Dewaal Pharmaceuticals and Biohealth Labs Merger

This report analyses the merger between Dewaal Pharmaceuticals and Biohealth Labs by looking at conflicting values between the two organizations, the process applied in integration, and recommendations on how the process could have been undertaken.

Running head: DEWAAL PHARMACEUTICALS AND BIOHEALTH LABS
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Dewaal Pharmaceuticals and Biohealth Labs Merger
Student’s Name
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Executive Summary
Mergers and acquisitions are strategic business decisions that organizations make to
improve their competitiveness and create new opportunities for change. This means that a merger
is supposed to lead to better competitiveness and improved business opportunities. Thus
employees and management should celebrate at the mention of any merger. However, there
exists challenges in the merger process that can lead to delays in executing the process or
resistance to the new changes by employees of either organizations. In the case of Dewaal
Pharmaceuticals and Biohealth Labs merger, the two organizations are facing challenges at the
negotiation stage where they have to determine the roles and responsibilities of each party in the
merger while at the same time determining which employees to leave out and which ones to
retain. This creates tension among employees when there is no clear communication on how the
merger process will be done and can led to high turnover as seen in the case of Biohealth.
Further, the merging organizations can also have challenges compromising their stands which
threatens the whole merger process. This report analyses the Dewaal Pharmaceuticals and
Biohealth Labs merger to present the conflicting values, critiquing the process and suggesting
recommendations on how the process could have been done.

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Table of Contents
Executive Summary.....................................................................................................................................2
Introduction.................................................................................................................................................3
Conflicting Values at Stake.........................................................................................................................3
Critique of the Merger Integration Process..................................................................................................5
How to Resolve the Conflicting Values.......................................................................................................8
Recommended Process for HR and Top Executive Integration.................................................................10
The Usefulness of Management and Organizational Theories and Practices.............................................11
Conclusion.................................................................................................................................................12
References.................................................................................................................................................14

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Dewaal Pharmaceuticals and Biohealth Labs Merger
Introduction
Mergers and acquisitions are strategic decisions that organizations take when they feel
they are facing greater risks in the industry that they operate. In most cases, they are seen as
survival decisions taken by management as a way of ensuring that the organization survives. As
businesses grow they face greater challenges that require merging with others businesses or
acquiring others to achieve competitive advantage (Homburg & Bucerius, 2006). This process
requires proper planning and execution to ensure that the organization achieves the required
advantage. In most cases, Schmid, Sánchez, & Goldberg (2012) argues that most mergers have
failed because management fails to put proper strategies in place to address any challenges that
may arise in the process since these are two different organizations coming together and being
integrated as one. Since they are uniting to form a new business entity, it means that some of the
elements have to be left out while others are considered. Like in the case of the merger between
Dewaal Pharmaceuticals and Biohealth Labs where there were challenges in integrating the two
organizations (Light, 2009). This report analyses the merger between the two companies by
looking at conflicting values between the two organizations, the process applied in integration,
and recommendations on how the process could have been undertaken.
Conflicting Values at Stake
One of the common challenges in any merger is the conflict of corporate culture when the
two organizations come together. Studies have shown that 30% of mergers fail within three
years due to disparities in organizational culture (Jemison & Sitkin, 2016). Organizational
culture encompasses values and behaviors that form the unique social and psychological

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environment within the organization. This includes collective values and beliefs that define the
way employees conduct themselves within the organization. Through shared assumptions that
employees have within the organization, their behavior is shaped to reflect the value and mission
of the organization (Luthans & Doh Jonathan, 2015). When two organizations merge together,
the biggest challenge they have to deal with is the cultural conflict that employees from the two
organizations undergo. Bradt (2015) adds that the conflicting value existing in the merger is
blending the two cultures together. As it is already seen the employees from each of the
organization are accustomed to certain cultural practices from their organization which makes
them feel threatened by the new merger because they feel one part of the organization they are
used may be left. For example, those from Biohealth felt threatened because they thought Kaspar
was the one in charge of everything thus feeling a little left out. Merging two cultural values is
challenging since they have to be blended to form a new organization.
The hiring of employees for the new merger is another conflicting value that managers
face during this process. When organizations come together, they have their own set of
employees who have earned a reputation in the organization for their achievements. However,
mergers do not recognize such employees since every organization has to decide what to take
and what to leave out (Koi-Akfori, 2016). Since the merger, Steve is having challenges dealing
with the issues of the head of the human resource since he believes that the individual has
achieved what is needed to be in that position. However, the power to hire does not solely lie in
the hands of Steve but rather in the new merger process which leaves all employees vulnerable.
Puranam, Singh, & Chaudhuri (2009) add that dduring the merger, the human resource system
must compare the benefits and compensation patterns of the two organizations and develop one
that accommodates both organizations. In this case, new jobs have to be created while existing

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ones have to be rendered null and void. This challenge makes it difficult for the human resource
system to manage employee-related issues from both organizations. This is the reason why Steve
and Kaspar have been forced to compromise each of their side and employees to achieve the
merger.
Retention challenges are not in most mergers as seen in the case of Biohealth. The
company has started losing some of its employees due to the process of the merger since some
feel threatened by the new business development while others have to weigh their options in the
merger and outside the merger (Stahl & Voigt, 2008). In the case of this merger, Biohealth
employees feel threatened by Kaspar who they think is in charge of the whole process rather than
both parties. Further, the fact that Biohealth is losing the human resource division to Dewaal
Pharmaceuticals becomes more threatening making retention difficult. From the case study,
Steven has already lost five people while the other three employees are still weighing their
options in the merger. This has been due to lack of communication from Steven on the future of
the employees which leaves them vulnerable and uncertain about the future success of the
merger. Further, organizational change theorists suggest that a merger is an organizational
change process that threatens the status quo of the organization thus the need to ensure that it is
carried out properly to achieve the desired goals.
Critique of the Merger Integration Process
The integration process in the merger regarding the structure and top management was a
negotiated process where the two organizations had to compromise with each other to reach an
understanding. Picot (2002) presents a three-stage model for merger integration that consists of
planning, implementation, and integration. Each of this stage consists of activities that take place

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in collaboration with the two organizations that are integrating. This means that the merger is a
streamlined activity that entails two organizations with common interests coming together to
develop a strategic advantage. However, Galpin & Herndon (2000) present five stages that
successful mergers and acquisitions go through; formulate, locate, investigate, negotiate and
integrate. The top structure and top management employees fall within the negotiation stage
where Steve and Kaspar have discussed how the organizational structure and top positions will
be shared out. However, in the case of this merger, the top management structure has been
shared out by the two companies on a compromise basis rather than using a general approach
that vets all the employees.
The two leaders have shared out the leadership positions as a way of protecting specific
interests. This approach can be disastrous since it can lead to retention challenges when some
employees feel like they have been intentionally thrown out of their positions (Light, 2009).
Schweizer (2005) suggests that if a merger is a strategic decision, then the top hiring process
needs to reflect this strategy by ensuring that those employees that fit are the one given priority.
However, the negotiation part has been done by the two leaders only rather than developing a
team that will be in charge of spearheading the whole merger process and determining what to
include and what not to include. To do this, a thorough selection process is required to ensure
that employees from both organizations are given a chance. What is happening in the merger is
filling out positions based on what every individual knows rather than developing a clear
recruitment strategy like the use of computerized systems to gauge employee abilities (Petitt &
Ferris, 2013). The employee selection plan lacks a clear process that uses facts rather than
feelings. What is happening between Steve and Kaspar is feeling rather than a proper selection
process. The two are protecting the employees that they know and do not want to lose rather than

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picking the employee based on a neutral criterion that cut across the two organizations.
According to Rhodes (2004) when a good strategy is used to recruit employees for the new
organization, a new culture develops from the recruits which are good for organizational growth
and development. Since Steve is having challenges on who stays and who goes, the recruitment
process has become so challenging to him to the extent that he is not sure which employees to
drop and which ones need to retain.
The recruitment process being used by the two leaders also presents the challenge of
inability to rise above cultural differences from both organizations. Each of the leaders is seeking
to a team that has been personally handpicked to be included in the top management rather than
using a free and fair process that reduces bias. Since Steve is championing for retaining the
China and Bangalore firms, it means that he has his own people that he believes should be given
the top management positions in the organization (Light, 2009). On the other hand, Kaspas group
has their own view of some of the businesses that they believe cannot be left out for the Steve
group. This presents suspicion and biases in the whole recruitment process since it lacks a non-
biased human resource integration. Such strategies present challenges in rising above the cultural
differences since each organization believes that there is part of their organization that matters
more than the merger (Dauber & Fink, 2011). This means that there are integration challenges
that the merger is facing since the negotiations seem not to have been done well. In most cases,
the negotiation part is what defines a merger since each organization is able to understand how to
work out the process.
Lastly, Steve and Kaspa seem to be having challenges in integrating the two
organizations together. In mergers and acquisitions, the two organizations are supposed to
integrate their business processes and form a new process that defines how the activities are

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carried out in the new organization (Weber & Tarba, 2010). However, in the recruitment process
for top management adopted by the two leaders, there seems to be the challenge of integration
since they are sharing pit departments rather than developing a clear strategy that allows their
employees to work together in the new merger. Kansal & Chandani (2017) suggest that an
integration plan should be put in place that will allow people from both companies to work out
strategies that will bring the employees to a common understanding on how the merger will run.
This is through setting up a project team to run the whole process or hiring a consultant to assist
the organization in dealing with the issues.
How to Resolve the Conflicting Values
The conflicting values in the merger can be resolved by developing an integration plan
that brings together the two organizations. With this, the organization can use executives from
both organizations to develop strategies for carrying out the merger smoothly. Integration plans
entail forming a team from both organizations and developing an integration plan that
harmonizes the needs of the two organizations. The role of this team is carrying out the merger
process and ensure that activities run smoothly. This process will also allow communication of
any merger integration issues that the employees need and ensuring that doubts, gossips, and
tensions are sorted out. The outcome is to ensure that employees understand the benefits of this
new merger process rather than viewing it as a threat to their jobs.
When organizations come together in a merger, they are presented with the challenge of
merging their human resource together to form a new outfit that meets the requirements. This
means that decisions have to be made regardless of what the leaders feel. To reduce biases and
confusion, the best approach will be to use the services of an external consultant who will recruit

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top employees without being biased. The individual will be charged with the responsibility of
guiding the integration process, through determining the employees that fit specific positions
within the organization. This process will reduce internal politics, interests, power clashes and
loyalty ties that employees have to the organization. According to the theory of hiring,
organizations need to screen and hire employees based on their performance and results and not
the skills and experiences that they have in the organization. Since the merger is presenting new
job opportunities, then the role of the consultant will be to move away from the transactional
hiring practice and adopt the long-term intrinsic reasons that make one fit for the job. This will
reduce bad hires and turnover after the merger.
Retention theorists suggest that rules and policies within the organization can lead to
employee dissatisfaction if they lack the potential to motivate them. This means that
management needs to ensure that the job is clearly defined to meet the needs of the organization
and at the same time motivate the employee. The nature of the job and the responsibilities
assigned to each employee have to be designed in a way that makes the job attractive to reduce
turnover and increase retention. By defining the performance objectives of each job, it becomes
easy for the organization to determine the right type of employees that meet the needs of the
organization.
On the other hand, should the organization fail to meet a particular employee that meets
the needs of the organization, then benchmarking process will be used to determine whether the
organization can get a better employee from outside the two organizations. The role of
benchmarking is to compare employee abilities with their counterparts who work for other
organizations. This process ensures that the organization is able to find the best brains that fit the
new business structure. In most cases, mergers are strategic business decisions that move the

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organization a level higher than where it was. Benchmarking is a strategy that can be used to
differentiate the hiring process from the normal one where the employee is hired through
advertisements (Straub, 2014). This is because only the most qualified candidates from the team
are hired rather than picking from the team of existing employees.
Recommended Process for HR and Top Executive Integration
The first step in the integration process is balancing the positions between the two
organizations to reduce tension. Management needs to ensure that the employees understand how
the merger is working and that each organization has to compromise some positions to see the
merger through. Through an equal distribution of the positions that exist, tensions will be
reduced since each organization will find a way of ensuring that it satisfies the needs of its
employees by accommodating them. Most mergers fail at the negotiation face some leaders are
rigid in letting go of some elements of the merger even if they are interested in the integration.
As seen in the case, both Steve and Kaspa have their positions that they are fighting to protect
since they define them in a certain way. In mergers and acquisitions, managing of human
resources is a daunting task since leaders have to balance between who remains and who leaves.
This is a business call that requires thorough management thought so that the right decision is
made by retaining only those employees that fit the strategic needs of the new business outfit.
Since each of the organizations had an operational workforce, there is need to ensure that the
whole team is considered through a free and fair process that analyses the potential of each
individual in relation to the new needs of the merger. There has to be a balance between the two
teams so that each side can benefit from the outcome of the merger. Without proper negotiations
on what to include and what to leave out, the merger process can fail due to one organization

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pulling out. This is seen in the case of BioHealth where Steve is willing to pull out of the process
if things do not roll out in his favor.
The second process is to develop the objectives of the whole recruitment process and
setting indicators for each objective. To allow the recruitment process to run well, there is a need
to develop objectives that need to be used so that the criteria for assessing the candidates can be
determined. This means that management can formulate a task force or can hire the services of a
consultant to carry out the process (Harroch & Lipkin, 2015).. Objectives define what the
organization seeks to achieve and address the main areas that need to be taken care. When proper
objectives are designed with activities that follow them, it becomes easy for the merger process
to be successful since it ensures that there is a blueprint to be followed. This can be necessitated
by a well-planned communication process that defines the role of every element in the merger
process and what is required by the top management team. This reduces tension, anxiety and
fault finding in the team that is performing the process.
The Usefulness of Management and Organizational Theories and Practices
Management theories offer grounds for understanding organizational issues in the case of
mergers and acquisitions. The theories form the basis of research and standards to be used in the
merger process. One major usefulness of these theories is guiding the whole merger process.
Mergers are strategic decisions taken by organizations to address the challenges that they are
having and developing the strategic advantage. According to Barros & Domínguez (2013),
models and theories of mergers and acquisition provide strategies and steps that managers follow
when executing such like business ideas. A merger is one of the difficult decisions for any leader
since it leads to loss of the organizational image to form a new image that meets the needs of the

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two merging organizations (Leepsa & Mishra, 2016). These theories explain the motives of any
merger and the benefits that the organizations derive from these whole process. For example
from the value-creating perspective, a merger is a strategic decision that organizations take to
create new value and become more competitive. The role of theory is to offer justification and
strategies that can be used to address the issues revolving around the merger process.
Dumi, Ura, & Çobo (2012) suggest that management practice relies on theories,
experiences and case studies to provide solutions for workplace situations that managers face.
Through the application of theoretical models and practices, managers develop strategic decision
making by applying laid down procedures for solving organizational issues in mergers and
acquisition. Through syncing information from successful mergers and acquisitions, mergers can
be successful if relevant challenges are learned from failed cases so that the mistakes made by
such organizations can be avoided while at the same time there is need to ensure that proper
management is applied to address the issues facing the organization (Haberberg & Rieple, 2008).
Therefore, the theories and practices guide managers in developing proper mechanisms for
addressing the merger process through the following of models that have been proposed so that
each and every stage of the process is addressed.
Conclusion
The merger and acquisition process is a strategic decision that needs to be executed with
caution to achieve the intended benefits, many mergers have failed while others have not kicked
off completely due to failure to meet the prerequisites clearly. This means that Steven and
Kaspas need to address relevant issues that are stalling the negotiation process so that the merger
can be achieved. When handling merger-related issues, the two leaders need to form a task force

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to be charged with the responsibility of meeting the needs of the organization. This means that a
panel or committee will work better in streamlining and addressing any pertinent issues in the
merger rather than the coffee meetings that the two are doing. Further, this calls for strategies to
be used in addressing retention challenges that the merger presents to employees so that the
finest resources are not lost.

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