Title: Cultural Issues (Change Management) in Mergers
ICON College of Technology Management
BTEC Edexcel Level 7 Advanced Professional Diploma in Management Studies
(DMS) (Semester 1)
Module Leader: Dr. Paul Howe
Course: Research Method
Today’s fast growing globalize economies and competition have forced industries to fine ways to survive in today’s perplexed business environment and generate profit for their shareholders. There are many methods to develop the organizations one of them is Mergers and Acquisitions. This is where strategies for success are developed by acquiring new companies or by the merger of two (P.Gaughan, 2000). Mergers and Acquisitions are amongst the most important phenomena of modern economies (Kwoka, J.E. Jr 2002).
Globally number of completed acquisitions tripled between 1991 and 2001. But the world wide announced deals declined rapidly after 2000 falling by nearly 30% in 2002, North America particularly showed its lowest level of activity since 1994(Johnson et al 2005). Mergers and acquisitions occur frequently in organizations, but rarely achieve their desired financial and strategic objectives. There is a need to review the human, organizational and cultural dynamics affecting mergers and acquisitions, and reports recent trends influencing interventions to enhance merger and acquisition success. Managers need to describe consulting approaches and methods required to minimize employee stress, management crisis and culture clash and to enhance the desired financial and strategic results of mergers and acquisitions (Mitchell lee marks 1997).
AOL and Time Warner:
America Online (AOL), founded by Steve Case, began life as a proprietary online service and became the biggest provider of home internet connections; in 2000 it bought a media conglomerate, Time Warner. The move, which needed almost a year to be approved by the FCC, sparked a flurry of (not necessarily wise) online-offline mergers. Just under three years later, the Time Warner investors, holdings in the merged company were worth only $36bn, a loss of over $50bn.
The new AOL Time Warner hoped to use its many divisions to promote group products, but ran into trouble when advertising revenues fell in 2001. Amid lawsuits from shareholders alleging that AOL's value had been overstated before the sale, Mr. Case stepped down as chairman in May 2003.The renamed Time Warner, under its chief executive, Richard Parsons, had to face off a challenge from Carl Icahn, a notorious "corporate raider" unhappy with company strategy, in early 2006. Jeff Bewkes, who will succeed Mr. Parsons as chief executive on January 1st 2008 is expected to make Time Warner much smaller.
The management of these two companies has still been unable to attain the benefits of synergy which actually is the main driving force behind the mergers and acquisition activities. Under achievement of the company is resulted from problems with cultural fit, learning and integration of the new company.
Source: http://www.economist.com/background/displayBackground.cfm?story_id =10097842
Purpose of the research:
The main reason for doing this research thesis is to identify the cultural issues at Time Warner and AOL. Which has been a hurdle in the path of company's progress? The aim is to identify the role and need of training for the management of the company to manage the desired impact of mergers and acquisition on the new conglomerate. There is also an immediate need to identify the importance of communication, leadership, synergy management, stress, motivation, training, performance feedback and culture.
Following research statements can be made in the context of above discussed issues:
How merger affects the performance outcome of the company? Which approach company uses to communicate the merger and acquisition? How staff can be...