BSS064-6: Organisational Changes Post-Acquisition of Co A by Co B

This report provides a comprehensive analysis of the organisational changes resulting from the acquisition of Co A by Co B. It examines the acquisition process, applying theories such as the 360-degree Congruence Model, Strategic Fit, and Organisational Fit to understand the impact on employees, information systems, and financial structures. The report also explores the application of Stakeholder Theory and different leadership styles, including transformational and autocratic leadership, within the context of the acquisition. Ultimately, it offers recommendations for Co B to improve its approach to managing organisational resources and ensuring a more positive outcome for all stakeholders, particularly employees of the acquired company. The analysis highlights the disparities between Co A's employee-centric approach and Co B's shareholder-driven focus, emphasizing the importance of considering organisational fit and employee well-being during acquisitions.

Running head: ORGANISATIONAL CHANGES DUE TO ACQUISITION
Organisational Changes Due to Acquisitions
Name of the Student:
Name of the University:
Author Note:

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ORGANISATIONAL CHANGES DUE TO ACQUISITION
Executive summary:
Acquisitions bring about substantial changes in the financial structures, organisational
leadership strategies and other significant business areas of companies, especially the
acquired companies. However, the changes which are the outcomes of the acquisitions are
not always favourable especially for the employees. The paper would analyse the outcomes
of a certain acquisition of Co A by Co B, both fictitious companies. The paper would analyse
these outcomes on the grounds of theories like strategic fit and the process of acquisition. It
would ultimately end with recommendations for Co B, the company which acquired Co A.

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ORGANISATIONAL CHANGES DUE TO ACQUISITION
Table of Contents
Introduction:...............................................................................................................................4
Analysis:.....................................................................................................................................6
Acquisition process:...................................................................................................................6
Step 1: Target choice:.............................................................................................................6
Step 2: Negotiation:................................................................................................................6
Step 3: Integration:.................................................................................................................6
Step 4: Results:.......................................................................................................................7
360 degree Congruence model:..................................................................................................7
Theory of strategic fit:................................................................................................................9
Theory of organisational fit:.....................................................................................................10
HR operation changes in organisations due to acquisition:.................................................10
Information system changes in organisations post acquisition:...........................................11
Financial structure changes in organisations due to acquisition:.........................................11
Stakeholder theory:..................................................................................................................12
Leadership theories:.................................................................................................................13
Transformational leadership theory:....................................................................................13
Autocratic leadership theory:...............................................................................................14
Conclusion:..............................................................................................................................14
Recommendations:...................................................................................................................15
References:...............................................................................................................................16

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ORGANISATIONAL CHANGES DUE TO ACQUISITION
Introduction:
Acquisitions bring about changes in the organisational attributes of the acquired
companies. These acquisitions create issues pertaining to strategic areas like employees,
information system and financial structure of the acquired companies. The paper would delve
into a case study which mentions about two hypothetical heavy engineering companies, Co A
and Co B where the second acquires the first. The paper analyses the acquisitions and its
impact on the employees of Co A in the aforementioned areas. The first section delves into
the acquisition process which companies follow while acquiring subsidiary companies. The
second section studies the 360 degree congruence model which companies can adopt to bring
about integration within their operations. The next section studies the theory of strategic fit
followed by the theory of organisational fit. These two theories after discussion of their initial
aspects would be explained from the view point of Co A and Co B mentioned in the case
study. The stakeholder theory in the fifth section would point out how the two companies
utilise the theory while conducting business. The fifth section would delve into leadership
theories considering two types of leadership namely, transformational and autocratic
leadership theories. The study would end with recommendations for Co B regarding
application of these theories.
Analysis:
Acquisition process:
The following are the steps of acquisitions which acquiring companies follow:

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ORGANISATIONAL CHANGES DUE TO ACQUISITION
Step 1: Target choice:
The acquiring companies at this step identify and analyses the benefits like
enhancement of goodwill they can enjoy by acquiring the prospective target companies. The
companies acquiring other companies identify the future growth opportunities like strong
market position and product innovation they can enjoy in the post acquisition phase (Zheng
and Sheng, 2015, p.13).
Step 2: Negotiation:
The acquiring and the target companies negotiate on the business terms like profit
sharing ratios between the two companies at this stage. This stage involves the apex
management of the acquiring companies making final decisions regarding the acquisition
based on the negotiation outcomes. For example, the apex management of Co B negotiated
with Co A and took over the former owing to positive outcome (Giuliani et al., 2014).
Step 3: Integration:
Once the negotiation is finalised between the acquirer company and the target
company, the operations of the target company are integrated with the acquirer company
(Rahman and Lambkin, 2015, p.24-35). The acquirer company may takeover or sell the assets
of the target company. The management of the acquiring company may employ the
employees of the target company or maintain them as outsource employees.
Step 4: Results:
The acquiring company measures the business results and operational outcomes of the
acquisition. For example, Co B took over Co B. The management of Co B would measure the
business growth it would experience like increase in revenue as from the acquisition. They
also make and monitor strategies according to the business results concerning the newly
acquired subsidiaries (Braguinsky et al., 2015, p.2086-2119).

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Target choice
Negotiations
Integration and Ownership change
Results
ORGANISATIONAL CHANGES DUE TO ACQUISITION
Figure 1. Steps of integration
(Author)
360 degree Congruence model:
The 360 degree congruence model takes into account four factors as the basis of
organisational performance namely, tasks, people, structure and culture (Newton and
Mazur, 2016, p. 1013-1033). The case study shows that Co A followed 360 degree
congruence model because its culture and structure were aligned to bring about development
of human resources. Co B regarded employees as resources and not as stakeholders; hence its
culture and structure were not aligned to employee development. One can infer that this lack

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of employee development would hit the productivity of Co B in the long run due to lack of
employee support (Wong, Ivtza and Lomas, 2017, p.13).
Figure 2. Figure showing 360 degree congruence model.
(Source: Author)
Theory of strategic fit:
The theory of strategic fit refers to the extent to which business organisations, both
the acquiring and the target organisations are able to enhance their resources and capabilities
to the macroeconomic environment. The apex management bodies of the organisations match
their resources and capabilities with their strategies. The strategic fit is a crucial tool which
companies consider while applying the strategy of acquisitions and mergers (Bauer and
Matzler, 2014, p.269-291).
Company
Structure
Task
People
Culture

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ORGANISATIONAL CHANGES DUE TO ACQUISITION
The case study presents two companies Co A and Co B where the former underwent
acquisition by the latter. The strategic fit attributes of Co A as pointed out in the case study
consisted of an able apex management and modern structure owing to the organisational
restructuring which the company had gone through in the past. Co A had its human resources
aligned to its projects which enabled it to produce innovative products and services. The next
strategically fit attribute of Co A was the leadership style prevailing within the organisation
(O'Boyle and Hassan, 2015). It is clear that Co B considered these factors as strategic fit
while acquiring Co A.
As far as Co B is considered, it is clear it the company is financially more powerful
and has a strong shareholder base. However, it had a very low human resource development
and maintenance capability. Thus, financially Co B is strategically fit but was unfit in terms
of human resource management. This was evident from the large number of acquired
employees which the company rendered redundant (Sarala et al., 2016, p.1230-1249). This
was even more evident from the employee policy of Co B which referred acquisitions as
‘buying a group of employees’.
Theory of organisational fit:
The theory of organisational fit stresses on the compatibility between acquiring
organisations and their target organisations. This theory is based on the attraction-selection-
attrition theory (ASA) which states that companies are attracted to work for organisations
having same values as them. Abdalla et al. (2017), state that this organisation fitness between
business organisations and their target can be judged from three important outcomes. They
are work attitudes, turnover and job performance.

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HR operation changes in organisations due to acquisition:
Organisational acquisitions have profound impact on the human resource operations
which ultimately affects employee morale and motivation. As far as application of
organisational fit theory in the case study is concerned, one can point out that Co A and Co B
do not show organisational fit. Co A aligned its employees to its projects which encouraged
innovation in products and services of the company (Ryu, 2017, p. 351-368). There is no
history of redundancy mentioned in case of Co A unlike Co B. Thus, the HR operations in Co
A were favourable to employees which integrated organisational fit theory, stakeholder
theory and 360 degree congruence model.
The case study mentioned clearly that Co B considered employees acquired from
subsidiaries as resources and not as stakeholders. It also mentioned that Co B rendered 500
employees redundant after September 2017. One can point out taking into account the
negative employee policy of Co B, there might have been chances that the company had
rendered its employees redundant without giving them notice period or redundant pay as per
the UK Labour Law (gov.uk 2018). Thus, the two organisations were not organisationally
fit.
Information system changes in organisations post acquisition:
Organisational acquisitions have deep impacts on the information systems, especially
in the acquired companies. The case study does not mention about any information system
explicitly in case of Co A but mentions that the apex management encouraged employee
development and participation of employees. There is also clear mention about smooth
organisational change and restructuring of operations of the company in the past. This all
point out to a strong information system which connected the employees and the employer,
thus making each transparent to the other (Chang, Bai and Li, 2015, p. 18-29). This strong
information system prevailing in Co A resulted in low employee turnover.

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ORGANISATIONAL CHANGES DUE TO ACQUISITION
The HR policies of Co B were not employee favourable which resulted in lack
communication gap between the employees of Co A which it acquired. As pointed out in the
organisational fit theory, this poor information system led to high employee turnover in Co B
(Abdalla et al., 2017).
Financial structure changes in organisations due to acquisition:
The financial structures of organisations change when they are acquired by other
organisations. The financial structure of Co A was less shareholder-driven and more aligned
towards generation of revenue by high performance of employees. The financial strength of
Co B was higher than Co A. The financial strength of Co B was owing to the investments of
the equity shareholders who played active role in the business strategies of the company
(Bloom, Sadun and Van, 2015, p. 442-46). Thus, the financial structure of Co A was driven
by revenue which is evident from the high level of innovation in products and employee
participation, thus organisationally fit. The financial structure of Co B is more capital driven
and less organisationally fit owing to lower importance of employees (Mwangi and Murigu,
2015).
Stakeholder theory:
The stakeholder theory is a management theory which states that business
organisations must function ethically to benefit its stakeholders. Business organisations
categorise their stakeholders into two broad categories namely, internal and external (Chang,
Bai and Li, 2015, p.18-29). The internal stakeholders are the apex management and
employees who make and executive the business strategies respectively. The customers,
governments, suppliers and shareholders are external stakeholders who do not form a part of
the company but can impact the business operations of the company by their decisions
(Hörisch, Freeman and Schaltegger, 2014, p.328-346). Co A in the case study considered its

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employees as important internal stakeholders and aligned them strategically with its
innovation projects. The innovation and high product quality were important to Co A, which
means that the company sought to benefit the customers and hence generated high revenue
(Bridoux and Stoelhorst, 2014, p. 107-125). The case study mentioned that the company
underwent dynamic organisational changes and brought about innovation in product lines.
This clearly shows that the Co A enjoys strong shareholder and customer support which
rendered it its strong financial base (Di and Kostovetsky, 2014, p.158-180).
As far as Co B is concerned, it gave more preference to shareholders’ theory
compared to stakeholders’ theory, thus exhibiting poor corporate governance. The case study
clearly mentions that it was the profit maximisation motive of the shareholders which was
instrumental behind Co B acquiring Co A. This lack of Co B’s motive to retain and manage
employees was more evident by the redundancy of 500 employees. Thus, it can be
summarised from the discussion that Co B though richer than Co A did not operate to bring
about benefits of all the stakeholders (Takacs, Campbell and Hitt, 2017, p. 555-584).
Leadership theories:
The case study mentions two leadership theories applied in two companies which
would analysed in the following section.
Transformational leadership theory:
The transformational leadership theory emphasises on the leadership where leaders
work along with the followers. The leaders here recognise the need to embrace changes
within the organisation to adapt to the changing macroeconomic scenario. The
transformational leaders motivate their followers to take responsibility and onus for their
work, thus empowering them in the process (Banks et al., 2016, p. 634-652).

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The case study clearly mentions that Co A underwent a great deal of change to make
its production capacity and operational capability robust. This great adaptability of the
employees to embrace the changes can be attributed to the transformational leadership of the
apex management. The management of Co A was very employee focussed and laid great
stress on the development of the employees (Antonakis and House, 2014, p.746-771).
Autocratic leadership theory:
The autocratic leadership theory refers to a leadership style where the leaders
exercises absolute powers and the group has little or no input at all in decision making. The
leaders following this style take entire onus and credit of the achievements of the group and
leave very limited scope for the followers to develop their decision making skills. This kind
of leadership gradually erodes the development of the subordinates which ultimately leads
them to leave the group like resignation of 500 employees in Co A. The autocratic leadership
style prevailing in Co B showed that it did not consider its employees, one of its internal
stakeholders of strategic importance (Smith and Rönnegard, 2016).
Conclusion:
The case study and the subsequent discussion reveal that Co A was more employee
centric, stakeholder beneficial and encouraged innovation. Co B is more profit centric and
driven by the motive to bring about maximisation of shareholders’ investment. The company
does not consider employees as stakeholders but as mere resources acquired either through
recruitment or from acquisition of companies. The discussion clearly points out that
leadership styles prevalent within organisations have deep impact on the organisational
culture. Transformational leadership in companies motivate employees to participate in the
operations which boosts their performances. The companies should align their leadership
strategies with their organisational culture to attain market growth. Although Co B is