Mergers: Reasons for Failure and Recommendations for Success

Running head: MERGERS 1
ASSIGNMENT 3
Mergers
Student’s Name
Institution Affiliation
Date

MERGERS 2
Executive summary
Based on studies and research, there are indications that most mergers fail often
following their establishments due to varied reasons. Following a survey that was conducted by
KPMG, it was apparent that more than 80% of mergers have failed in mastering the concept of
maximizing shareholder’s value. Thus, the morale and motivation that propels success for
alliances may be a fabric of lies and the problems linked with making mergers work may be too
sophisticated to be mended. Mergers have been thought to be driven by all the wrong reasons
such as fear. The advent of globalization and the use of emerging technologies make the decision
making by the executives be influenced. The decision to integrated firms is based on the
compatibility of commodities from the merged firms, though, employees are tasked with making
the difference, and at times they get ignored.

MERGERS 3
Introduction
Following the news of merging of the two companies that are DeWaal Pharmaceuticals
and BioHealth, such a move was perceived as being strategic as it could help both companies
harness and tap on the opportunities available for such pharmaceutical companies. The bringing
together of great minds of people such as Steve Lindell and the chairman Kaspar to work and
drive the company amidst competition was prudent (Light, 2001). DeWaal was a company that
had its headquarters in the Netherlands and was an established drugmaker in the region of
Europe. BioHealth, on the other hand, had its headquarters in New York and competed in the
American market.
Discussion
The decision to merge DeWaal and BioHealth led to a pile of problems such as the
employment issue for the management of the merged companies. On the one hand, Steve was
striving to maintain that the top cream of BioHealth while Kaspar on the other end wanted his
team to hold key strategic positions in the company (Light, 2001). The failure to rise above
cultural disparities appears to affect both Steve and Kaspar and based on Steve’s perception, his
team of employees are fit and always get things done the right way, while Kaspar on the other
hand, wants his staff from the Indonesian plant retained at all costs. As such it is not surprising to
find that when management views its team through the lens of culture, then problems arise out of
selecting the right people to fill positions deemed strategic always emanate.
The attitude and belief that people are not like them and thus ineligible carry the day.
Steve failed to assure and comfort his people who would be essential for the success of the
organization and now becomes a huge problem as some of his employees started leaving the
company. For instance, an indispensable asset for the company such as Sandy Allen exited the

MERGERS 4
company as she felt insecure and lacked clear direction the company was heading regarding her
fate and the future of her work. Thus, it ought to have been the responsibility of the human
resource and selection team to talk to such people openly and guarantee them of future
opportunities that the company would be offering to serve their vested interests. It would have
been better if Steve approached Sandy Allen and gave her some assurance that in future he
would need her to succeed him in his role (Light, 2001). With such type of assurance, Sandy
would have her morale boosted, and she would have opted to stay behind and wait for the perfect
moment when she would have clinched that position.
Allison expresses fear and concerns of how employees were leaving the company while
others were considering the hefty offers extended to them by other companies. It was painful
enough to accept that four other employees left BioHealth due to poor communication regarding
the security of their jobs and still many others were expected to leave the company due to the
uncertainty that seemed to dominate the workplace environment (McGregor & Doshi, 2015).
Steve understands clearly that people such as Allison who possessed strategic positions and were
close to him as she held the position of the director of sales were on the verge of losing such
positions to their DeWaal counterparts. This made Steve uncomfortable based on his past
relationship with Allison which seems profound (Tsuji, 2015). It has been stated that most
mergers fail to deliver the expected value of shareholders’ wealth due to perceived cultural
differences and the implementation of integration strategies by the human resource that are ill-
conceived. The prevailing war for talents that seems to dominate the merged companies, it is no
wonder that little or no attention is channeled to address issues related to human capital in the
advent of merging and acquisition.
Problems