Leadership & Integration: A Case Study of DeWaalBioHealth Merger

This case study examines the merger between DeWaal Pharmaceuticals and BioHealth Labs, highlighting the critical role of strategic fit in achieving successful mergers and acquisitions. It identifies conflicting values, particularly financial and leadership aspects, arising from cultural differences and power struggles between top managers. The analysis reveals that the integration process was flawed due to a lack of compatibility in management styles and corporate missions. The paper recommends using Lewin's change management model to resolve conflicts and improve integration. It emphasizes the importance of addressing these issues before senior executives and HR departments to ensure a smoother transition and mitigate potential negative impacts on organizational culture and employee morale. The study concludes that prioritizing strategic alignment and conflict resolution is essential for the success of mergers and acquisitions.

Running head: MERGERS AND ACQUISITIONS
Mergers and Acquisitions
Subject Code and Title
Name of the Student
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Word Count: 2781 words

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Executive Summary:
The case study shows that establishment of strategic fit is of utmost importance to attribute
acquisitions and mergers with the desired results, capital appreciation and increased market
competitiveness. However, the competition to gain power and influence between the top
managers of the merging companies inhibit establishment of the strategic. The struggle erodes
the organisational culture, thus creating an ambience of insecurity and tension. It can pointed out
that the case study several times mentions employees of both DeWaal and BioHealth, due to
cultural shock they were suffering from. It can also be pointed out that the lobbying activities
which Steve and Kasper of BioHealth and DeWaal embarked upon were unethical and would
lead to failure of the new company DeWaalBioHealth..

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Table of Contents
Executive Summary:....................................................................................................................1
Introduction:................................................................................................................................2
Part 1. Conflicting values:...........................................................................................................2
Financial value:................................................................................................................................3
Value of leadership and top managers:........................................................................................4
Part 2. Process of integration between DeWaal and BioHealth:.....................................................5
Theory of strategic fit:.................................................................................................................5
Part 3. Recommended conflicting resolution:.................................................................................8
Unfreeze:......................................................................................................................................8
Change Implementation:..............................................................................................................9
Refreeze:....................................................................................................................................10
Part 4. Recommended process before senior executives and HRs:...............................................10
Conclusion:....................................................................................................................................11
References:....................................................................................................................................12

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Introduction:
Mergers and acquisitions are one of the most formidable strategies used by multinational
companies to expand their businesses. This is because both the strategies leads to appreciation of
asset values for the companies involved. Increased financial power and asset value appreciation
act as security for investors and customers. This leads to attracting more capital and revenue
respectively. These two strategies on the flipside initiate a conflict of power and influence
between the top managers of the participating companies, especially in case of mergers where
both the companies integrate their resources to form a new company. The conflict for power
exists in case of a merger since unlike an acquisition, none of the companies become subsidiary
to one other, thus retaining their positions. This tussle between top executives for power and
influence would form the crux of the paper. The aim of the paper would to explore this
competition for power which takes places between the apex managers and their allies of the
companies participating in the merger. An article published in the Harvard Business Review
titled ‘Who Goes, Who Stays?’ depicting struggle for power between top managers of two
arbitrary companies namely, DeWaal and BioHealth. The theories applied in the study are
strategic fit, stakeholder theory and Lewin’s change management models.
Part 1. Conflicting values:
The conflicting values of the DeWaal Pharmaceuticals and BioHealth Labs, were at stake
due to the decision of the two companies to merge into one organisation namely, DeWaal
BioHealth. The conflict of the culture between the two companies arose because they belonged
to the different markers with diverse corporate culture. DeWaal was based in Netherlands while
BioHealth was based in New York City, the United States of America (Hbr.org. 2019). The

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following are the conflicting value which were at stake due to merger of the two companies to
form DeWaal BioHealth:
Financial value:
The first conflict which arose due to the merger between DeWaal and BioHealth was fall
in the financial value instead of the targeted high value which the apex management of the two
companies had aimed to achieve. As far as BioHealth was concerned, the stock price of the
Dutch pharmaceutical company fell by 20 percent. This devaluation of the one of the companies
participating in the merger, namely BioHealth would obviously lower the value of the combined
stock of the new company. It can also be pointed going by the theory of strategic fit, the
cultural diversity between the two companies proved to a major impediment. This was evident
from the dwindling share prices of BioHealth and resigning of employees from both the
companies. Manconi, Peyer and Vermaelen (2017) mention that companies should gain the
approval of the shareholders before taking any major business decision in order to gain their
support. However, in this case the fall of share price of the BioHealth by a whopping 20 percent
clearly showed that the shareholders of the company did not assent to the merger which proved
the conflict of interests between the company and the shareholders (Hbr.org. 2019). Pearlson,
Saunders and Galletta (2016) mention that employees play strategic role in business
performance. They acquire and apply knowledge in performing significant operations like
product strategy. As far the case study in concerned, it can be mentioned that both the companies
manufacture highly specialised drugs. Thus, it can be inferred from the discussion that retention
of employees is empirical to high organisational performance in order to earn high revenue. The
case study mentions that both the companies are losing employees due to the cultural difference
(American work culture and European work culture) which means that they were losing revenue.

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Thus, the company which would be formed due to the merger namely, DeWaal BioHealth would
suffer from erosion of financial value due to cultural difference between the two companies.
Value of leadership and top managers:
The second aspect of value which was subject to erosion was leadership which included
the top managers of both the companies namely, DeWaal and BioHealth. Mahadewi (2017)
mention that one of the area of conflicts in case of mergers is leadership and that employees of
the participating company feel secure to see their respective management bodies take the leading
position. Alvesson and Sveningsson (2015) strengthen the opinion by employees perceive
change of leadership as change of culture which creates a perception of insecurity among them.
The discussion can also be analysed through the lenses of stakeholder’s theory. Korschun
(2015) mentions that management and employees are the two important internal stakeholders.
The case study reveals that there was a cold war commencing between the two CEOs namely,
Steve Lindell the CEO of BioHealth and Kaspar van de Velde, the CEO of DeWaal. Steve, being
the CEO of the bigger company wanted to retain his position in the new company as well.
Kasper on the hand was an experienced corporate leader, especially in the European
pharmaceutical market, assented to hold the position of the chairman since he was heading
towards retirement. However, the case study does not provide any strong evidence to prove his
wilful acceptance of the offer. Kasper using his experience and influence wanted the HR
department of BioHealth to lead the new company. Steve in to accord with Kasper had to demote
Bruce, the former HR head at BioHealth to the position of the director of corporate training,
much to dismay of the latter (Hbr.org. 2019). Thus, it is evident that difference in work
culture between merging organisation lead to conflict between the apex leadership and
employees holding senior positions.

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Part 2. Process of integration between DeWaal and BioHealth:
A critical analysis of the case study shows that the procedure which was used to integrate
the systems of the two companies namely, DeWaal and BioHealth in terms of structure and
top management was not appropriate. The fact can be established using strategic fit theory as
under:
Theory of strategic fit:
The theory fit plays a very important in establishing success of mergers and acquisitions
between two or organisations. Angwin and Meadows (2015) defines strategic fit as the situation
in which two or more organisations are compatible in terms of the organisational cultures and
overall business objectives. The factors which comes into play in terms of judging strategic fit
are management teams, corporate mission, alignment of organisational business aims and
cultural factors. Marks and Mirvis (2015) point out that the first factors which have to be
considered while deciding strategic fit is compatibility of management bodies of the
participating organisations. Greve and Man Zhang (2017) mention in this respect that
compatibility of the top layer and the medium layer of management of the participating decide
the success of the merger to a great extent. This is because the mergers of organisation
necessitate in drastic changes in the organisational operations and this change has be to be
managed efficient at the apex management levels of the merging organisations. As far as the case
study is concerned, it can be pointed out that there existed a struggle of power and influence
between the management of both the companies at the top as well middle levels. Steve wanted to
hold his position of the CEO even in the new company formed due to the merger namely,
DeWaal BioHealth being the CEO of BioHealth, the bigger of the two companies. Kasper, the
apex manager of DeWaal using his influence reserved the position of HR head for Christian

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Meyer, belonging to DeWaal. It was also decided that the headquarters of DeWaalBioHealth
would be the United States but the European operations would be controlled from Netherlands,
the headquarters of DeWaal. Thus, it is evident from the discussion that far from striking a
compatibility, the two corporate leaders were in a war to exercise and retain their influences on
the new company by appointing their respective executive level employees in high positions in
the new company. For example, though Kasper ceded the position of CEO to Steve, he appointed
Meyers, his representative as the HR head in order to retain his influence over the employees of
the company (Heracleous and Werres 2016). Thus, it is evident from the discussion that
procedure which Steve and Kasper in manage the merger at the top level was not legitimate.
The corporate missions, the second factor affecting strategic fit was not entirely similar
in case of DeWaal and BioHealth, in spite of the fact that both the companies belonged to the
pharmaceutical industry. Chatterjee and Brueller (2015) point out that a very significant criteria
which comes into consideration of strategic fit in case of merger is integration of assets which
also include plants. Steve in order to strengthen the stake of BioHealth in manufacturing process
of DeWaalBioHealth, the new company wanted to close DeWaal plant in Indonesia and retain
the Shanghai plant of BioHealth. As far as India was concerned, Kasper wanted to close to down
the plant in Mumbai which was under the ownership of BioHealth. As far as heading the Indian
operations were concerned, the Steve and Kasper negotiated to put their respective confidantes
Vijay and Kruger as joint heads. Thus, this discussion also shows that though corporate missions
of both the firms were to dominate the Asian market, both of them were in conflict to retain their
respective influences over the market by placing their respective candidates in high positions.
This conflict of interest between Steve and Kasper led to insecurity among the subordinate
employees which affected the culture of both the companies. The outcome of this insecurity and

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DeWaal
(Netherlands) BioHealth(USA)
Kasper Steve
DeWaalBioHealth
(merger)Meyer
(HR head)
Bruce
(Director,
Corporate
training
Asian operations (DeWaalBioHealth)
Indonesian
plant Shanghai plant
Bangalore
plant Mumbai plant
cultural degeneration led to high turnover of employees. Thus, it can be inferred that from the
discussion that integration between the DeWaal and BioHealth was not successful in terms
of structure and top management staffing.

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Figure 1. Model showing conflict between DeWaal (yellow) and BioHealth (blue) merging to
form DeWaalBioHealth (green)
(Source: Author)
Part 3. Recommended conflicting resolution:
The management bodies of DeWaal and BioHealth can be recommended to resolve the
conflict by using the change management model proposed by Kurt Lewin. The change model
of Kurt Lewin takes into account three steps to bring about changes in organisations namely,
unfreeze, change and refreeze. Rosenbaum, More and Steane (2018) point out that merger
between two or more business organisations result in change of leadership which have
significant impacts on the all the operational aspects right from the organisational culture and
operational methods. Chatterjee and Brueller (2015) can be reiterated in this respect to point out
that merger between companies also result in change in the manufacturing process due to change
in the personnel making important decisions like financing and procurement at the senior level.
Wojciechowski et al. (2016) can be applied in this case to point out that all the operational areas
of business are interdependent and work as a system, the base of the systems theory. Thus, in
this respect it can be pointed out that case study did not mention involvement or training of the
lower level employees of the two companies even after the high turnover of employees. Thus, it
can be recommended that the management of the two companies should use the three step
change management model formed by Kurt Lewin to successfully manage the merger to form
DeWaalBioHealth.

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Unfreeze:
It can be recommended that the management of both the companies namely, DeWaal and
BioHealth should make the employees understand the need for the change. Thompson (2017)
points out that organisational changes due to mergers result in fear and insecurity among the
employees. The employees in the lower level fear losing their jobs and try to resist the changes.
Cummings, Bridgman and Brown (2016) point out that this insecurity among employees result in
conflict between the former and the management. As far as the case study is concerned, it does
not mention any conflict between the employees and the management of the two companies.
However, it mentions employees resigning due to a feeling of insecurity. It is clear that this high
employee turnover would render the new company DeWaalBioHealth inefficient. Thus, it can be
recommended that Steve and Kasper should educate the employees, including the lower level
employees about the importance of the merger and the positive results it would usher like
strengthen the operations of the company financially (Rosenbaum, More and Steane 2018). The
insecure employees should be offered counselling to deal with the fear. The employees from
both the US and Netherlands should be given cultural training to boost cultural understanding
both the employees based in both the countries. The departmental heads should obtain their
support and participation in order to manage the change which would take place post-merger.
This would lead to more effective and long term solution of the high turnover of the employees
in both the companies owing to insecurities.
Change Implementation:
The next step is to implement the changes as a part of the organisational culture. The
Steve and Kasper should implement the newly formed laws and policies while leading
DeWaalBioHealth, the new organisation. They should gain participation of all the employees in

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embracing the change. This would lead to more successful management of the change which
would come up in the two organisation. This would also prevent the organisations from losing
the talents in operating the new company. Thompson (2017) can be reiterated in this respect
leaders play a very important role in aiding the subordinate employees in embracing the change.
It can be pointed out in the light of the case study that Steve and Kaspar instead of conflicting to
retain their influences. They must negotiate ethically to place the most appropriate personnel in
responsible positions.
Refreeze:
It can be recommended that this step should take place in the newly formed company
namely, DeWaalBioHealth. The two companies namely, Dewaal and BioHealth should retain all
the employees and train them to operate in the newly formed company. They should emphasise
on strengthening the organisational culture of the company which had broken down.
Part 4. Recommended process before senior executives and HRs:
Steve and Kaspar should integrate the operations in collaboration with their respective
HR to integrate the top structure. They should hold meetings to decide on the positions in the
new organisation which have to be filled. They must along their respective HR teams decide the
most appropriate employees who could hold top positions and set the staffing plan according to
the competencies of the employees. The following is the outline of the integration of the
management of DeWaalBioHealth at the top position.
Activity nos Activity details Responsible
personnel
Time(months
)
1
Kasper holds meeting with HR of DeWaal to
shortlist employees at high levels Kasper 1
2
Steve holds meeting with HR of BioHealth to
shortlist employees at high levels Steve 1