Bestway & Co-operative Pharmacy Merger Analysis

This assignment requires an in-depth analysis of the merger between Bestway and Co-operative Pharmacy. Students must examine various aspects including cultural differences, communication impacts, leadership roles, integration challenges, employee perceptions, and overall performance outcomes. The analysis should utilize a provided questionnaire to gather employee insights and perspectives on the merger's effects.

Acquisition by Pakistani-owned Enterprises in the UK: a case study of
Bestway acquisition of Co-Operative Pharmacy
Contents
Acquisition by Pakistani-owned Enterprises in the UK: a case study of Bestway acquisition
of Co-Operative Pharmacy ........................................................................................................1
Chapter 2 Literature Review.....................................................................................................2
2.1 Introduction......................................................................................................................2
2.2 Ethnic Minority Businesses in the UK.............................................................................3
2.3 Asian Family-Owned Businesses in the UK....................................................................5
2.4 Defining Acquisitions.......................................................................................................8
2.4.1 Friendly vs Hostile....................................................................................................8
2.4.2 Contested vs non-contested.......................................................................................8
2.4.3 Horizontal vs vertical................................................................................................9
2.4.4 External environment..............................................................................................10
2.5 Managing the Acquisition Process.................................................................................10
2.5.1 Financial Issues.......................................................................................................12
2.5.2 Legal Issues.............................................................................................................14
2.5.3 Operational Issues...................................................................................................17
2.6 Acquisition Integration...................................................................................................18
2.7 Strategies for Merging....................................................................................................21
2.7.1 Human Resources Issues.........................................................................................23
2.7.2 Challenges Faced by Individuals during Mergers...................................................24
2.7.3 Social Identities.......................................................................................................25
2.8 Leadership .....................................................................................................................27
2.8.1 Trait Approach to Leadership..................................................................................28
2.8.2 Transformational Leadership..................................................................................29
2.9 Employee Factor.............................................................................................................30
2.10 Management Practices..................................................................................................33
2.10.1 Greek Case Study..................................................................................................35
2.10.2 Nigerian Case Study..............................................................................................36
2.10.3 American Case Study............................................................................................36
2.11 Success and Failure of M&A.......................................................................................37

2.12 Conclusion....................................................................................................................38
References............................................................................................................................39
APPENDIX..............................................................................................................................53
Questionnaire........................................................................................................................53
Chapter 2 Literature Review
Interview question Literature Review
Since how long you are working in the
Bestway
This study is researching the phenomenon of
a Pakistani-owned acquisition; therefore it is
appropriate to explore the literature on this
particular ethnic minority. Approximately
80% of the listed companies in Pakistan are
family-oriented (Zaidi & Aslam, 2006),
which indicates that Pakistanis generally are
embedded in family business practices,
whether in their own homeland or as ethnic
minorities in other countries. There are
approximately one million Pakistanis living
in the UK, where they are the second largest
ethnic minority and the majority of these
migrant Pakistani families work in the taxi
service industry or as self-employed small
shop owners (QCA, 2009). Yet the literature
suggests that Pakistanis are not as successful
as many other Asian communities in the UK
and this has been attributed to religion
(Metcalf et al, 1996); Islamic values make
them less willing to integrate with Western
culture (Smallbone et al, 1999). There were
many employees those who were working in

the organization since longer duration.
Do you think that external environment
matters in the organization?
Surprisingly, given the number of studies on
acquisitions, there are few studies on the role
of the external environmental context (Wan
&Yiu, 2009) and this represents a gap in the
literature. The external environment is related
to the industry and the macro-environment,
which has been relatively under-investigated,
yet the macro-environment may have a
significant influence on the post-completion
merger (Yaghoubi et al, 2016). The level of
market activity, for example, is correlated
with the level of market valuation
(Jovanovic& Rousseau, 2001) and those
buying during high-valuation levels have
higher initial returns but lower operating
performance than those buying during low-
valuation markets (Bouwman et al, 2009).
External environment matters a lot in the
organization, if condition of external
environment is not favourable then company
will not be able to sustain in the market for
longer duration. This is within the context of
a high-risk strategy to acquire another
organisation, as Johnson et al (2008: 359)
suggest: “Acquisitions are not an easy or
guaranteed route to improving financial
performance. As many as 70% of
acquisitions end up with lower returns to
shareholders of both organisations”.
What is you opinion about family business? This study is researching the phenomenon of

a Pakistani-owned acquisition; therefore it is
appropriate to explore the literature on this
particular ethnic minority. Approximately
80% of the listed companies in Pakistan are
family-oriented (Zaidi & Aslam, 2006),
which indicates that Pakistanis generally are
embedded in family business practices,
whether in their own homeland or as ethnic
minorities in other countries. There are
approximately one million Pakistanis living
in the UK, where they are the second largest
ethnic minority and the majority of these
migrant Pakistani families work in the taxi
service industry or as self-employed small
shop owners (QCA, 2009). Yet the literature
suggests that Pakistanis are not as successful
as many other Asian communities in the UK
and this has been attributed to religion
(Metcalf et al, 1996); Islamic values make
them less willing to integrate with Western
culture (Smallbone et al, 1999). There were
many employees those who were working in
the organization since longer duration.
Despite the number of Pakistani immigrants
in the UK, there are a surprisingly small
number of successful businesses run by this
ethnic minority. This is why it is surprising to
find that one of the seven largest family-
owned businesses in the UK was set up by a
Pakistani immigrant who first arrived in the
UK in 1956 (Prosser, 2014); this relates to

the Bestway Group established by Anwar
Pervez. Compared with other Asian
businesses, this has been a remarkable
success story. Starting with a small
convenience store in London in 1963, funded
by earnings working as a bus conductor, Sir
Anwar and his family built up a £3.4bn
conglomerate within 50 years (Economia,
2014). At the initial phase company has faced
many issue because it was an Asian family
owned business so it was difficult for the
entity to work in UK. For that it has to make
its employees aware and motivate so that
they put their hard efforts in critical situation
as well. Company has faced many barriers
which has affected its performance in the
initial years.
To give some perspective to this
success story, Asian family businesses are
often in the retail trade and associated with
small convenience stores. Aldrich, Zimmer
and McEvoy (1989) hypothesised that these
small Asian businesses had increased at the
expense of indigenous owners, due to
changes in residential areas; for example, the
white families moved out of certain areas and
other ethnic groups took their place.
However, they found that the change in
ownership was gradual and depended more
on economics and profitability; expansion of
the Asian businesses occurred because white

owners tended to avoid buying shops in
changing residential areas. It was the great
strategy because owner was knowing that Uk
is the leading country where many retail
shops are running successfully from past few
years. They are established and have loyal
customers. So it was the major barrier for the
company. Owner has made this strategy
which has helped in gaining success and
profit in the UK market. Yet the Asian
businesses were not limited to ethnic areas:
Aldrich et al (1989) indicated that they were
found also in areas with large white
populations and very small ethnic
communities. This indicates that family
businesses were prepared to set up wherever
they saw business opportunities.
Do you think that clear research is required
and effective decision making is important in
merger and acquisition?
In addition, members of the acquired
organisation may feel a sense of inferiority as
they perceive the other merger partners to
have higher status (van Oudenhoven& de
Boer, 1995). This presupposes that members
of the acquirer organisation may feel the
opposite and indeed research has found that
employees of that organisation identify more
with the newly formed merged organisation
(Amiot, Terry & Callan, 2007; Boen,
Vanbeselaere& Cool, 2006; Fischer et al,
2007).
To what extent financial resources are
important in organization while merger and
Whenever company plan merger then it has
to look upon its financial status because it

acquisition? does not have sufficient monitory resources
then it will not be able to survive for longer
duration. It is the finance side that is integral
to most mergers and acquisitions; the main
purpose of most mergers is related to
profitability. One company sees the
opportunity of growing its client base or
taking on new technologies by absorbing the
resources of another company. The objective
is then to increase revenues and market share,
but often the opposite tends to happen and
merged organisations are confronted with
lower productivity and loss of revenue.
Do you think that valuation of the company
has implications on success and profitability
of the merger?
Managers, therefore, need to be cautious
when making offers for acquiring companies.
The valuation of the company has
implications for the success and profitability
of the merger. Additionally, there are further
risks associated with a merger activity not
being completed. Termination fees are put in
place to protect the organisations, should a
merger not eventuate. This is to cover the
costs involved in waiting for agreements,
such as shareholder approval, and it has been
shown that deals often collapse if there is an
extended waiting period (Afsharipour, 2010).
It has also been found that the risk of a deal
not going through is minimised, if a
termination agreement is in place (Butler
&Sauska, 2014).
Do you think that owner and his family As Asian businesses tend to rely on family, it

handle business properly. is important to point out some of the
challenges that may arise when family
businesses start to develop. One of the
theories that has been contributed to such
studies is the agency theory; this focuses on
potential conflict between the owner of the
business and the manager or agent running
the business. The owner may have different
objectives and interests to the approach taken
by the agent and this may lead to issues when
it comes to decision-making (Eisenhardt,
1989). As the business is expanding in ways
that are not within the skillset of the owner,
he may not understand the actions of the
agent (Alchian& Woodward, 1988).
Alternatively, he may inadvertently select the
wrong agent to run the business as he is
unsure of the qualifications needed for the
role (Chrisman, Chua &Litz, 2004).
Company has taken support of agent and due
to which it has found many ways to run its
business in this location successfully. But
due to skills and improper communication it
was struggling in this situation.
What do you think family or non family
business is better?
It is suggested that such connections in
family businesses are often between parents
and children and there is, consequently, a lot
of flexibility in the ways they act towards
each other; this is attributed to altruistic
behaviour that encourages family members to
be considerate and can therefore improve the

performance of the business (Van den Berge
&Carchon, 2003). Studies have found that
such altruistic behaviour can indeed help to
build a competitive edge in family businesses
(Carney, 2005; Chami, 1997; Chua &
Schnabel, 1986). Alternatively, other studies
have found that altruism can result in
children taking advantage of perks and
parents being unaware of the shortcomings of
their children (Dyer, 2003; Schulze,
Lubatkin& Dino, 2003). There is potential to
explore the relationship between altruism and
family business development as this is an
area not fully investigated, given that all
successful family businesses are different. It
is essential to have strong relationship
between family business and altruism
because in the absence of this relationship
company will not be able to survive in the
new market for longer duration. At various
stages of a business development, there may
be advantages or limitations in working
closely with family members.
Do you think that skills of employee mater in
the organization?
his was further highlighted in Welsh et al’s
(2003) study of Pakistani community
convenience store owners in Edinburgh.
They found that competition from
supermarkets and changing consumer
behaviours meant that many had to look at
different strategies in order to survive. Whilst
some found other work instead, others

involved other members of their family in
expansion of the business. This appeared to
be the strategy undertaken by Sir Anwar.
Family businesses tend to use altruistic
behaviour in the early stages as they utilise
close family members to gain a competitive
edge (Karra, Tracey & Phillips, 2006). In
other words, family members are more likely
to see the long-term benefits and thus
contribute their time and energies in ways
that paid employees would not be able to do.
Yet as businesses expand, they need to be
more circumspect in their selection of
members in order to gain the skills needed to
develop. Employees are the major pillar of
the company, if they are positive and support
the firm then entity can face any issue easily.
Organization is required to hire skilled
employees those who can work in such
cultural difference's situation well. If
individual is not capable to perform well then
it would increase burden on the firm and
entioty will not be able to gain success. That
is why cited firm has selected the most
capable and deserving candidates in the
organization when it entered into UK
business.
How role of leader is important in the
organization when company gets merge with
other?
Leadership is important when company takes
decision of merger, if leader does not lead
the team well them team members will not
perform their duties well which may create

consequences in the workplace and it will not
be able to sustain in the market for longer
duration. Leadership is essential in any
acquisition process. This must ensure that the
vision is there to ensure both organisations
are working toward this. Armstrong (2011)
identified specific themes relating to
leadership practice during mergers and
acquisitions and one of the most important
was the ability of leaders to make sure all
employees were treated fairly. The process of
negotiation was also regarded as extremely
important to ensure the smooth running of
any merger; in this way it would ensure that
each organisation would gain from the
acquisition (Armstrong, 2011). The calming
of fears among employees was viewed as one
of the factors that could make a significant
impact on the success of the acquisition
(Armstrong, 2011), and this also required
sensitive as well as strong leadership.
However, a study by Teerikangas (2012)
showed that many employees in the target
firm believed the acquisition were
opportunities and therefore they approached
the merger with motivation rather than
uncertainty.
Does company has taken support of agent? As Asian businesses tend to rely on family, it
is important to point out some of the
challenges that may arise when family
businesses start to develop. One of the

theories that has been contributed to such
studies is the agency theory; this focuses on
potential conflict between the owner of the
business and the manager or agent running
the business. The owner may have different
objectives and interests to the approach taken
by the agent and this may lead to issues when
it comes to decision-making (Eisenhardt,
1989). As the business is expanding in ways
that are not within the skillset of the owner,
he may not understand the actions of the
agent (Alchian& Woodward, 1988).
Alternatively, he may inadvertently select the
wrong agent to run the business as he is
unsure of the qualifications needed for the
role (Chrisman, Chua &Litz, 2004).
Company has taken support of agent and due
to which it has found many ways to run its
business in this location successfully. But
due to skills and improper communication it
was struggling in this situation.
Does motivation is important for smooth
functioning of company after merger and
before merger?
Management can react to changing needs or
be proactive in determining the best options.
In cases of mergers and acquisitions, the
organisation needs to be proactive as
decisions need to be made and then careful
planning is required. It is clear that any
organisation considering being involved in a
merger or acquisition realises that changes
will be needed as it goes forward in a new
direction, and this is within the first stage of

Lewin’s model. The management can create
conditions for change by involving
employees and having them participate in
generating ideas and possible solutions to
potential problems (Vroom &Yetton, 1973);
this can increase motivation for change and
also offer reassurance. Such employee
participation requires management to
communicate what is happening; in this way
trust will be enhanced and employees will
feel they have an element of control over the
situation (Morgan &Zeffane, 2003). In
addition, this will encourage the workforce to
accept change. It also implies that a new
vision is to be created for the company.
How it has run its business in UK after this
merger?
It is essential for the organization that to
manage the operation after merger well,
otherwise it can harm the reputation of the
firm to great extent. Nevertheless, despite the
acquisition holding the promise of creating
value, this is often not realised. Haspeslagh
and Jemison (1991) suggest that there are
certain aspects that must be managed
properly if the acquisition is to have the best
chance of success. Initially, it must be
assessed whether the acquisition is going to
be a proper fit for the acquiring company’s
own strategic plans. It can sometimes be
tempting to believe that a particular target
company will add value, when it does not
match the strategy the company has agreed.

How Bestway is performing in the market? Despite the number of Pakistani immigrants
in the UK, there are a surprisingly small
number of successful businesses run by this
ethnic minority. This is why it is surprising to
find that one of the seven largest family-
owned businesses in the UK was set up by a
Pakistani immigrant who first arrived in the
UK in 1956 (Prosser, 2014); this relates to
the Bestway Group established by Anwar
Pervez. Compared with other Asian
businesses, this has been a remarkable
success story. Starting with a small
convenience store in London in 1963, funded
by earnings working as a bus conductor, Sir
Anwar and his family built up a £3.4bn
conglomerate within 50 years (Economia,
2014). At the initial phase company has faced
many issue because it was an Asian family
owned business so it was difficult for the
entity to work in UK. For that it has to make
its employees aware and motivate so that
they put their hard efforts in critical situation
as well. Company has faced many barriers
which has affected its performance in the
initial years.
What is the most important cultural
differences you have found in
communication within organization after this
acquisition?
Culture plays significant role in the
organization if two firms work together then
it may cause difficulty. In this condition it
because difficult to communicate due to cross
cultural issues. The integration of two
previously disparate organisations into one

entity requires cultural compatibility and that
can be problematic in the early stages of any
acquisition (Harrison & Carroll, 2006).
Firstly, there is the management’s preferred
culture that must be assimilated (Saunders,
Altinay& Riordan, 2009). Much depends on
the size of each organisation, as there may
need to be a reduction in the workforce; this
can create an atmosphere of uncertainty. It
may also mean that there is a time of
transition, when workers are all learning
about each other and trying to work out their
new roles within the merged entity. In many
cases, this means that the costs of merging
are underestimated as the transitional period
means less efficiency; there may be valuable
working time spent in teaching others about
their new roles.
Nevertheless, there are also positive aspects
about cultural diversity in the workplace.
Because of the differences in ways of looking
at things, any problems can be viewed from a
number of different perspectives (Martin,
2014). Sharing experiences through group
work can also help employees understand
each other, as Al-Jenaibi (2011) found in his
study of cultural diversity in Emirati
companies. The inherent values of shared
beliefs and assumptions impact on the
attitudes and behaviours of employees as
well as on the mission of an organisation

(Risberg, 2013). An understanding of how
cultural differences affect the integration
process, and how these can be managed, is
seen as a key factor in determining how
employees can work together and share
experiences (Stahl &Voight, 2008).
Does communication has improved within
the organization after the acquisition of Co-
operative Pharmacy?
A failure to communicate effectively can
have implications for the merger as people
begin to suspect the worst (Nawert, 2000).
However, if they understand the reasons for
the merger, they are more likely to accept the
changes that come with it. Regular meetings
with employees can also help to allay fears as
there will always be concerns about jobs.
Such concerns about job security can cause
psychological issues in some employees
(Jayesh, 2013). Some restructuring is
inevitable when companies merge, and there
will be redundancies due to duplication.
Uncertainty can result in key employees
being offered positions with competitors and
reassurance needs to be used to retain them.
It is always important to ensure that fairness
is seen to prevail; otherwise the merged
organisation will be going forward with
resentful employees.
What is the best way to manage merger and
acquisition?
Strategies for Merging
There are various strategies which
help the organization in successfully merging
with other companies. Integrating
organisations is a challenge in any

circumstances, but then two different
organisational cultures are involved; it can be
even more of a challenge. Rhodes (2004)
suggests there are three areas that can lead to
success or failure of the union of the two
organisations; these are cultural cohesion,
collaborative leadership and talent retention.
The most critical, according to Rhodes
(2004) is that of cultural cohesion and he lists
seven concepts that are crucial to understand
and which result in organisational cultural
traits and practices. It is important to be
aware of these traits and to deal with them in
a way that will lead to acceptance from the
acquired organisation. These have been
identified as follows (adapted from Rhodes,
2004):
1. Metallurgy. The system of processes
and procedures used in the company
demonstrate how people approach their work
on a daily basis. Because of these processes,
the organisation has a belief that it is
achieving ongoing quality improvement, and
employees are likely to be proud of their
achievements. It is therefore important that
the acquiring company does not replace these
systems without realising the impact that may
have on the employees of the acquired
organisation.
2. Mythology. Stories and beliefs that
are related to the background of the acquired

company reflect its history and the way in
which employees relate to the company. It is
important that the new management
recognises these stories and perhaps builds
them into the merger so that they become a
source of shared history.
It is essential for the organization that to
manage the operation after merger well,
otherwise it can harm the reputation of the
firm to great extent. Nevertheless, despite the
acquisition holding the promise of creating
value, this is often not realised. Haspeslagh
and Jemison (1991) suggest that there are
certain aspects that must be managed
properly if the acquisition is to have the best
chance of success. Initially, it must be
assessed whether the acquisition is going to
be a proper fit for the acquiring company’s
own strategic plans. It can sometimes be
tempting to believe that a particular target
company will add value, when it does not
match the strategy the company has agreed.
Proper decision making plays
significant role in the organization when it
plan to move towards the merger and
acquisition. The decision to acquire another
company is sometimes made without a
proper justification. Although there may be
general consensus within the acquiring firm,
the individuals within the company may not
be in agreement on the reasons for the

acquisition; it has been found that they key
motive appears to be price (Haspeslagh&
Jemison, 1991).
Do you think that relationship between
altruism and family business is important?
It is suggested that such connections in
family businesses are often between parents
and children and there is, consequently, a lot
of flexibility in the ways they act towards
each other; this is attributed to altruistic
behaviour that encourages family members to
be considerate and can therefore improve the
performance of the business (Van den Berge
&Carchon, 2003). Studies have found that
such altruistic behaviour can indeed help to
build a competitive edge in family businesses
(Carney, 2005; Chami, 1997; Chua &
Schnabel, 1986). Alternatively, other studies
have found that altruism can result in
children taking advantage of perks and
parents being unaware of the shortcomings of
their children (Dyer, 2003; Schulze,
Lubatkin& Dino, 2003). There is potential to
explore the relationship between altruism and
family business development as this is an
area not fully investigated, given that all
successful family businesses are different. It
is essential to have strong relationship
between family business and altruism
because in the absence of this relationship
company will not be able to survive in the
new market for longer duration. At various
stages of a business development, there may

be advantages or limitations in working
closely with family members.
How cultural differences influence
coordination between both company's top
managers?
clash of cultures can bring about stress and
tensions within the company; the
Acculturation Theory suggest this is all
because people experience difficulties in
adjusting to a completely different
organisational culture (Berry, 1980). Another
problem facing individuals is that their job
roles change in a merger and they may not
know what they are meant to be doing, nor
how they fit into the company any more. The
Role Conflict Theory suggests this can result
in low productivity and low job satisfaction
(Marks &Mirvis, 1992). This is similar to
the Job Characteristics Theory, which again
points to low job satisfaction, and can result
in absenteeism (Buono& Bowditch, 1989);
this is because of changes in the work
environment after the merger. Overall, there
is the perception of fairness, as mentioned in
the previous section, where employees may
feel they have not been treated very well; the
Organisational Justice Theory determines
that this may cause psychological problems
and result in people leaving the company.
Do you think that cultural difference leads
misunderstanding among the employees and
affect performance of the Bestway?
In other words, family members are more
likely to see the long-term benefits and thus
contribute their time and energies in ways
that paid employees would not be able to do.
Yet as businesses expand, they need to be

more circumspect in their selection of
members in order to gain the skills needed to
develop. Employees are the major pillar of
the company, if they are positive and support
the firm then entity can face any issue easily.
Organization is required to hire skilled
employees those who can work in such
cultural difference's situation well. If
individual is not capable to perform well then
it would increase burden on the firm and
entioty will not be able to gain success. That
is why cited firm has selected the most
capable and deserving candidates in the
organization when it entered into UK
business.
What was the major barrier which has
obstructed integration process of entity?
It is often a neglected area when two
companies come together, as not enough
attention is given to the compatibility of
workers brought together. However, Bird
(2015) suggests lessons can be learned from
Proctor & Gamble’s takeover of Gillette;
firstly, they created integrated teams from
both groups, forcing them to work together to
achieve shared goals. Although Proctor &
Gamble did not rename their whole
company, they did rename parts, and this
created a new identity for both groups. They
also preserved many of each company’s
original identities; for example Gillette
retained their focus on male customers, while
Proctor and Gamble’s focus was on the

female market. They also took the best
practices, processes and procedures from
both companies, not being proprietorial about
existing systems.
Do you think that Bestway and cooperative
operative pharmacy merger was essential to
understand cultural diversity?
Sharing experiences through group work can
also help employees understand each other,
as Al-Jenaibi (2011) found in his study of
cultural diversity in Emirati companies. The
inherent values of shared beliefs and
assumptions impact on the attitudes and
behaviours of employees as well as on the
mission of an organisation (Risberg, 2013).
An understanding of how cultural differences
affect the integration process, and how these
can be managed, is seen as a key factor in
determining how employees can work
together and share experiences (Stahl
&Voight, 2008).
What main benefit has gained by Bestway
from acquiring the co-operative pharmacy?
t is therefore debatable as to whether mergers
increase productivity or whether they
decrease shareholder value; there is certainly
excitement in the stock markets when
mergers are first announced (Tichy, 2001).
However, industrial organisations found that
acquisitions did not actually create value,
instead they were unprofitable (Meeks,
1977); a study by Jensen and Ruback (1983)
revealed that the shareholders of a target
company receive returns of 20 – 30% upon
the announcement of a merger, whilst the
acquiring company did not gain or lose. The

reasoning behind this was suggested that the
acquiring company probably had a better
management team and therefore the stock
markets believed that the target company
would benefit from more effective
management (Jensen &Ruback, 1983).
However, following a merger the
organisation can lose market share (Baldwin
&Gorecki, 1990) and just over one quarter of
mergers managed to increase sales and
improve profits Gugler et al, 2000).
What major post-acquisition challenges
Bestway has faced and how those were
resolved
One of the biggest challenges faced by
management is dealing with the resistance to
change. According to Kurt Lewin’s (1947)
change model, there are three stages to
overcoming any resistance that may ensue
from combining organisations; these are
basically unfreezing current procedures and
policies, making changes, and then refreezing
the amended changes. This model has stood
the test of time as it involves employees and
communication channels within the company
are activated, which reassures employees and
allows them to understand what changes are
necessary and the rationale for these. Change
needs to take place in all companies for them
to be able to survive in a changing world
(Alvesson&Sveningsson, 2008). Markets
change, needs change, processes change and
all of these need to be taken into
consideration; the flexibility of any

organisation to meet market demands is
fundamental to survival in a competitive
world.
Do you think that employees of both
companies are able to perform well after this
merger?
There are many human resource issue which
are faced by the firms while merger and
acquisition. One of the main reasons for
organisations to merge is that together they
will experience financial growth. However,
there may be conflicts between personnel and
Hubbard (1999) argues that this is one of the
main reasons why mergers are not successful.
Jayesh (2013) suggests that the factors that
cause problems for employees are: cultural
differences; leadership issues; effective
communications; psychological effects;
rewards; and restructuring.
Corporate culture defines the
character of a company and two companies
merging will always have different ways of
doing things. This can cause resentment on
the part of the ones being forced to change.
As Jayesh (2013) explains, the acquiring
company will see themselves as winners and
want to impose changes, whilst the acquired
company may feel they are losers and be very
resistant to any changes. This cultural
incompatibility has been found to be a
significant cause of poor financial
performance, which can ultimately result in
the failure of the merger (Cartwright &
Cooper, 2014).Some very high profile

mergers have failed due to corporate culture,
including Daimler-Chrysler, which tried to
merge two opposing organisational cultures.
The greater the amount of difference between
the two organisational cultures, the more
difficult it is likely to be to integrate
(Bouwman, 2013).
Interestingly, it may not be mergers that are
the cause of people losing their jobs, as it
may simply be the advance of technological
changes. Mergers often give organisations
the opportunity to reassess their processes,
and make decisions about human capital and
the value to the company. Technology has
meant that many routine tasks have become
automated and the number of employees can
be reduced. Mergers may simply bring
forward the time for laying off a number of
employees whose jobs are no longer
essential. Those whose jobs are no longer in
demand are more likely to be lower-paid
employees, therefore in a merger the
organisation will seek to retain higher skilled
workers. The company being targeted will
have been targeted to a great extent because
of its skilled employees, as this is one of the
motivations for an acquisition
(Ouimet&Zarutskie, 2014). However, this
may be a risky approach as literature
indicates many of these skilled workers are
likely to leave the company and this can have

implications for the organisation (Walsh,
1988). Consequently, after a merger there
may be an increase in the recruitment of
more highly skilled workers, as turnover
necessitates the replacement of key workers
and as technological changes place more
emphasis on different requirements.
What extent cultural-diversity impact on both
business performances?
The inherent values of shared beliefs and
assumptions impact on the attitudes and
behaviours of employees as well as on the
mission of an organisation (Risberg, 2013).
An understanding of how cultural differences
affect the integration process, and how these
can be managed, is seen as a key factor in
determining how employees can work
together and share experiences (Stahl
&Voight, 2008).
Does acquisition of Bestway with the co-
operative pharmacy has positively affected
the entity?
It can bring financial benefits to merge
organisations but there are also some
difficulties when the organisations have
opposing cultures, especially noted when an
international merger is involved. There is
also a high rate of failure, mainly due to
cultural differences, and in 2006 this was put
at an average of 60% of mergers failing to
meet financial objectives
(Makhlouk&Shevchuk, 2008; Mitleton-
Kelly, 2006); culture clashes have been found
to reduce productivity as diversity can affect
the ways in which employees work as teams
(Ukachukwu&Iheriohamma, 2013). Workers,

who are culturally diverse, have different
values and beliefs and this can create
barriers, result in miscommunication, and
produce dysfunctional adaptive behaviours
(Martin, 2014). These interpersonal issues
are particularly noticeable when employees
are encouraged to work in teams (Harrison,
Price & Bell, 1998), and they can cause
conflict, which has an adverse effect on the
whole organisation.
Do you think that unresolved issues related to
corporate culture need to be addressed by
authorities again?
This can create some problems with ethical
requirements and debate on the independence
of judgement that should come from the legal
profession; however, this becomes further
blurred when applied to company lawyers, as
they tend to act in the interests of the
company they represent, rather than
presenting an unbiased view (Connatser,
2001). Equally, there are professional ethical
standards for accountants, but there is always
a risk of conflict of interests. It becomes
more of a problem when professional
organisations merge, as they may have some
clients in common, whose representation may
be contrary to the interest of the other
company, or there may be a confidentiality
clause in place. Nevertheless, this should be
resolved in the due diligence.
What are the human resource issue that
Bestway has faced while merger?
Strong leadership is very much in demand
during mergers and has been defined as the
single most important factor for success

(Schuler & Jackson, 2001). It can be an issue
in mergers if there is not transparency in
selection of leaders (Jayesh, 2013). This is
also a time when talented management may
decide their skills are no longer appreciated
and seek positions elsewhere. However,
strong leaders can inspire trust and a shared
sense of purpose, ensuring that their
workforce is engaged (Able, 2007). In some
of the family-owned businesses, or
partnerships, that decide on a merger, the
reason is that they do not have a strong leader
to take over once the current leader retires
(Tysiac, 2016).
A failure to communicate effectively
can have implications for the merger as
people begin to suspect the worst (Nawert,
2000). However, if they understand the
reasons for the merger, they are more likely
to accept the changes that come with it.
Regular meetings with employees can also
help to allay fears as there will always be
concerns about jobs. Such concerns about job
security can cause psychological issues in
some employees (Jayesh, 2013). Some
restructuring is inevitable when companies
merge, and there will be redundancies due to
duplication. Uncertainty can result in key
employees being offered positions with
competitors and reassurance needs to be used
to retain them. It is always important to

ensure that fairness is seen to prevail;
otherwise the merged organisation will be
going forward with resentful employees.
Does legal system of the country impact on
the firm which is going to merge?
If due diligence is carried out effectively,
then the financial and legal aspects can be
properly considered; consequently there are
specific areas that any due diligence process
should address. This is also where
technology and intellectual property rights
need to be scrutinised, as this is likely to be
of much interest to the acquiring company.
The areas that need to be questioned are:
 Domestic and foreign patents
 Intellectual property and
confidentiality agreements
 Trademarks
 Copyrighted materials owned by
company
 Trade secrets
 Any infringements, litigation or
disputes
 Technology licences, including third
party licences
 Open source software issues
 Software licences
 Indemnities
What are the litigation issues which may be
faced by the organization?
There are many litigation issues which may
be faced by the firm while merging with

other firm or entering into new country. If
there are any litigation issues, these need to
be reviewed; complaints and any claims
being made against the company could have
an effect on the merger. Insurance and
indemnities are a point for consideration;
these may include liability insurance, health
insurance for employees, car insurance for
company vehicles, key man policies and
worker compensation insurance. More
important are any government proceedings
that may be pending, as these could be
detrimental to the deal. Furthermore, all the
contracts and agreements the target company
has need careful scrutiny, including leases. It
is a time-consuming operation to review all
the paperwork but it is important to gain a
full picture of the state of the company, as the
valuation will depend on this.
What are the operational issue that can be
faced by Bestway while merger and
acquisition?
Operations plays significant role in the
organization. If entity is unable to handle
operations then it may help in gaining
success. An acquiring company may consider
several possibilities before deciding on a
particular target. Even then, they may draw
up a shortlist of potential targets before
making the final decision. During this
process they need to assure themselves of the
viability of the transaction and will look for
targets that meet certain criteria; DePamphilis
(2010) reports that these should include the

industry, the size of the company and
whether the company may be culturally
compatible. Additionally, other criteria may
be the profitability of the targeted company
and its market share (Baldacchino&Vella,
2014).
What are the best strategies for merger and
acquisition?
Managers, therefore, need to be cautious
when making offers for acquiring companies.
The valuation of the company has
implications for the success and profitability
of the merger. Additionally, there are further
risks associated with a merger activity not
being completed. Termination fees are put in
place to protect the organisations, should a
merger not eventuate. This is to cover the
costs involved in waiting for agreements,
such as shareholder approval, and it has been
shown that deals often collapse if there is an
extended waiting period (Afsharipour, 2010).
It has also been found that the risk of a deal
not going through is minimised, if a
termination agreement is in place (Butler
&Sauska, 2014).
Legal system of the nation impact on the
performance of the company. Firm which is
entering into new location need to take care
of legality so that it can plan activities
accordingly. There are many changes in the
legal systems and laws come in that may not
be relevant to one company but apply to the
other. It is therefore important to have

company legal teams, who can scrutinise the
small print. Employee contracts are just one
small part that needs to be considered. In the
contracts some workers may be more
protected than others, which means the
acquiring company will not be able to replace
them. In addition, there are pension costs,
which can be substantial and make a
significant difference to the value of the
target company. This appears to be an
accounting issue, but Connatser (2001)
reports that the lines between accountancy
and law are now being crossed, especially
when dealing with mergers.
What are the positive aspects about cultural
diversity in the workplace?
Culture plays significant role in the
organization if two firms work together then
it may cause difficulty. In this condition it
because difficult to communicate due to cross
cultural issues. The integration of two
previously disparate organisations into one
entity requires cultural compatibility and that
can be problematic in the early stages of any
acquisition (Harrison & Carroll, 2006).
Firstly, there is the management’s preferred
culture that must be assimilated (Saunders,
Altinay& Riordan, 2009). Much depends on
the size of each organisation, as there may
need to be a reduction in the workforce; this
can create an atmosphere of uncertainty. It
may also mean that there is a time of
transition, when workers are all learning

about each other and trying to work out their
new roles within the merged entity. In many
cases, this means that the costs of merging
are underestimated as the transitional period
means less efficiency; there may be valuable
working time spent in teaching others about
their new roles.
Nevertheless, there are also positive aspects
about cultural diversity in the workplace.
Because of the differences in ways of looking
at things, any problems can be viewed from a
number of different perspectives (Martin,
2014). Sharing experiences through group
work can also help employees understand
each other, as Al-Jenaibi (2011) found in his
study of cultural diversity in Emirati
companies. The inherent values of shared
beliefs and assumptions impact on the
attitudes and behaviours of employees as
well as on the mission of an organisation
(Risberg, 2013). An understanding of how
cultural differences affect the integration
process, and how these can be managed, is
seen as a key factor in determining how
employees can work together and share
experiences (Stahl &Voight, 2008).
According to you what are the negative
impact of acquisition of Bestway with the co-
operative Pharmacy?
Ethnic minority groups tend to find it more
difficult to source external finance through
banks and are often funded through their own
resources. Although this may be due to levels
of experience, or the nature of the business, it

has still led to a perception of discrimination
amongst younger ethnic minority business
owners (Smallbone, Ram &Deakins, 2007).
It is a feature of many ethnic minority
businesses that they are family enterprises
and this may also be a deterrent to those
seeking growth; it may be that some
members of families are not perceived to
have the skills required for working in the
business. Such ethnic minority businesses
running as family enterprises consequently
tend to do so for economic purposes (Basu,
2004).
This study is researching the
phenomenon of a Pakistani-owned
acquisition; therefore it is appropriate to
explore the literature on this particular ethnic
minority. Approximately 80% of the listed
companies in Pakistan are family-oriented
(Zaidi & Aslam, 2006), which indicates that
Pakistanis generally are embedded in family
business practices, whether in their own
homeland or as ethnic minorities in other
countries. There are approximately one
million Pakistanis living in the UK, where
they are the second largest ethnic minority
and the majority of these migrant Pakistani
families work in the taxi service industry or
as self-employed small shop owners (QCA,
2009). Yet the literature suggests that
Pakistanis are not as successful as many other

Asian communities in the UK and this has
been attributed to religion (Metcalf et al,
1996); Islamic values make them less willing
to integrate with Western culture (Smallbone
et al, 1999). There were many employees
those who were working in the organization
since longer duration.
Collins and Fakoussa (2015) carried
out a case study on a Pakistani family
business in the UK SME sector; this was an
Asian food shop with 60% of its sales to
business to business clients, almost
invariably from the Pakistani community.
Culture plays significant role in this respect if
any firm conduct their operation with other
nation then it has to face cultural issues.
Employees feel demotivated because they fail
to communicate well with the customers and
rest staff. Apart from this it brings negative
environment in the workplace. But if
company gets merged effectively and handle
cultural changes effectively then it can
support in meeting with its objectives.
Does Bestway have made changes in its
policies and procedures so that employees of
the co-operative Pharmacy can coordinate
with each other effectively?
Due diligence is a process that needs to be
conducted before any real negotiations can
take place, as the acquiring company needs to
know the exact position (Guaghan, 2011).
This would cover all aspects of the company
and look in depth at every part including
legal issues, taxes, payroll, operations and
technology (Sudarsanam, 2010). Such

scrutiny of these aspects can help in reducing
later problems as the issues will be known in
advance.
What are the best management practices at
the time of merger?
Leadership is important when company takes
decision of merger, if leader does not lead
the team well them team members will not
perform their duties well which may create
consequences in the workplace and it will not
be able to sustain in the market for longer
duration. Leadership is essential in any
acquisition process. This must ensure that the
vision is there to ensure both organisations
are working toward this. Armstrong (2011)
identified specific themes relating to
leadership practice during mergers and
acquisitions and one of the most important
was the ability of leaders to make sure all
employees were treated fairly. The process of
negotiation was also regarded as extremely
important to ensure the smooth running of
any merger; in this way it would ensure that
each organisation would gain from the
acquisition (Armstrong, 2011). The calming
of fears among employees was viewed as one
of the factors that could make a significant
impact on the success of the acquisition
(Armstrong, 2011), and this also required
sensitive as well as strong leadership.
However, a study by Teerikangas (2012)
showed that many employees in the target
firm believed the acquisition were

opportunities and therefore they approached
the merger with motivation rather than
uncertainty.
What action have been taken by Bestway to
manage its cultural diversity issue?
Corporate culture defines the character of a
company and two companies merging will
always have different ways of doing things.
This can cause resentment on the part of the
ones being forced to change. As Jayesh
(2013) explains, the acquiring company will
see themselves as winners and want to
impose changes, whilst the acquired
company may feel they are losers and be very
resistant to any changes. This cultural
incompatibility has been found to be a
significant cause of poor financial
performance, which can ultimately result in
the failure of the merger (Cartwright &
Cooper, 2014).Some very high profile
mergers have failed due to corporate culture,
including Daimler-Chrysler, which tried to
merge two opposing organisational cultures.
The greater the amount of difference between
the two organisational cultures, the more
difficult it is likely to be to integrate
(Bouwman, 2013).
According to you how both these firms can
minimize issues and can improve their
performance after this cultural diver
acquisition?
It has been found that the stronger the
identification with an organisation, the
greater the job satisfaction (Riketta, 2005;
Riketta& van Dick, 2005). This has therefore
been aligned with productivity (Haslam,
2004). It provides more understanding of

why mergers may not always be successful,
and why it is so important to take the human
aspect into consideration. People do not like
being taken out of their comfort zone and
when they are taken from their organisational
identity, then they are likely to lose their
interest in that organisation; productivity
levels drop and the merger no longer meets
its financial objectives, which were probably
the main reason the merger took place.
How merger has created understanding of
two disparate organisational culture?
The integration of two previously disparate
organisations into one entity requires cultural
compatibility and that can be problematic in
the early stages of any acquisition (Harrison
& Carroll, 2006). Firstly, there is the
management’s preferred culture that must be
assimilated (Saunders, Altinay& Riordan,
2009). Much depends on the size of each
organisation, as there may need to be a
reduction in the workforce; this can create an
atmosphere of uncertainty. It may also mean
that there is a time of transition, when
workers are all learning about each other and
trying to work out their new roles within the
merged entity. In many cases, this means that
the costs of merging are underestimated as
the transitional period means less efficiency;
there may be valuable working time spent in
teaching others about their new roles.
Explanation for choice of

Interview Questions
1. Do you think Pre-acquisition
relationship between acquirer
and acquiree has influence on
the acquisition process? If yes,
up to what extent?
2.In what way did the relationship
between Bestway and the Co-op
Pharmacy develop before the
acquisition? Was this maintained
post-aquisition?
Link to Literature
Chapter 2 –2.12
The Acquisition
by Bestway
Chapter 2 –2.12
The Acquisition
by Bestway; 2.3
Asian Family
Owned
question.
Yes pre-acquisition
relationship influence to the
acquisition process because it
highly linked with business
gathering. In this regard,
Bestway acquire new business
at workplace.
Acquisition is the great
strategy for the Bestway
because they are able to
deliver effective results and
outcomes at workplace to
Asian family that assists to
develop more effective
functions at workplace.
2.1 Introduction
This chapter reviews the literature related to mergers and acquisitions of UK
businesses. The chapter starts by defining acquisitions, given that this study is an exploration
of a UK enterprise’s acquisition and merger with another UK organisation. Each of the
companies involved has its own set of values and its own history; one is Pakistani-owned and
the other is a co-operative. The Pakistani company is a family business, whereas the co-
operative is a business owned by its members, who all have equal rights and are accountable
to each other. The type of acquisition that has taken place may have a significant impact on
the ensuing merger. Every organisation has its own organisational culture and there are
challenges in combining different organisational cultures; however, there are also many
benefits and this chapter presents some of the advantages and limitations that have been
found in other studies.
There is much literature available on organisational culture and this chapter
introduces some of the issues related to merging two dissimilar businesses. It is clear that
there will be a certain amount of cultural diversity, and this may reflect organisational or
national culture. Encouraging employees to work together may be a challenge, as diverse
cultures operate in different ways, and some studies that explore this aspect are reviewed.
Asian businesses are often family-owned and this chapter presents a background of
the kinds of businesses and the ways in which they operate. It explores the challenges faced

by owners of family businesses. Furthermore, it then looks at the literature on personnel
working within these businesses and the leadership attributes required as businesses develop.
This is especially significant in terms of the different kinds of leaders that may be required to
take organisations through the acquisition process as they may not require the same set of
traits as those who have the responsibility of ensuring the merger operates successfully.
When it comes to mergers and acquisitions, there are a number of areas where focus
needs to be on finding ways for both organisations to work together and integrate. This
chapter presents some of the strategies suggested, which may lead to a smoother transitional
period. A substantial number of mergers tend to fail because of disparity between
organisational cultures and theories for these failures are discussed. The impact on employees
can be significant, and the process of a merger may be a period of much anxiety for the
workforce. The literature on effects on the workforce is reviewed, and management practices
are further discussed, showing how senior managers have a responsibility to the employees.
A few case studies are then presented, providing further information on ways in which
mergers are conducted. This allows an evaluation of whether these management practices
have been successful, and encourages reflection on good practices as well as possible
mismanagement. The conclusion identifies gaps in the literature and discusses where there
may be areas for further exploration.
The next section discusses ethnic minority businesses in the UK, with a focus on the
Pakistani community.
2.2 Ethnic Minority Businesses in the UK
Ethnic minority groups tend to find it more difficult to source external finance
through banks and are often funded through their own resources. Although this may be due to
levels of experience, or the nature of the business, it has still led to a perception of
discrimination amongst younger ethnic minority business owners (Smallbone, Ram
&Deakins, 2007). It is a feature of many ethnic minority businesses that they are family
enterprises and this may also be a deterrent to those seeking growth; it may be that some
members of families are not perceived to have the skills required for working in the business.
Such ethnic minority businesses running as family enterprises consequently tend to do so for
economic purposes (Basu, 2004). There were many employees those who were working in
the organization since longer duration.

This study is researching the phenomenon of a Pakistani-owned acquisition; therefore
it is appropriate to explore the literature on this particular ethnic minority. Approximately
80% of the listed companies in Pakistan are family-oriented (Zaidi & Aslam, 2006), which
indicates that Pakistanis generally are embedded in family business practices, whether in their
own homeland or as ethnic minorities in other countries. There are approximately one million
Pakistanis living in the UK, where they are the second largest ethnic minority and the
majority of these migrant Pakistani families work in the taxi service industry or as self-
employed small shop owners (QCA, 2009). Yet the literature suggests that Pakistanis are not
as successful as many other Asian communities in the UK and this has been attributed to
religion (Metcalf et al, 1996); Islamic values make them less willing to integrate with
Western culture (Smallbone et al, 1999).
Collins and Fakoussa (2015) carried out a case study on a Pakistani family business in
the UK SME sector; this was an Asian food shop with 60% of its sales to business to business
clients, almost invariably from the Pakistani community. Culture plays significant role in this
respect if any firm conduct their operation with other nation then it has to face cultural issues.
Employees feel demotivated because they fail to communicate well with the customers and
rest staff. Apart from this it brings negative environment in the workplace. But if company
gets merged effectively and handle cultural changes effectively then it can support in meeting
with its objectives. It operated on a collectivist basis with a power structure, where the three
owners were in charge. The study found that the participants had strong views based on their
own cultural values, and they were not prepared to compromise. It was also found that these
migrant entrepreneurs were not considering their own needs, but were working with a view to
developing their children’s opportunities. This does not seem to be limited to the Pakistani
community as a study by McKeon (2014) found similar attitudes in Polish families, where the
parents stayed in the UK simply because they saw greater opportunities there for their
children’s futures; this was despite not finding life satisfaction in the UK.
Such aspirations are important to understanding the motivations of business owners
(Basu, 2004). The business and the family are closely involved in the Pakistani businesses in
the UK and Dunn (1995) argues that the business serves the family in many cases. This
builds on Ward’s (1987) assertion that businesses which put the family first are reluctant to
bring in non-family shareholders or promote non-family members to senior management
roles. It is also difficult to access family businesses for research purposes, which may account

for the lack of studies on migrant entrepreneurs; researchers from the same ethnic
background are more likely to help in building rapport and trust (Altinay& Wang, 2009).
Nevertheless, many cultures consider family businesses to be a private matter and are
unwilling to talk about their business to anyone outside the family (Altinay& Wang, 2009).
These suspicions may change as more graduate entrepreneurs become involved.
However, it has been found that more women graduates from ethnic minority groups are
starting up their own businesses (Mason et al, 2006), although Pakistanis tended to have the
lowest aspirations for starting up a business (Mascarenhas-Keyes (2006). Their motivation
was more focused on making money (Hussain, Scott & Hannon, 2008). This will be limited if
they stay within their own ethnic community (Altinay&Altinay, 2006). In order to grow a
business and make money, ethnic businesses need to attract a wider client base. How such
small ethnic businesses can reach their growth potential has not been fully investigated,
especially in a Pakistani context.
2.3 Asian Family-Owned Businesses in the UK
Despite the number of Pakistani immigrants in the UK, there are a surprisingly small
number of successful businesses run by this ethnic minority. This is why it is surprising to
find that one of the seven largest family-owned businesses in the UK was set up by a
Pakistani immigrant who first arrived in the UK in 1956 (Prosser, 2014); this relates to the
Bestway Group established by Anwar Pervez. Compared with other Asian businesses, this
has been a remarkable success story. Starting with a small convenience store in London in
1963, funded by earnings working as a bus conductor, Sir Anwar and his family built up a
£3.4bn conglomerate within 50 years (Economia, 2014). At the initial phase company has
faced many issue because it was an Asian family owned business so it was difficult for the
entity to work in UK. For that it has to make its employees aware and motivate so that they
put their hard efforts in critical situation as well. Company has faced many barriers which has
affected its performance in the initial years.
To give some perspective to this success story, Asian family businesses are often in
the retail trade and associated with small convenience stores. Aldrich, Zimmer and McEvoy
(1989) hypothesised that these small Asian businesses had increased at the expense of
indigenous owners, due to changes in residential areas; for example, the white families
moved out of certain areas and other ethnic groups took their place. However, they found that

the change in ownership was gradual and depended more on economics and profitability;
expansion of the Asian businesses occurred because white owners tended to avoid buying
shops in changing residential areas. It was the great strategy because owner was knowing that
Uk is the leading country where many retail shops are running successfully from past few
years. They are established and have loyal customers. So it was the major barrier for the
company. Owner has made this strategy which has helped in gaining success and profit in the
UK market. Yet the Asian businesses were not limited to ethnic areas: Aldrich et al (1989)
indicated that they were found also in areas with large white populations and very small
ethnic communities. This indicates that family businesses were prepared to set up wherever
they saw business opportunities.
This was further highlighted in Welsh et al’s (2003) study of Pakistani community
convenience store owners in Edinburgh. They found that competition from supermarkets and
changing consumer behaviours meant that many had to look at different strategies in order to
survive. Whilst some found other work instead, others involved other members of their
family in expansion of the business. This appeared to be the strategy undertaken by Sir
Anwar. Family businesses tend to use altruistic behaviour in the early stages as they utilise
close family members to gain a competitive edge (Karra, Tracey & Phillips, 2006). In other
words, family members are more likely to see the long-term benefits and thus contribute their
time and energies in ways that paid employees would not be able to do. Yet as businesses
expand, they need to be more circumspect in their selection of members in order to gain the
skills needed to develop. Employees are the major pillar of the company, if they are positive
and support the firm then entity can face any issue easily. Organization is required to hire
skilled employees those who can work in such cultural difference's situation well. If
individual is not capable to perform well then it would increase burden on the firm and
entioty will not be able to gain success. That is why cited firm has selected the most capable
and deserving candidates in the organization when it entered into UK business.
As Asian businesses tend to rely on family, it is important to point out some of the
challenges that may arise when family businesses start to develop. One of the theories that
has been contributed to such studies is the agency theory; this focuses on potential conflict
between the owner of the business and the manager or agent running the business. The owner
may have different objectives and interests to the approach taken by the agent and this may
lead to issues when it comes to decision-making (Eisenhardt, 1989). As the business is

expanding in ways that are not within the skillset of the owner, he may not understand the
actions of the agent (Alchian& Woodward, 1988). Alternatively, he may inadvertently select
the wrong agent to run the business as he is unsure of the qualifications needed for the role
(Chrisman, Chua &Litz, 2004). Company has taken support of agent and due to which it has
found many ways to run its business in this location successfully. But due to skills and
improper communication it was struggling in this situation.
It is suggested that such connections in family businesses are often between parents
and children and there is, consequently, a lot of flexibility in the ways they act towards each
other; this is attributed to altruistic behaviour that encourages family members to be
considerate and can therefore improve the performance of the business (Van den Berge
&Carchon, 2003). Studies have found that such altruistic behaviour can indeed help to build a
competitive edge in family businesses (Carney, 2005; Chami, 1997; Chua & Schnabel, 1986).
Alternatively, other studies have found that altruism can result in children taking advantage
of perks and parents being unaware of the shortcomings of their children (Dyer, 2003;
Schulze, Lubatkin& Dino, 2003). There is potential to explore the relationship between
altruism and family business development as this is an area not fully investigated, given that
all successful family businesses are different. It is essential to have strong relationship
between family business and altruism because in the absence of this relationship company
will not be able to survive in the new market for longer duration. At various stages of a
business development, there may be advantages or limitations in working closely with family
members.
The growth of Asian businesses is not limited to convenience stores and has extended
to food services; a plethora of so-called Indian restaurants are now found throughout the UK.
These Indian restaurants may be staffed by Pakistani and Bangladeshi workers and the food
they serve may be nothing like genuine Indian food, but they are so popular that they have
become accepted in all British communities (Buettner, 2008). It is estimated that almost 90%
of Indian restaurants are owned by Bangladeshi Muslims and the remainder are mainly
owned by Pakistani Muslims. This aligns with the theory that ethnicity is not just groups
coming from a common origin and culture, but also the perception that others have that this is
so (Aldrich &Waldinger, 1990). Therefore, the concept of ethnicity may be seen as being
socially constructed (Karra et al, 2006); in other words, although Pakistanis and Bangladeshis
may operate the Indian restaurants, it is perceived by clients that they are part of the Indian

culture and are delivering an Indian experience. This is another area that has not been fully
investigated: whether the perceptions that individuals have of specific business cultures are
shaped by their own experiences or whether they may be determined by what they are led to
believe.
2.4 Defining Acquisitions
Acquisition is a corporate action, whereby businesses are integrated by taking more than 50%
ownership of a targeted organisation (Cartwright & Cooper, 2014). Often the reasoning
behind such acquisitions is linked to synergy between companies, resulting in financial
efficiencies through reduced operational costs and opportunities of expanding market share
(Bailey, 2014). The customer base that an acquiring organisation obtains is often significant;
Schmidt (2015) suggests that acquisition is in fact a growth strategy. However, Pearl and
Rosenbaum (2013) argue that the main intent behind the tactic of acquisition is to reduce
competition in a specific industry. Emerging technology is also attractive to more established
organisations, which see acquiring young technology companies as a way of purchasing
Research and Development departments (Krug, Wright & Kroll, 2014).
2.4.1 Friendly vs Hostile
Acquisitions can be cordial or aggressive (Moschieri&Campa, 2014); cordial or friendly
acquisitions occur when both organisations agree to the merger (Cummins, Klumpes& Weiss,
2015). However, when the targeted company objects to being taken over, there is often a
scenario where the acquiring organisation is active in buying up shares as a way of gaining a
majority of the targeted company. It is clear that the impact on the organisational culture may
be significant, where there has been resistance to the acquisition (Phan, 2014). The
leadership style of an acquiring organisation is influential in determining the culture, and
where there has been a hostile takeover, it is likely that the leadership style will be more
aggressive and this can lead to a change in the cultural dimension (Rossi, Tarba&Raviv,
2013). However, Schwert (2000) has investigated so-called hostile takeovers and found that
there is nothing to differentiate them in economic terms from friendly acquisitions; he reports
that it is usually a public relations exercise and that the term ‘hostile takeover’ is more likely
to be part of the whole bargaining process as such takeovers result in lower valuations of the
target organisation.

2.4.2 Contested vs non-contested
Contested acquisitions are seen when the acquired or target firm resists the merger and the
acquiring firm negotiates aggressively (Buono& Bowditch, 1989). It is evident that one
organisation wants the deal but the other does not and it can create a lot of anxiety. This is
often when more than one organisation may take an interest in the target and in the end the
target company has to concede as the valuation offered to shareholders becomes more
attractive to them. In addition, the target is usually well-managed and profitable, according to
Boyle (1970), who found that few were suffering losses when becoming targeted. However,
this may be because of tactics in disclosing profits.
A contested takeover bid can be hostile, but it can also involve more than one competing bid
(Brennan, 1999). The disclosure of profit forecasts can be used by a target company as a
defence strategy (Sudarsanam, 1995), indicating that the company may be in better shape
than it really is. This would then attract higher bids from the competing acquirers.
Sudarsanam (1994) revealed that profit forecasts were disclosed in 45% of contested bids,
whereas Gray et al (1991) found uncontested bids released profit forecasts in just 19% of
cases.
The resulting mergers can often prove unproductive as the behaviours of employees from the
acquired company may be detrimental to smooth working relationships; it has even been
found they can result in acts of sabotage (Farschtschian, 2011). On the other hand, the
acquiring company has often been pushed into a position where they overbid for the target
company and it consequently becomes more difficult to make up those losses in the short-
term; additionally, high payments have also been found to be the most significant factor in
long-term profitability (Malmendier, Moretti& Peters, 2016).
2.4.3 Horizontal vs vertical
It is often the case that horizontal acquisition takes place, whereby similar organisations
merge (Friedman et al, 2016). These have shared knowledge of goods or services and have
some familiarity with the products and markets each deals with. This is a consolidation of
companies operating in a similar sector (Deng & Yang, 2015), and can be viewed as one
organisation taking a competitor out of the market. There may, however, be problems with
such acquisitions if they result in a decentralised structure without firm control in managing
work processes (Ferreira et al, 2014). Nevertheless, horizontal acquisitions tend to be more

preferred by employees and offer them more job satisfaction (Baker &Niederman, 2014).
This is often because employees have a greater degree of freedom and independence and can
share and retain product knowledge.
On the other hand vertical acquisitions relate to where one organisation providing a specific
product or service will take over another organisation in the same supply chain (Ensign et al,
2014). This means, for example, that a clothing store may acquire a textile factory; these
types of acquisitions are generally accepted by the organisations as they can see the benefits
and do not feel they are in competition (Cefis&Marsili, 2015).
2.4.4 External environment
Surprisingly, given the number of studies on acquisitions, there are few studies on the
role of the external environmental context (Wan &Yiu, 2009) and this represents a gap in the
literature. The external environment is related to the industry and the macro-environment,
which has been relatively under-investigated, yet the macro-environment may have a
significant influence on the post-completion merger (Yaghoubi et al, 2016). The level of
market activity, for example, is correlated with the level of market valuation (Jovanovic&
Rousseau, 2001) and those buying during high-valuation levels have higher initial returns but
lower operating performance than those buying during low-valuation markets (Bouwman et
al, 2009). External environment matters a lot in the organization, if condition of external
environment is not favourable then company will not be able to sustain in the market for
longer duration. This is within the context of a high-risk strategy to acquire another
organisation, as Johnson et al (2008: 359) suggest: “Acquisitions are not an easy or
guaranteed route to improving financial performance. As many as 70% of acquisitions end
up with lower returns to shareholders of both organisations”.
2.5 Managing the Acquisition Process
The objective of an acquisition is to create value, and there are, according to
Haspeslagh and Jemison (1991), four ways of doing this. It is anticipated that combining two
companies will mean that resources will be shared and operating costs can be reduced.
Sharing information and knowledge is another way of creating value, as the workforce makes
use of the best talent. The third way is by improving the management control and insight,
creating economies of scale. Finally, the fourth way of creating value is by gaining more

benefits by increasing purchasing power and market share. Consequently, both companies
depend on each other to help create this value.
It is essential for the organization that to manage the operation after merger well,
otherwise it can harm the reputation of the firm to great extent. Nevertheless, despite the
acquisition holding the promise of creating value, this is often not realised. Haspeslagh and
Jemison (1991) suggest that there are certain aspects that must be managed properly if the
acquisition is to have the best chance of success. Initially, it must be assessed whether the
acquisition is going to be a proper fit for the acquiring company’s own strategic plans. It can
sometimes be tempting to believe that a particular target company will add value, when it
does not match the strategy the company has agreed.
Proper decision making plays significant role in the organization when it plan to move
towards the merger and acquisition. The decision to acquire another company is sometimes
made without a proper justification. Although there may be general consensus within the
acquiring firm, the individuals within the company may not be in agreement on the reasons
for the acquisition; it has been found that they key motive appears to be price (Haspeslagh&
Jemison, 1991). The business decision often appears to take second place, when there needs
to be clarification of how the target company can add value.
Such value creation can, however, only eventuate after the acquisition has taken
place. In order to create value, however, both companies need to work together and really
find out what the other can do; as Haspeslagh and Jemison (1991) observe, the new merger
will often try and maintain a status quo as much as possible, in order to refrain from
disruption within the organisations. However, it is the interactions between the two
companies that will realise the potential within the merged organisation.
Leadership is important when company takes decision of merger, if leader does not
lead the team well them team members will not perform their duties well which may create
consequences in the workplace and it will not be able to sustain in the market for longer
duration. Leadership is essential in any acquisition process. This must ensure that the vision
is there to ensure both organisations are working toward this. Armstrong (2011) identified
specific themes relating to leadership practice during mergers and acquisitions and one of the
most important was the ability of leaders to make sure all employees were treated fairly. The
process of negotiation was also regarded as extremely important to ensure the smooth

running of any merger; in this way it would ensure that each organisation would gain from
the acquisition (Armstrong, 2011). The calming of fears among employees was viewed as
one of the factors that could make a significant impact on the success of the acquisition
(Armstrong, 2011), and this also required sensitive as well as strong leadership. However, a
study by Teerikangas (2012) showed that many employees in the target firm believed the
acquisition were opportunities and therefore they approached the merger with motivation
rather than uncertainty.
Motivation is very important because if people are not motivated then they will not
perform their duties well and company will not be able to accomplish its goal. The
enthusiasm of the employees actually encouraged the management of the target company to
be much more proactive and involved in the merger (Teerikangas, 2012), wanting to ensure it
was successful. This indicates that the perceptions of employees in a target firm can be
influenced by perceived benefits.
2.5.1 Financial Issues
Whenever company plan merger then it has to look upon its financial status because it
does not have sufficient monitory resources then it will not be able to survive for longer
duration. It is the finance side that is integral to most mergers and acquisitions; the main
purpose of most mergers is related to profitability. One company sees the opportunity of
growing its client base or taking on new technologies by absorbing the resources of another
company. The objective is then to increase revenues and market share, but often the opposite
tends to happen and merged organisations are confronted with lower productivity and loss of
revenue.
There are serious financial considerations to taking over another company. Valuations
of companies can vary, though it has been shown that buyers tend to maintain the same offer
price over one year for a potential merger (Baker, Pan &Wurgler, 2009). However, sellers
can adjust their valuation and many can be overvalued, hence this creates a problem for
acquiring organisations. Sometimes these overvaluations are related to stock (Fu, Lin &
Officer, 2013) and, because many mergers happen at different stages of the business cycle,
there can be variations in the pricing. It is important for the valuation to be as accurate as
possible as this can have serious implications post-merger; it may account for many of the
losses that occur after mergers and acquisitions have taken place.

Agarwal and Paul (2017) link the valuations process and negotiations to a game,
where risks are taken when the buyer offers a higher price for the target company; the seller
is optimistic that they will get this price, even though it may have little to do with the real
valuation. It becomes a psychological issue, where the buyer wants the company and the
seller is aware of this, so there is no need to lower the price. However, this changes when the
business environment is weak. There are likely to be more occasions when sellers need to sell
the company and the buyer knows this, therefore a lower valuation ensues. Most buyers
would prefer to wait for the moment when the external environment is weak and the business
cycle is at its lowest, as this means they can acquire the target company at the best price
(Agarwal & Paul, 2017).
Managers, therefore, need to be cautious when making offers for acquiring
companies. The valuation of the company has implications for the success and profitability of
the merger. Additionally, there are further risks associated with a merger activity not being
completed. Termination fees are put in place to protect the organisations, should a merger not
eventuate. This is to cover the costs involved in waiting for agreements, such as shareholder
approval, and it has been shown that deals often collapse if there is an extended waiting
period (Afsharipour, 2010). It has also been found that the risk of a deal not going through is
minimised, if a termination agreement is in place (Butler &Sauska, 2014).
Costs involved in the pre-merger stage may include loss of employees due to
uncertainty, a drop in the price of shares affecting shareholders, management time and loss of
valuable information about the company being acquired; to cover these, Fox et al (2012)
estimate about four percent of the company’s value is a reasonable termination penalty. The
fees need to be set at a reasonable level; if they are too low, there has been shown to be an
increase in terminations (Butler &Sauska, 2014). This is a consideration in managing the
acquisition process, as the level of the termination fee may reflect the desire for the deal to go
through.
In order to assess any financial risks that may be involved, a process of due diligence
needs to be carried out. DePamphilis (2010) suggests that a full market assessment is also
required, especially if the new markets being exploited are not in the same sector as in the
acquiring company. The plan for the acquisition should include a timetable, as this may have
a significant impact on the financial risks involved. As discussed earlier, any delays may

cause the valuations to change. The financial aspects that need to be questioned are,
according to Harroch and Lipkin (2014), as follows:
 Financial performance over the past 3 years
 Audits that take place
 Liabilities of the company
 Profit margins
 Projections
 Capital needed for operations
 Working capital available
 Investments required
 Assets
 Outstanding debts
 Ageing of accounts receivable
 Sufficiency of financial resources Any unusual revenue
Source: Harroch&Lipkin (2014)
It is clear that government policies may have an impact on the way the merger process goes
forward; these may include employment laws, competition laws and pension rights.
Notwithstanding the financial issues, there are also legal issues to contend with, although
some of these may be closely aligned to the financial side.
2.5.2 Legal Issues
Throughout the whole acquisition process there need to be decisions made on the deal
and these will include ownership of the target company. This will determine assets and
liabilities and will affect the way in which the new organisation is to be structured
(DePamphilis, 2010). In most cases, it should be a simple procedure, but it can be more
complex when completely different companies are merged; for example, a privately owned
company may need to restructure its systems if it is taking on a listed company.

Due diligence is a process that needs to be conducted before any real negotiations can
take place, as the acquiring company needs to know the exact position (Guaghan, 2011). This
would cover all aspects of the company and look in depth at every part including legal issues,
taxes, payroll, operations and technology (Sudarsanam, 2010). Such scrutiny of these aspects
can help in reducing later problems as the issues will be known in advance.
Legal system of the nation impact on the performance of the company. Firm which is
entering into new location need to take care of legality so that it can plan activities
accordingly. There are many changes in the legal systems and laws come in that may not be
relevant to one company but apply to the other. It is therefore important to have company
legal teams, who can scrutinise the small print. Employee contracts are just one small part
that needs to be considered. In the contracts some workers may be more protected than
others, which means the acquiring company will not be able to replace them. In addition,
there are pension costs, which can be substantial and make a significant difference to the
value of the target company. This appears to be an accounting issue, but Connatser (2001)
reports that the lines between accountancy and law are now being crossed, especially when
dealing with mergers.
This can create some problems with ethical requirements and debate on the
independence of judgement that should come from the legal profession; however, this
becomes further blurred when applied to company lawyers, as they tend to act in the interests
of the company they represent, rather than presenting an unbiased view (Connatser, 2001).
Equally, there are professional ethical standards for accountants, but there is always a risk of
conflict of interests. It becomes more of a problem when professional organisations merge, as
they may have some clients in common, whose representation may be contrary to the interest
of the other company, or there may be a confidentiality clause in place. Nevertheless, this
should be resolved in the due diligence.
The UK Law Society allows a solicitor to work for a corporate business, but they
must only work for one business. This presents a dilemma in a merger that, if the organisation
continues post-merger to operate as two separate businesses, the legal team may be split.
These are all legal issues that must be addressed and this is why it is important to have an
experienced mergers and acquisitions lawyer on hand.

There are a number of other legal aspects that need to be considered. All stakeholders
in a company have rights and there is a regulatory framework that must be adhered to, when
considering a takeover; this is in order to prevent misconduct (Wei, 2008). One of the
primary objectives of this framework is to ensure that target shareholders are treated fairly,
although this is not always an easy task; on the one hand the deal must provide value for the
shareholders but also ensure that employees can keep their jobs (Wang, 2013).
The conduct of how the takeover is conducted is protected in law by the Takeover Panel and
the City Code. These determine the rules and procedures that must be applied when
companies decide to merge, and they regulate any change of control in companies; this
maintains confidence in the financial markets as well.Some of the rules include the length of
time that shareholders have for reviewing an offer, the sufficiency of information for making
informed decisions, the ruling that all shareholders must receive the same amount of
information, and ensuring that a fair price is offered to shareholders (Wang, 2013).
Furthermore, directors of companies have a duty to the shareholders as well, and they
must ensure they are working in the best interests of the company, not allowing any personal
interests to conflict with their responsibilities to the company; in other words, the director
must take on the role of a trustee (Hill, 2004). These regulations have all been put in place
due to problems with mergers and acquisitions in the past, where shareholders may have been
deceived by directors about the deal. The directors, however, must give their opinion of the
deal to the shareholders and this may influence the way the shareholders vote; consequently
much power is placed in the hands of the directors and it is important to ensure there are rules
to prevent any misconduct.
If due diligence is carried out effectively, then the financial and legal aspects can be
properly considered; consequently there are specific areas that any due diligence process
should address. This is also where technology and intellectual property rights need to be
scrutinised, as this is likely to be of much interest to the acquiring company. The areas that
need to be questioned are:
 Domestic and foreign patents
 Intellectual property and confidentiality agreements
 Trademarks

 Copyrighted materials owned by company
 Trade secrets
 Any infringements, litigation or disputes
 Technology licences, including third party licences
 Open source software issues
 Software licences Indemnities
Source: Harroch&Lipkin (2014)
There are many litigation issues which may be faced by the firm while merging with
other firm or entering into new country. If there are any litigation issues, these need to be
reviewed; complaints and any claims being made against the company could have an effect
on the merger. Insurance and indemnities are a point for consideration; these may include
liability insurance, health insurance for employees, car insurance for company vehicles, key
man policies and worker compensation insurance. More important are any government
proceedings that may be pending, as these could be detrimental to the deal. Furthermore, all
the contracts and agreements the target company has need careful scrutiny, including leases.
It is a time-consuming operation to review all the paperwork but it is important to gain a full
picture of the state of the company, as the valuation will depend on this.
In addition, there are various aspects that are not covered by financial or legal issues.
2.5.3 Operational Issues
Operations plays significant role in the organization. If entity is unable to handle
operations then it may help in gaining success. An acquiring company may consider several
possibilities before deciding on a particular target. Even then, they may draw up a shortlist of
potential targets before making the final decision. During this process they need to assure
themselves of the viability of the transaction and will look for targets that meet certain
criteria; DePamphilis (2010) reports that these should include the industry, the size of the
company and whether the company may be culturally compatible. Additionally, other criteria
may be the profitability of the targeted company and its market share (Baldacchino&Vella,
2014).

Once negotiations get underway, valuations need to be considered very carefully as
they must be attractive enough to persuade the target company’s shareholders (Sudarsanam,
2003). Management would normally scrutinise the estimated future cash flows or the
estimated future earnings, as these predictions will determine whether the company is likely
to be a worthwhile investment (Baldacchino&Vella, 2014).
The key activities in a merger, however, relate to due diligence.These are mainly
associated with finance and legalities but they include content that is not able to be sourced
from the public domain. The acquiring company needs to understand the client base of the
target company and to check the following:
 Top 20% of customers and revenue from them
 Potential issues in maintaining client base
 Satisfaction of customers
 Sales terms and policies Financial incentives for sales people
Source: Harroch&Lipkin, 2014
It is important to assess whether the two companies are compatible. The buyer needs
to look at how the target company will fit with its own business objectives. There must be a
rationale for wanting a merger, and one of the aspects that may add value is if the target
company supplies a service or product that is different from what the buyer can currently
offer. If these products or services require specialist employees, then it is important to
consider whether they will stay with the merged organisation, given the number of employees
who decide to leave. In general, every aspect of the target company needs to be reviewed as
this is the information upon which decisions will be made.
Whenever there is an acquisition, there will be a merger of cultures, and the next section
looks at some of the challenges when different cultures are brought together in the workplace.
2.6 Acquisition Integration
It can bring financial benefits to merge organisations but there are also some
difficulties when the organisations have opposing cultures, especially noted when an
international merger is involved. There is also a high rate of failure, mainly due to cultural

differences, and in 2006 this was put at an average of 60% of mergers failing to meet
financial objectives (Makhlouk&Shevchuk, 2008; Mitleton-Kelly, 2006); culture clashes
have been found to reduce productivity as diversity can affect the ways in which employees
work as teams (Ukachukwu&Iheriohamma, 2013). Workers, who are culturally diverse, have
different values and beliefs and this can create barriers, result in miscommunication, and
produce dysfunctional adaptive behaviours (Martin, 2014). These interpersonal issues are
particularly noticeable when employees are encouraged to work in teams (Harrison, Price &
Bell, 1998), and they can cause conflict, which has an adverse effect on the whole
organisation.
Culture plays significant role in the organization if two firms work together then it
may cause difficulty. In this condition it because difficult to communicate due to cross
cultural issues. The integration of two previously disparate organisations into one entity
requires cultural compatibility and that can be problematic in the early stages of any
acquisition (Harrison & Carroll, 2006). Firstly, there is the management’s preferred culture
that must be assimilated (Saunders, Altinay& Riordan, 2009). Much depends on the size of
each organisation, as there may need to be a reduction in the workforce; this can create an
atmosphere of uncertainty. It may also mean that there is a time of transition, when workers
are all learning about each other and trying to work out their new roles within the merged
entity. In many cases, this means that the costs of merging are underestimated as the
transitional period means less efficiency; there may be valuable working time spent in
teaching others about their new roles.
Mergers are always more difficult with organisations that are in the services industry
and whose assets are people; these workers have developed client relationships and feel
personally responsible for much of the success of the organisation (Mitleton-Kelly, 2006).
Employees can be very sensitive when companies merge as they may feel threatened
(Saunders et al, 2009). Effective communication is,therefore, essential for developing trust
with all employees (Lodorfos&Boateng, 2006) and that can help in integrating companies
and reducing anxiety.The culture of an organisation emanates from the leadership; Tsui et al
(2006) found a positive correlation between the CEO of a company and the organisational
culture. This was further influenced by other senior management. It is therefore important
that the culture of any organisation considering a merger understands the culture of the
acquisition (Badrtalei& Bates, 2007).

Nevertheless, there are also positive aspects about cultural diversity in the workplace.
Because of the differences in ways of looking at things, any problems can be viewed from a
number of different perspectives (Martin, 2014). Sharing experiences through group work
can also help employees understand each other, as Al-Jenaibi (2011) found in his study of
cultural diversity in Emirati companies. The inherent values of shared beliefs and
assumptions impact on the attitudes and behaviours of employees as well as on the mission of
an organisation (Risberg, 2013). An understanding of how cultural differences affect the
integration process, and how these can be managed, is seen as a key factor in determining
how employees can work together and share experiences (Stahl &Voight, 2008).
It is often a neglected area when two companies come together, as not enough
attention is given to the compatibility of workers brought together. However, Bird (2015)
suggests lessons can be learned from Proctor & Gamble’s takeover of Gillette; firstly, they
created integrated teams from both groups, forcing them to work together to achieve shared
goals. Although Proctor & Gamble did not rename their whole company, they did rename
parts, and this created a new identity for both groups. They also preserved many of each
company’s original identities; for example Gillette retained their focus on male customers,
while Proctor and Gamble’s focus was on the female market. They also took the best
practices, processes and procedures from both companies, not being proprietorial about
existing systems.
National culture can be linked with national identity-building and this can create
specific problems in mergers; if the organisations are from different national cultures, it can
create a barrier to cooperation (Vaara, 2003). This is often because similarities tend to elicit
feelings of trustworthiness, whilst differences may lead to negative associations, according to
Hogg and Terry (2000). However, a number of studies have linked national cultural
differences to positive value creations (Bjorkman, Stahl &Vaara, 2007; Chakrabarti, 2009;
Hebert et al, 2005; Sarala &Vaara, 2010); this is mainly because the differences can
complement each other and add to the transfer of knowledge. Yet Sarala and Vaara (2010)
found that organisational cultural differences had no significant effect on knowledge transfer,
although this is an area where more in investigation is needed. Knowledge transfer is when
collaboration takes place and employees share activities, such as marketing ideas and
technical plans. There is still debate on whether national cultural differences may have an
impact on knowledge transfer. Sarala and Vaara (2010) also found that cultural integration

was important to transferring knowledge; more could be done on looking into processes for
integrating differing cultures, as there is still a lack of understanding on the role of cultural
integration in knowledge transfer.
Knowledge transfer is regarded as the most important resource in the modern world of
business. Bresman, Birkinshaw and Nobel (2010) showed that after acquisitions knowledge
tended to be transferred from the acquiring company to the acquired; however, this changed
over time and became reciprocal. The factors that facilitate knowledge transfer have not been
widely researched, as more attention has been given to the creation of value due to
acquisitions. This is therefore a gap in the literature that should be addressed. Bresman et al’s
(2010) study of Swedish multinational acquisitions found that technological knowledge was
best transferred through a series of intensive meetings once the acquisition was fully
integrated. They also found that the first two or three years after a merger showed a high level
of imposed knowledge transfer from the acquirer to the acquired and very little reciprocal
flow; however, after three years this started to change and there was a high level of
knowledge transfer in both directions. Much of the early stages were characterised by
uncertainty and distrust and generally a lack of relationship between the companies in
Bresman et al’s case study, but this gradually improved over time. It is clear that trust takes
time to develop and that there needs to be a focus on relationships, especially in the early
stages.
The following section discusses the different strategies that are applicable for merging
organisations.
2.7 Strategies for Merging
There are various strategies which help the organization in successfully merging with
other companies. Integrating organisations is a challenge in any circumstances, but then two
different organisational cultures are involved; it can be even more of a challenge. Rhodes
(2004) suggests there are three areas that can lead to success or failure of the union of the two
organisations; these are cultural cohesion, collaborative leadership and talent retention. The
most critical, according to Rhodes (2004) is that of cultural cohesion and he lists seven
concepts that are crucial to understand and which result in organisational cultural traits and
practices. It is important to be aware of these traits and to deal with them in a way that will

lead to acceptance from the acquired organisation. These have been identified as follows
(adapted from Rhodes, 2004):
1. Metallurgy. The system of processes and procedures used in the company
demonstrate how people approach their work on a daily basis. Because of these processes, the
organisation has a belief that it is achieving ongoing quality improvement, and employees are
likely to be proud of their achievements. It is therefore important that the acquiring company
does not replace these systems without realising the impact that may have on the employees
of the acquired organisation.
2. Mythology. Stories and beliefs that are related to the background of the acquired
company reflect its history and the way in which employees relate to the company. It is
important that the new management recognises these stories and perhaps builds them into the
merger so that they become a source of shared history.
3. Missiology. Employees’ attitudes to the merger can alienate or assimilate. This comes
from both sides as integrating is important for both organisations and is not one-sided. It may
be an opportunity for reflecting on company values as new employees are integrated into the
acquiring company. It may also be an opportunity to review the skills of existing employees
and their fit into the merged organisation.
4. Meritocracy. Differing traditions of rewards can be an issue in merging companies.
Some prefer to reward longevity and promote on the basis of length of time served, whilst
others reward productivity and abilities. It is therefore important that managers recognise
there may be different reward systems and considers how these are perceived by employees.
There is a particular problem with family-owned businesses where family members may be
seen as occupying senior positions solely on the basis of nepotism.
5. Modality. There may be reasons why the acquired company was in a position to be
taken over and this needs to be quickly identified and remedied. On the other hand, the
company may possess remedies that can add value to the merger.
6. Mores. The moral and ethical standards of each company may differ and therefore
there is a need to identify these in each company and decide which best practice is. It is how
people really feel about values and standards, and not just paying lip service to them. For
example, if training is on the agenda, then is this because it is developing employees, or is it
simply because it looks good on quality inspections?

7. Mettle. Characteristics of the individuals within a company are very important to the
way an organisation presents itself. Behaviours such as having respect for others should be
highlighted.
Rhodes (2004) argues that if all of these concepts are addressed, then mergers will
more easily integrate and be successful. It is accepted that acquisitions have problems with a
high failure rate; indeed it is stated that nearly half of all acquisitions are unsuccessful (Aon
Hewittt, 2011; Jayesh, 2013). Some estimate the number of failures as being up to 80%
(Cartwright & Cooper, 1990; Higgs & Rowland, 2005; Lotz& Donald, 2006), thus it can be
seen why it is a real issue for merging companies. One third of these mergers that failed to
live up to expectations stated that cultural integration issues were the main cause of failure
(Bouwman, 2013). This is why it is important that the right strategies are used in order to
make the merger as smooth as possible. Mergers require adjustments, especially related to
people, as they can cause much distress and uncertainty in employees of both organisations.
2.7.1 Human Resources Issues
There are many human resource issue which are faced by the firms while merger and
acquisition. One of the main reasons for organisations to merge is that together they will
experience financial growth. However, there may be conflicts between personnel and
Hubbard (1999) argues that this is one of the main reasons why mergers are not successful.
Jayesh (2013) suggests that the factors that cause problems for employees are: cultural
differences; leadership issues; effective communications; psychological effects; rewards; and
restructuring.
Corporate culture defines the character of a company and two companies merging will
always have different ways of doing things. This can cause resentment on the part of the ones
being forced to change. As Jayesh (2013) explains, the acquiring company will see
themselves as winners and want to impose changes, whilst the acquired company may feel
they are losers and be very resistant to any changes. This cultural incompatibility has been
found to be a significant cause of poor financial performance, which can ultimately result in
the failure of the merger (Cartwright & Cooper, 2014).Some very high profile mergers have
failed due to corporate culture, including Daimler-Chrysler, which tried to merge two
opposing organisational cultures. The greater the amount of difference between the two
organisational cultures, the more difficult it is likely to be to integrate (Bouwman, 2013).

Strong leadership is very much in demand during mergers and has been defined as the single
most important factor for success (Schuler & Jackson, 2001). It can be an issue in mergers if
there is not transparency in selection of leaders (Jayesh, 2013). This is also a time when
talented management may decide their skills are no longer appreciated and seek positions
elsewhere. However, strong leaders can inspire trust and a shared sense of purpose, ensuring
that their workforce is engaged (Able, 2007). In some of the family-owned businesses, or
partnerships, that decide on a merger, the reason is that they do not have a strong leader to
take over once the current leader retires (Tysiac, 2016).
A failure to communicate effectively can have implications for the merger as people
begin to suspect the worst (Nawert, 2000). However, if they understand the reasons for the
merger, they are more likely to accept the changes that come with it. Regular meetings with
employees can also help to allay fears as there will always be concerns about jobs. Such
concerns about job security can cause psychological issues in some employees (Jayesh,
2013). Some restructuring is inevitable when companies merge, and there will be
redundancies due to duplication. Uncertainty can result in key employees being offered
positions with competitors and reassurance needs to be used to retain them. It is always
important to ensure that fairness is seen to prevail; otherwise the merged organisation will be
going forward with resentful employees.
2.7.2 Challenges Faced by Individuals during Mergers
Certain theories have been attributed to the challenges individuals involved in
merging companies face, as can be seen in Table 2.2. As mentioned above, employees can
become very fearful and anxious during this stage. The Anxiety Theory confirms that people
who are affected in this way are likely to have a lack of motivation resulting in low
productivity, and this can even lead to mental or physical illness (Brockner et al, 1992).
Table 2.2 Underlying theories in Merger and Acquisition
Underlying theory Source of Problem
Anxiety theory Uncertainty & negative impact on job
Prolonged anxiety

Social identity theory Loss of old identities
Acculturation theory Adjustment to different organisational culture
Role conflict theory Ambiguous & conflicting roles
Job characteristics theory Changes in job environment
Organisational justice theory Perceived fair treatment
Source: Myeong-GuSeo& Sharon Hill, 2005. Understanding the Human Side of Merger and Acquisition: An
Integrative Framework
When mergers take place, it is hard for people to understand how they are positioned in the
new company. The Social Identity Theory states that this causes a loss of their sense of
identity and can lead to feelings of anger, as well as resulting in a refusal to make any
changes (Ashford &Mael, 1989). A clash of cultures can bring about stress and tensions
within the company; the Acculturation Theory suggest this is all because people experience
difficulties in adjusting to a completely different organisational culture (Berry, 1980).
Another problem facing individuals is that their job roles change in a merger and they may
not know what they are meant to be doing, nor how they fit into the company any more. The
Role Conflict Theory suggests this can result in low productivity and low job satisfaction
(Marks &Mirvis, 1992). This is similar to the Job Characteristics Theory, which again points

to low job satisfaction, and can result in absenteeism (Buono& Bowditch, 1989); this is
because of changes in the work environment after the merger. Overall, there is the perception
of fairness, as mentioned in the previous section, where employees may feel they have not
been treated very well; the Organisational Justice Theory determines that this may cause
psychological problems and result in people leaving the company.
2.7.3 Social Identities
There have been few studies on the impact of different groups of people on each other
after a merger (Newman &Krzystofiak, 1993; Van Knippenburg et al 2002). This is based on
the Social Identity Theory, which suggests the stronger group will dominate the weaker one
(Bachman, 1993; Sidanius et al, 2004). Mael and Ashworth (1995) state that people identify
with an organisation to such an extent that they see themselves as the organisation. This is
what makes it so personal to them when there is any change. Workers in an organisation
know where they stand within that environment, but when companies are merged, they lose
that social structure (Reich, 2011). They also identify more with the pre-merger organisation
than with the merged one (Giessner, Ullrich& van Dick, 2011).
It has been found that the stronger the identification with an organisation, the greater the job
satisfaction (Riketta, 2005; Riketta& van Dick, 2005). This has therefore been aligned with
productivity (Haslam, 2004). It provides more understanding of why mergers may not always
be successful, and why it is so important to take the human aspect into consideration. People
do not like being taken out of their comfort zone and when they are taken from their
organisational identity, then they are likely to lose their interest in that organisation;
productivity levels drop and the merger no longer meets its financial objectives, which were
probably the main reason the merger took place.
Hogg (2000, 2007) suggests that people tend to identify with an organisation as they
dislike uncertainty and being part of a group gives them meaning and purpose. This can be
lost during a merger. Giessner et al (2011) explain that two types of groups must be
considered from an employee’s perspective: one is the pre-merger organisation and the other
is the post-merger organisation. They are likely to be significantly different. There will be
new employees, different processes and procedures and a general feeling of strangeness about
the employment environment. When employees first learn of a merger, they tend to feel
uncertainty and it is not a situation most will feel happy about (van Dick, Ullrich&Tissington,

2006). They may begin to feel a ‘them and us’ comparison (Giessner et al, 2006), and even
form a closer identity with their existing pre-merger organisation.
In addition, members of the acquired organisation may feel a sense of inferiority as they
perceive the other merger partners to have higher status (van Oudenhoven& de Boer, 1995).
This presupposes that members of the acquirer organisation may feel the opposite and indeed
research has found that employees of that organisation identify more with the newly formed
merged organisation (Amiot, Terry & Callan, 2007; Boen, Vanbeselaere& Cool, 2006;
Fischer et al, 2007).
There are only three outcomes for corporate mergers: a completely new organisation
with a new identity; keeping one identity and losing the other; maintaining both identities
(Giessner et al, 2011). Experiments have shown that when people think they are one single
group, they are more positive towards each other (Gaertner et al, 1996; Giessner et al, 2011).
However, another study found the opposite; where considering the two organisations merging
into one resulted in quite negative evaluations of workers from the other company
(Giessner&Mummendey, 2008).
It is important that employees perceive that they are still part of an organisation and can
identify with it. If they can continue to feel that the organisation is still theirs, then it is more
likely that the merger will be successful (Boen et al, 2005; Jetten et al, 2002). This may be
the role of leadership in encouraging their employees to follow their vision and feel part of it.
Employees tend to feel protected by working for large organisations as they feel their jobs are
more secure. There may be less trust and more initial resistance when organisations regarded
as being owned by ethnic minority groups take on established national organisations, as is
discussed in the next section.
2.8 Leadership
The guiding force in any organisation is the leader and it is the leader who is a key
figure in any merger. Good leadership is expected to be a key factor in any organisation’s
success. This relationship between leadership and performance is supported by a number of
studies over the years (Darling &Nurmi, 1995; Kirkpatrick & Locke, 1991; Nohria et al,
2003). The four characteristics of successful leadership are seen as vision, communication,
positioning and respect (Darling &Nurmi, 1995). However, Pinar & Girard’s (2008) study
found that only two of these had an impact on organisational performance; these were

support through vision and trust through positioning. This indicates that companies whose
leader has a vision are more likely to support their employees to achieve that vision, and that
where leaders trust their employees, they will have that trust returned by employees showing
more commitment to the company. This is especially important in mergers and acquisitions
as employees need reassurance and guidance from their leaders during what may be a rather
difficult transitional period (Able, 2007). Indeed, it has been found that the effect of the
leadership style has a significant impact on a merger (Hussain et al, 2017).
There are three basic ways in which leaders relate to others in the organisation, according to
Ryan (2005), who suggests looking at whether relationships are horizontal or hierarchal, if
leadership is contained within one role or whether shared, and whether the leadership takes
risks to achieve specific ends. These can determine whether the leader is taking a collectivist
or individualistic approach and can influence the way in which the leader deals with the
organisation (Armstrong, 2011). Although it was previously considered that leadership
revolved around charismatic figures at the top (Avolio& Bass, 1988; House, 1977; Tosi,
1982; Yukl, 1981), more recent literature tends towards a collective approach (Corson, 1996;
Gronn, 2002, Ryan, 2002).
Literature suggests that different leadership competencies may be required for different
situations, and may even need a change of leadership to deal with specific events (Dunning,
2013). Communication is extremely important at times of change, such as impending
mergers. Leadership communication is regarded as a key component in facilitating any
merger where organisational cultures are merged (Balmer&Dinnie, 1996). As Armstrong
(2011) confirms, leaders must be open and honest with employees, otherwise they may
mistrust them in future. It can also result in low productivity as employees are not kept aware
of what may happen with their jobs (Smye& Grant, 1989). In addition leaders must be
decisive and let employees know very early that their job is at risk (Daniel, 1999; Marks
&Mirvis, 1997). Therefore, this indicates that unless a leader has a high level of
communication skills he is not the right person to be at the helm when the organisation is
undergoing a merger. The leader must communicate his vision and ensure all the workers
both understand the vision and are on board with it. It is essential to have a good
communicator at the beginning of a merger to explain what is happening, and then just as
important to have a good communicator during the merger, in order to reassure.

Being able to make difficult decisions is something a leader needs to be able to do, as there
will be many challenges when merging organisations. However, Kouzes and Posner (2002)
argue that leaders must be able to compromise as they will have to find solutions to problems
that meet a number of different needs and concerns.
2.8.1 Trait Approach to Leadership
It is important to try and determine the characteristics that may identify the kind of
leader, who may be the right person to lead an organisation through acquisition and merger.
There have been numerous traits identified over the years as being the ones required for
leadership, but very few have been consistent. Much of this has been due to the fact that
leadership deals with so many different events and situations and these all require different
characteristics. Stogdill (1974) produced a list of 13 different traits, which he suggested were
the main leadership ones.
1. Adaptable to situations
2. Alert to social environment
3. Ambitious and achievement-orientated
4. Assertive
5. Cooperative
6. Decisive
7. Dependable
8. Dominant (desire to influence others)
9. Energetic (high activity level)
10. Persistent
11. Self-confident
12. Tolerant of stress
13. Willing to assume responsibility
(Stogdill (1974)
However, it is difficult to measure some of these and to indicate whether they are indeed
present in leaders. It also suggests that these traits are inherent, rather than developed. Other
studies have determined that leaders can succeed if they have emotional stability, can admit
error, are able to communicate and are intelligent (McCall & Lombardo, 1983). However,
there is still no definitive study that provides specific traits that are present in leaders and
show which individuals are most likely to succeed as leaders.
2.8.2 Transformational Leadership
It is suggested that transformational leaders are charismatic and inspiring and this is
why they are the best kinds of leaders for change management; they have been shown to be

the most important factor in change management (Gong, Huang &Farh, 2009). Clark and
Clark (1990: 153) suggest such leadership is demonstrated when “leaders broaden and
elevate the interests of their subordinates, when they generate awareness and acceptance
among the subordinates of their purposes and mission of the group”, indicating the vision
and communicating that vision are high on the list. The likely traits found in transformational
leaders would be characteristics such as enthusiasm, activity, energy, creativity, originality
and initiative (McGuire, 2004).
Hussain, Aamir and Rehman’s (2011) study found that transformational leaders were fully
involved in communicating vision and information about the acquisition and that they
focused on a two-way process of communication with the workforce; in this way they were
able to receive feedback and allay uncertainties about the merger. However, there was a
problem after the merger and steps were not taken to deal with culture clash and to manage
employee stress (Hussain et al, 2011). This indicates that transformational leaders are
effective at dealing with the initial changes, but are not suited to the reassurance and
integration role required after the merger takes place.
In Bratianu and Anagoste’s (2007) study there were several specific factors identified in
transformational leaders; the first of these was the vision the leader has and his commitment
to changing the organisation to meet that vision. Another factor was associated with the
relationship between the leader and others; this was shown by the way leaders had enough
trust in their team to provide alternative solutions. Trust was very important between leaders
and their team, and this was determined as a way of the leader being able to inspire others.
Bratianu et al (2007) also suggested that the decisions made by transformational leaders were
principled and ethical, and made after listening to solutions offered by others, encouraging
them to participate in such decision-making processes. Being empathetic to the needs and
fears of others, given that changes would make differences to their lives, was an additional
factor (Bratianu et al, 2011). It is recognised that human needs are crucial when merging
organisations as the workforce is fundamental to the success of an organisation.
2.9 Employee Factor
The workforce also determines the success of any merger and this is why they must
be considered, as any negativity on their part could create difficulties both in company
morale and productivity. A merger, when two companies join together in their combined best

interests, may appear to be less problematic than an acquisition, where there may be ill-
feeling as one company takes over another against its will. Yet a friendly merger still evokes
the same anxiety and concerns from employees; basically, their jobs are at risk. This
replicates the situation where employees may be facing redundancy, when a company needs
to downsize. The lead-in to such a situation may last a number of months and can cause
immense stress to the workforce.
A study by Naveed, Hanif and Ali (2011) of the banking sector in Pakistan found that
employees working in a pre- and post-M&A environment were demotivated and fearful of
job security. Those who started new jobs after the merger were very positive regarding job
security and were fully motivated. This indicates that being involved in the company whilst it
is undergoing a merger can affect employees long after the company has merged. In other
words, the stress does not go away once both companies have combined.
It has been suggested that mergers can benefit employees as they encourage the newly
merged organisation to invest in up skilling the workforce and therefore there is more
investment in human capital, especially when new technologies are involved (Agrawal
&Tambe, 2016). However, the ultimate aim of a merger is to increase profits, and this is
usually achieved by restructuring through laying people off and this creating value for the
organisation (John, Knyazeva&Knyazeva, 2015). There is therefore good reason for
employees to be concerned about their jobs.
Siegel and Simons (2008) carried out a large-scale analysis of employees affected by mergers
and concluded that it was better for employees if only part of their organisation was acquired,
as employers then tend to place a higher value on human capital. This may of course be due
to the fact that those employees contribute to the productivity of the organisation, as they
know how to use the machinery, or provide the service. Siegel and Simons (2008) also found
that, although mergers increased the possibility of unemployment, women were less likely to
become unemployed. As this was a quantitative approach, no reasons were given for this but
a qualitative study may provide more information about this phenomenon.
Interestingly, it may not be mergers that are the cause of people losing their jobs, as it
may simply be the advance of technological changes. Mergers often give organisations the
opportunity to reassess their processes, and make decisions about human capital and the value
to the company. Technology has meant that many routine tasks have become automated and

the number of employees can be reduced. Mergers may simply bring forward the time for
laying off a number of employees whose jobs are no longer essential. Those whose jobs are
no longer in demand are more likely to be lower-paid employees, therefore in a merger the
organisation will seek to retain higher skilled workers. The company being targeted will have
been targeted to a great extent because of its skilled employees, as this is one of the
motivations for an acquisition (Ouimet&Zarutskie, 2014). However, this may be a risky
approach as literature indicates many of these skilled workers are likely to leave the company
and this can have implications for the organisation (Walsh, 1988). Consequently, after a
merger there may be an increase in the recruitment of more highly skilled workers, as
turnover necessitates the replacement of key workers and as technological changes place
more emphasis on different requirements.
This does not reassure the workers who stay post-merger as they have to face new processes
and new management. It has more impact on workers if their own senior management leave
the merged company, especially as they may have worked with these management teams for
a number of years. In Siegel and Simon’s (2008) study, they reported that turnover was
definitely higher for organisations undergoing M&A, but that it was not necessarily because
the companies had merged; in other words, the employees were not being laid off, they left of
their own accord. This may be because such employees found themselves under stress and
could no longer cope with the changes happening around them (Dahl, 2011). Stress can cause
physical as well as mental issues, and some employees may feel their health is suffering,
because the new organisation is not what they are used to:
“Even when career related concerns may have been resolved, and employees have
survived the initial aftermath, many employees are likely to find themselves unable to
fit into the new or dominant organizational culture, and this is also likely to be
stressful.” (Cartwright & Cooper, 1990, p. 8).
Once employees start to feel stressed by the changes, they may no longer feel any loyalty to
the new organisation nor find the job satisfaction they once experienced (Al Arkoubi, Bishop
& Scott, 2007). If employees are satisfied with their job, they will be able to cope with the
changes and perhaps even be energised by them; however, once they lose interest in their
work, they will no longer feel fulfilled in the job they are carrying out, and are more likely to
leave the company (van’tVeen, 2013).

There have been several factors identified as being responsible for influencing job
satisfaction. One of these is justice, which is the perception that all employees are being
treated fairly (Price, 2001); this may affect employees post-merger, if they believe that
someone from the other organisation is taking on some of their role, or receiving preferential
treatment. Stress may be caused when justice is perceived to be lacking in the organisation
and employees feel they are undervalued. Career opportunities may influence job satisfaction
as employees see promotion prospects or an interesting career ahead of them within the
company (Mueller & Price, 1990). Support may be available from management or from co-
workers and this can lead to employees feeling happy in their job, as they feel they are not
alone (Cohen, 1993); however, if these providers of support have left the company, an
employee may believe they are not getting any support from the existing team. One other
factor is autonomy, where employees feel they are able to work independently as their skills
are valued and they are trusted to be able to carry out their role; van’tVeen (2013) suggests
autonomy can increase commitment to the job.
It is clear that the departure of key personnel can have a significant impact on the
organisation, so job satisfaction is integral to the success of any merger. Demotivation is
another factor that affects employees and can result in an acquisition failing to meet
expectations (Bartunek et al, 2006). To many employees their place of work is their second
home and their comfort zone; when this disappears, they can experience a feeling akin to
bereavement (Larsson & Finkelstein, 1999). In addition, they may also lose their self-
confidence (Georgiades&Georgiades, 2014) and feel rejected, even when there is no
immediate risk of losing their job.
From the literature, therefore, studies show there is a significant impact on employees
when confronted with their organisation being involved in a merger. Yet Ellis, Reus and
Lamont (2009) reported that little attention was paid to these potential effects on employees
when a merger was being considered. This brings into question the value that corporates
place on their workforce and their relationship with the workers who provide their services or
produce their goods. When employees are treated as cogs in a wheel, and do not perceive that
they are fully valued by the company, and then there is no wonder that they review their
commitment to the organisation. However, it is not in the interests of the organisation to
disregard the feelings and concerns of their employees as it has been shown that the success
of a merger depends on individuals (Vaara&Monin, 2010).These individuals also include

management, where the skills of handling change management are sometimes not sufficient.
It suggests that the managers or leaders who drive the merger process do not have the
requisite skills for continuing the process.
2.10 Management Practices
It has been argued that the majority of mergers and acquisitions are unsuccessful due
to poor change management practices. There is no doubt that it requires much effort to merge
the cultures and systems of two different companies. Changes are needed across a number of
areas, including financial, legal, technology and even computer software being used. As most
mergers will be duplicating many processes, there will also be changes that lead to the
reduction of costs as the newly formed organisation seeks to improve its productivity and
become more efficient.
The human resources also need attention; as discussed previously, the impact on
employees can be significant. However, in human resources departments there are more
challenges as employment contracts of both companies are scrutinised and rewritten; these
may need to be renegotiated. Kansal and Chandani (2014) report there are other issues for
human resources departments as they need to integrate policies, review visions and strategies
and make decisions on training and developing the workforce.
One of the biggest challenges faced by management is dealing with the resistance to change.
According to Kurt Lewin’s (1947) change model, there are three stages to overcoming any
resistance that may ensue from combining organisations; these are basically unfreezing
current procedures and policies, making changes, and then refreezing the amended changes.
This model has stood the test of time as it involves employees and communication channels
within the company are activated, which reassures employees and allows them to understand
what changes are necessary and the rationale for these. Change needs to take place in all
companies for them to be able to survive in a changing world (Alvesson&Sveningsson,
2008). Markets change, needs change, processes change and all of these need to be taken into
consideration; the flexibility of any organisation to meet market demands is fundamental to
survival in a competitive world.
Management can react to changing needs or be proactive in determining the best
options. In cases of mergers and acquisitions, the organisation needs to be proactive as
decisions need to be made and then careful planning is required. It is clear that any

organisation considering being involved in a merger or acquisition realises that changes will
be needed as it goes forward in a new direction, and this is within the first stage of Lewin’s
model. The management can create conditions for change by involving employees and
having them participate in generating ideas and possible solutions to potential problems
(Vroom &Yetton, 1973); this can increase motivation for change and also offer reassurance.
Such employee participation requires management to communicate what is happening; in this
way trust will be enhanced and employees will feel they have an element of control over the
situation (Morgan &Zeffane, 2003). In addition, this will encourage the workforce to accept
change. It also implies that a new vision is to be created for the company.
Being able to have an open communication channel in a company is essential for any
change to occur successfully. However, sharing knowledge is not just a one-way process.
Communication about change may come from the senior management, but the management
also need to be able to have information about employee roles; employees can share their
knowledge and give management clear ideas about what needs to be changed and how this
can occur (Cummings & Worley, 2003). Gaining such knowledge is selecting the right
procedures and policies for a successful change and this is when Lewin’s second stage is
applied. It is when there is movement within the company. The processes and procedures
have been reviewed, and now it is time for those to be amended or changed to suit existing or
impending conditions. Employees need to be motivated to follow the decisions that their
leaders are making and commit to a new vision (Laura & Stephen, 2002). Bass (1985)
suggests that this is the time that leaders show their characteristics and when the
transformational leaders are really needed.
The third stage of Lewin’s model is associated with the processes that will be applied
once the merger takes place. Although planning for these can occur beforehand, the
implementation is the test as to whether these are best suited to the merged environment. All
the new organisation’s activities need to be reassessed and the resources made available for
the changes to be implemented as smoothly as possible. However, it is clear that employee
involvement is essential for change to take place and this is across all three stages of Lewin’s
model. They need to be involved from the beginning by being informed and having the
information communicated to them about any changes that may be happening in the
company. This is the management’s role, to communicate this information as rapidly as
possible and ensure that the communications are both sensitive and effective. Management

also needs to be there to support employees and develop a relationship with them that will
encourage the sharing of knowledge. At the final stage, it is the employees who are involved
in the application of changes, and again they need to be fully supported by management.
It is the interrelationship between managers and employees that is essential for change
management and the transition from one company into a merger. The following case studies
provide more detail of what can go wrong in mergers and transitions, and what appears to
show a successful transition and merger.
2.10.1 Greek Case Study
A case study of the merger of two Greek insurance companies by Georgiades and Georgiades
(2014) revealed that they took one and a half years before they began to operate as a single
entity, as they were working to completely different systems. The acquiring company
benefited by substantially increasing its portfolio, which was the purpose behind the
acquisition. In interviews conducted with managers from both companies, it emerged that
little information was provided to employees concerning the proposed acquisition and the
managers themselves were unaware of what was happening, as they had only rumours to
inform them. The top management of the acquired company all decided to leave and start up
again themselves by establishing a new company and this further unsettled the workforce.
The employees themselves panicked in the beginning and made decisions that were not
properly considered; this was when some decided to leave, not realising the benefits that
would eventually some to them had they stayed. They had no emotional attachment to the
new organisation; those that did stay on felt they were in an unfamiliar environment and this
made them insecure. In addition, the change from a familiar, friendly workplace into a more
structured corporate environment adhering to rules and procedures was difficult for many
employees to accept. Nor were they provided with any training to help them understand the
new systems. The study showed that communication channels were not open enough and
that this caused a lot of uncertainty. The impact on employees could have been mitigated by
reassurance about their jobs, involvement in the projected plans and training on the new
processes. Much of the stress may then have been avoided.
2.10.2 Nigerian Case Study
A second case study was conducted by Aliyu (2013) involving the merger and acquisition of
deposit banks in Nigeria. It was found that employees experienced high job satisfaction after

the merger; this was an unusual result as it seemed to contradict all the other studies that have
indicated job satisfaction suffers after a merger. However, Aliyu suggested that this may have
been because the job market is difficult in Nigeria and the employees may just have been
satisfied to be employed. There is also a suggestion that there may be differences in the kind
of companies involved in mergers, and this may account for different employee attitudes. It
may be that there are certain industries that attract employees with similar temperaments;
therefore there is a lesser effect on the workforce when organisations are merged. However, it
is more likely that the employees were involved, but few changes were required as similar
processes and procedures were being used by the banks. This is an advantage of mergers
within an industry.
2.10.3 American Case Study
The merger of Compaq and Hewlett-Packard (HP) was an extremely acrimonious one as
there was much opposition to the merger. However, it went ahead and it was expected that it
would create value by building a strong company due to increased research and development
opportunities in technology as well as in employee reductions (Dykman, Davis & Lamb,
2013). The actual merger process initially seemed successful as the management from both
companies worked on integrating efforts together (Zimmerman &Ficery, 2007). This
involved high-level teams, who were not allowed to return to their previous positions as they
then knew too much about the process; all communications remained inside these teams,
numbering about 2500 individuals. They discussed all the details, such as systems and
policies as well as products and shared knowledge of each other. It was discovered that there
were a number of cultural differences between the companies, however, as Compaq was
more demanding of its employees, used to making quick decisions, while HP was more
relaxed and took time to make decisions (Perlow& Kind, 2004).
The merged organisation, which had started with so much promise, lost half of its market
share as many of the product lines inherited from Compaq overlapped with those of HP and
heavy job losses were subsequently incurred. HP has had many failed initiatives since the
merger, and eventually in 2015 split into two companies. Although it has been regarded as an
unsuccessful merger, there are, on the other hand, many who regard it as successful; they
argue that HP is still operating and is a stronger and more proactive company than it was
before. This indicates that measurements for success or failure of mergers may not always

depend on accounting procedures, and may be long-term, rather than the short-term indicators
that are usually used in acquisitions.
2.11 Success and Failure of M&A
It has been the custom to evaluate the success or failure of a merger on the basis of its
financial performance, and this is the post-merger productivity. However, Ahuja and Katila
(2001) chose to evaluate through innovation performance, and others, as shown above, have
used a case study approach, where they review various factors that may have contributed to
the success or failure of a merger.
Accounting performance measurements have been popular because they show the actual
financial outcomes of an acquisition (Harrison et al, 1991) and they can be easily understood
by managers, who make decisions based on productivity. Nevertheless, Capasso and Meglio
(2007) argue that accounts are produced retrospectively and cannot provide a true picture of
the state of the company so soon after a merger. It is also noted that different ways of
measuring performance can produce different results and, consequently, different conclusions
may be drawn (Krishnakumar&Sethi, 2012).
It is therefore debatable as to whether mergers increase productivity or whether they decrease
shareholder value; there is certainly excitement in the stock markets when mergers are first
announced (Tichy, 2001). However, industrial organisations found that acquisitions did not
actually create value, instead they were unprofitable (Meeks, 1977); a study by Jensen and
Ruback (1983) revealed that the shareholders of a target company receive returns of 20 –
30% upon the announcement of a merger, whilst the acquiring company did not gain or lose.
The reasoning behind this was suggested that the acquiring company probably had a better
management team and therefore the stock markets believed that the target company would
benefit from more effective management (Jensen &Ruback, 1983). However, following a
merger the organisation can lose market share (Baldwin &Gorecki, 1990) and just over one
quarter of mergers managed to increase sales and improve profits Gugler et al, 2000).
Acquisitions that occur in waves are also seen to be less profitable. This may be because
many organisations in the same industry are over-populating the markets at the same time.
Additionally, such waves usually represent high and rising share prices (Gort, 1969) and can
be significantly impacted by a general drop in the stock markets. There is no direct factor

that contributes to the few mergers that are successful; rather the focus is mainly on the ones
that fail.
2.12 Conclusion
This review of the literature has raised several opportunities for further investigation of the
Bestway business and its successful acquisition of other UK companies. It is interesting to
note that it is a family-owned business and therefore family members have been instrumental
in how the business has developed. The owner has been involved in selecting the right family
members to carry the business forward in ways that meet his objectives. There is therefore
room to explore the selections he has made and whether these have fulfilled his objectives.
Another area for investigation is whether there has been a successful merger of cultures,
given the disparity between family-owned Asian businesses and UK businesses grounded in
cooperative membership. It has been suggested that a merging of cultures can cause many
challenges in acquisitions. There are different cultures evident in the Pakistani family-
oriented Bestway and the collaborative culture of the Co-op pharmacy, therefore this merging
has potential for exploration. However, there is the argument that cultures may be perceived
by what individuals are led to believe rather than their own experiences. It may be that
people’s expectations of a Pakistani family-owned business may not in fact be the reality.
The external environment in which the acquisition takes place is also not well covered in the
literature. This is an aspect that would benefit from further investigation as it has an impact
on the experience of Bestway and the timing of its acquisition. This may have been
particularly beneficial to both organisations and that may have contributed to the success of
the venture. However, it is equally important to consider the leadership and the vision that
made the decision to undertake the merger. There is a need to give attention to the person
leading the merger and how this has been achieved, in order to understand how the leader has
managed to integrate the workforce and whether this has been influenced by specific
characteristics.
Given the large number of merger failures, it would be interesting to find factors that may
contribute to the success of a merged organisation. There may be a number of causes, but
perhaps the industry sector may have an impact. Diversification has been suggested as a
reason for some acquisitions, whilst others suggest that companies want to buy in new

technology; however, success or failure may be in the way that these aspects are measured. It
is therefore worth exploring exactly how success can be measured.
The following chapter provides details of the methods used to investigate the acquisition of a
culturally British company by an Asian family-owned business, and any issues and
challenges that may have occurred.
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APPENDIX
Questionnaire
1. Since how long you are working in the Bestway ?
2. Do you think that external environment matters in the organization?
3. What is you opinion about family business?
4. Do you think that clear research is required and effective decision making is
important in merger and acquisition?
5. To what extent financial resources are important in organization while merger and
acquisition?
6. Do you think that valuation of the company has implications on success and
profitability of the merger?
7. Do you think that owner and his family handle business properly.
8. What do you think family or non family business is better?
9. Do you think that skills of employee mater in the organization?
10. How role of leader is important in the organization when company gets merge with
other?
11. Does company has taken support of agent?
12. Does motivation is important for smooth functioning of company after merger and
before merger?
13. How it has runits business in UK after this merger?
14. How Bestway is performing in the market?
15. What is the most important cultural differences you have found in communication
within organization after this acquisition?
16. Does communication has improved within the organization after the acquisition of
Co-operative Pharmacy?
17. What is the best way to manage merger and acquisition?
18. Do you think that relationship between altruism and family business is important?
19. How cultural differences influence coordination between both company's top
managers?
20. Do you think that cultural difference leads misunderstanding among the employees
and affect performance of the Bestway?
21. What was the major barrier which has obstructed integration process of entity?
22. Do you think that Bestway and cooperative operative pharmacy merger was essential
to understand cultural diversity?
23. What main benefit has gained by Bestway from acquiring the co-operative pharmacy?
24. What major post-acquisition challenges Bestway has faced and how those were
resolved after merger with the co-operative pharmacy?

25. Do you think that employees of both companies are able to perform well after this
merger?
26. What extent cultural-diversity impact on both business performances?
27. Does acquisition of Bestway with the co-operative pharmacy has positively affected
the entity?
28. Do you think that unresolved issues related to corporate culture need to be addressed
by authorities again?
29. What are the human resource issue that Bestway has faced while merger?
30. Does legal system of the country impact on the firm which is going to merge?
31. What are the litigation issues which may be faced by the organization?
32. What are the operational issue that can be faced by Bestway while merger and
acquisition?
33. What are the best strategies for merger and acquisition?
34. What are the positive aspects about cultural diversity in the workplace?
35. According to you what are the negative impact of acquisition of Bestway with the co-
operative Pharmacy?
36. Does Bestway have made changes in its policies and procedures so that employees of
the co-operative Pharmacy can coordinate with each other effectively?
37. What are the best management practices at the time of merger?
38. What action have been taken by Bestway to manage its cultural diversity issue?
39. According to you how both these firms can minimize issues and can improve their
performance after this cultural diver acquisition?
40. How merger has created understanding of two disparate organisational culture?