, and processes. They also neglected to create a
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6 comprehensive integration plan that included training, support, and effective communication. By utilizing proper change management strategies, these challenges could have been avoided through identifying and communicating changes to all affected members and anticipating potential obstacles. The failure to properly analyze and anticipate challenges in integrating organizational cultures and business structures had severe consequences for both organizations involved in the merger. This lack of attention resulted in financial losses, decreased productivity, and a disengaged workforce. It serves as a reminder of the importance of thorough analysis and planning when undertaking mergers and acquisitions, as well as the need for effective communication and cultural integration strategies to ensure success. Recommendations One of the potential challenges that may arise from the merger is the differences in organizational culture. Each organization may have its own unique values, beliefs, and ways of doing things. These cultural differences can lead to conflicts and resistance to change among employees. It is crucial to thoroughly analyze and understand the cultural dynamics of both organizations to identify areas of alignment and potential areas of conflict. By addressing these cultural differences early on and promoting a culture of collaboration and integration, the merger can be more successful. Another challenge that may arise is the differences in specific business processes. Each organization may have its own established processes and systems that have been optimized for their own operations. When merging two organizations, it is important to evaluate and align these processes to ensure efficiency and effectiveness. This may involve streamlining processes, eliminating redundancies, and integrating systems. By thoroughly analyzing and aligning these processes, the merged organization can benefit from improved productivity and cost savings.
7 Employee skill sets can also pose a challenge during a merger. Each organization may have employees with different skill sets and expertise. It is important to assess the skills and capabilities of the workforce and identify any gaps or overlaps. This will allow for proper workforce planning and development to ensure that the merged organization has the right talent in place to support its strategic objectives. By addressing the challenges in skill sets, the merged organization can leverage the strengths of both organizations and create a more capable and competitive workforce. Lastly, management interaction can be a potential challenge during a merger. Each organization may have its own management style, decision-making processes, and communication practices. It is important to establish clear lines of communication and decision- making authority to avoid confusion and conflicts. Additionally, leadership teams from both organizations should work together to create a shared vision and align their management practices. By addressing these management interaction challenges, the merged organization can foster a cohesive and collaborative leadership team that can effectively drive the integration process. In summary, thoroughly analyzing and addressing potential challenges such as differences in organizational culture, specific business processes, employee skill sets, and management interaction is crucial for a successful merger. By implementing effective change management strategies, aligning key business processes, and fostering transparent communication, the merged organization can navigate these challenges and achieve its strategic objectives. References
8 Bridgepoint Consulting. (2023, June 20). Post-Merger Integration: challenges & Tips to avoid . https://bridgepointconsulting.com/insights/post-merger-integration-challenges-tips- strategies-avoid/ Sousa, M., & Comiteau, L., (2015). Bumpy road ahead: The automotive interiors merger that wasn’t. In Sage Business Cases. SAGE Publications, Ltd., https://doi.org/10.4135/9781529754889
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