Mktg577 - Week 6 Case Study

Topics: Mergers and acquisitions Pages: 7 (2202 words) Published: April 16, 2013
I. Statement of the Problem

The analysis is based on the merger and acquisition between E.T Kearney and EDS. E.T Kearney is the largest management consulting group while EDS is a technology firm. The company’s merged to form a new defining entity that could combine the synergies of both firms in the quest for improved efficiency. The merger created a cultural shock which created problems that are associated with organizational culture change .In this paper, we analyze the merger and acquisition as well as the recommendations for better performance of the newly created entity.

II. Summary of the Facts

The acquisition of the management consulting firm A.T Kearney by an information technology firm EDS marked a significant move by such a technology firm in acquiring one of the best management firms in the corporate world. EDS bought A.T Kearney for a total of $300 million in liquid cash and contingency payments as well as a stock incentive provision of seven million shares. The total amount was more than $600 million. The merger between the two firms was good as a result of the synergetic as well as complimentary industry, geographic as well as functional strength. The acquisition of A.T Kearney by EDS was one of EDS grand vision of becoming a “Defining Entity”.

III. Analysis

An analysis of the case reveals that the merger and acquisition greatly impacts organizational performance and organizational culture. Our analysis covers the effects of mergers and acquisition on an organizational performance, success factors in M&A as well as organizational culture change and resistance that take place in a merger and acquisition.

The strategies of a successful M& A
For A.T Kearney by EDS to merge successfully, there is a need for the process to be conducted smoothly. From the A.T Kearney by EDS case, we realized that the integration of the firms that has been acquired should be carried out as an ongoing process that must be initiated prior to the closing of the deal. During this period of acquisition negotiation as well as its subjection to regulatory review, the management of the companies that are involved in the merger must work together in drawing up a clear and proper integration strategy. Ravenscraft and Scherer (1987) indicated that even if a thorough investigation is carried out before the merger, some of the problems might never reveal themselves until at such a time that the deal has already been done. The integration management of the new entity must be appropriately recognized as a very distinct business function having an experienced manager who is especially appointed to oversee the integration process. Should uncomfortable changes such as restructuring and layoff be necessary, it is crucial that the management of the newly formed entity to announce as well as implement these as soon as possible. This is necessary in order to avoid resistance to organizational change. The aim of such swiftness is to avoid the various uncertainties as well as anxieties that may demoralize the company’s workforce in the newly formed entity. Another important lesson that we can learn from this case is that it is important to integrate both the practical as well as business of the company’s workforce as well as their cultures. An optimal strategy is the one that involves the degree to which the cultural difference can exist between the various organizations can retain their own culture as well as identity as indicated by Appelbaum et al (2000).The merger between the two companies created synergies as well as completely new services like CoSourcing. Cultural shock is noted in the study to be one of the main challenges that could have resulted as a result of the acquisition. A.T Kearney feared that there would be a mass exodus of most of its excellent and professional staff. The potential loss of clients was also envisioned. Organization culture is a term that is used to refer to the collection of values, policies...

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