The sale proceeded through open tender and a number of other bids for the company were submitted in addition to that of Enel, including from Czech and Russian companies. From Hydro’s perspective, its oil and gas business was considered too small to enable it realistically to participate in the international market, which meant that some form of merger or alliance was necessary for this objective to be pursued. The merged company is not only the largest offshore producer of oil and gas in the world but also the largest company in any activity in the Nordic region. At the time of the acquisition, Interia.pl was valued at about €50 million and employed only 170 people, whereas Bauer Publishing had around 6,400 employees. Slovakia: Slovenské elektrárne, a.s. and Enel When this attempt failed, the trade unions agreed a social plan to provide compensation for employees losing their jobs – those in ABN AMRO head office, in particular – which was subsequently improved in order to offer them redundancy payments equivalent to 18 months’ salary. The Hungarian government, through the Hungarian Privatisation and State Holding Company (Magyar Nemzeti Vagyonkezelő Zrt. MNV Zrt. ), announced the privatisation of Budapest Airport Rt. in June 2005. The sale of the company to the British company BAA took place in December 2005. Within months, BAA decided to auction its stake in Budapest Airport Handling (Kereskedelmi es Szolgáltató Kft, BAH) that provides ground handling services at Budapest airport, which it purchased as part of the takeover deal. This was acquired by Celebi Ground Handling Inc. of Turkey in October 2006. In June 2007, BAA then sold its holding in Budapest Airport to HOCHTIEF AirPort GmbH (HTA ), part of the German HOCHTIEF Group, one of the largest construction companies in the world. The merger has succeeded in increasing the growth of the business, the market share of the new company in the region and its profitability. This growth has also resulted in intensifying competition in the banking market, creating pressure on other banks to expand in the same way and leading to further rounds of merger activity. Competition, in other words, has come, in part, to take the form of growth through acquisitions. As it turned out, the two companies’ financial performance has been, if anything, better than anticipated and, in 2007, the two together achieved an increase in turnover of 6% and a growth in profits before tax of 26%. In March 2006, the German pharmaceutical company Bayer announced plans to take over the German pharmaceutical company Schering three parts of essay writing, with production plants in Asia, Europe, Latin America and the US and with R&D facilities in Europe, Japan and the US. The purchase was eventually completed in 2008 to form Bayer-Schering Pharma after agreement from the US authorities and the European Commission. Although the companies are both in the same industry, the fields in which they specialise and carry out research tend to differ. At the time of the merger, Arcelor was the second largest steel manufacturer in the world employing in the region of 13,000 people in Belgium, 78,000 in Europe and 96,000 worldwide, while Mittal, the largest producer in long steel, employed 220,000 people in its plants around the world. After the takeover, in 2007, the merged group ArcelorMittal had a total of 310,000 employees worldwide. Citywire.co.uk, ‘Boots spell out job losses in Alliance UniChem merger plan’, 6 June 2006. One point to emphasise at the outset is that, while the company cases reviewed in this report cover a relatively wide range of circumstances and many different sectors of economic activity, they cannot claim to be representative of the mergers that have occurred across the EU in recent years or of the outcomes either for the companies involved or for employees. The instructions given to the national correspondents responsible for selecting a particular merger in their country as a case study for addressing the various aspects listed above were relatively open-ended. Guidelines stated that: Within less than a year of its acquisition, Interia.pl has expanded its workforce by 45% and now employs some 245 people. Although no explicit forecast was made of the scale of the expected increase in employment, an increase was expected to occur given the plan to extend the company’s activities. Most of the jobs created have been for qualified web designers and developers, database programmers, system administrators and sales support staff. Trade unions in both companies were consulted to some extent in relation to the merger, although the process was constrained by stock exchange rules over confidentiality. Since the merger was certain to go ahead, trade union efforts were focused on obtaining the best deal possible for their members. Neither trade unions nor employee representatives played any role in the decision-making process leading up to the acquisition. The trade unions in Dacia were informed of the purchase prior to negotiations between the State Ownership Fund (Fondul Proprietăţii de Stat. FPS) and Renault and were consulted during these negotiations. The trade unions were in favour of the acquisition and supported Renault’s proposed strategy for Dacia. The results that ABB anticipated from the acquisition of Elsag Bailey have largely been achieved, in the sense that it has enabled ABB to gain a predominant position in the segments of the market in Italy in which the two companies operated. In Hungary, after the Budapest Airport Works Council had successfully challenged successive attempts to privatise the facility in the Labour Court because it had not been consulted beforehand, the authorities took extra care to involve employee representatives in subsequent negotiations with potential buyers, although this simply meant being formally consulted. Ericsson: www.ericsson.com – Interview with Sivert Bergman, Senior Vice-President and General Manager of the business unit Transmission and Transport Networks at Ericsson, 18 June 2008. The Swiss investment company Sorbes AG, which previously held 51% of the shares in AS Repo Vabrikud, a manufacturer of melamine-faced chipboard in Estonia, purchased the remainder of the shares in August 2005. At the time of the acquisition, about 590 people were employed in AS Repo Vabrikud. The new owners of the company were initially criticised by both GWU and the Union of United Workers (Union Haddiema Maghqudin, UHM ) over the restructuring, but issues were quickly resolved and acceptable solutions were found. The terms and conditions of employment remained broadly unchanged. Although employees were asked to work full days during the summer months instead of reduced hours, they were compensated for this extra working time. However, GO began employing most non-technical staff on temporary employment contracts of up to six months’ duration and skilled technical staff on contracts of at least two years’ duration. The year before the merger, both companies made major financial losses. Both were relatively small operators in the market trying to compete with France Telecom as well as Free, the largest internet service providers in the country. The motivation for the merger was to improve their position in this respect and to become the main competitor against France Telecom and Free in the provision of internet as well as telephone services. Soon after the merger, the management of the new group set a target of accumulating four million private clients, including two million subscribers to ADSL – a data communications technology that enables faster data transmission over copper telephone lines than a conventional voiceband modem can provide – within 18 months and securing 20% of the market for services to companies. The overall aim was to increase turnover from €2.8 billion in 2005 to €3.3 billion in 2007. The change in ownership did not lead to any rationalisation of activities and no jobs were lost. Instead, it was expected that in the longer term the change in ownership would result in an expansion of business and job creation. Terms and conditions of employment remained unchanged after the change in ownership. ABN AMRO had been underperforming for several years and this was reflected in its share price, which led the London-based hedge fund TCI, which acquired shares, to demand that either the bank be split up or sold to the highest bidder. This prompted the bank to first seek a merger with ING, another Dutch bank, and when this failed, with Barclays. The Bulgarian case is different again but with much the same outcome in terms of business. In this case, UniCredito SpA, an Italian company and the largest banking group in central and eastern Europe, consolidated its activities by merging two of its subsidiaries in Bulgaria, HVB Bank Biochim and Hebros Bank, with a third bank, Bulbank, to form UniCredit Bulbank. While the merger led to rationalisation of operations, with about 300 job losses, it has created the biggest and most profitable bank in Bulgaria, which has significantly increased its share of the lending market since the merger. Nevertheless, as in other cases, few signs are evident that the merger has reduced the degree of competition in the sector, although it may have created pressure on other banks to expand through external rather than internal means. Austria: Austria Frost and Frenzel At the time, Bulbank had about 2,000 employees, HVB Bank Biochim some 1,400 workers and Hebros Bank around 800. UniCredito at present employs almost 180 how to cover letter sample,000 workers in various countries. Schering agreed to the acquisition in order to prevent an unfriendly takeover by the German pharmaceutical company Merck. For Bayer, the takeover was intended to expand the company’s market share in pharmaceutical and consumer health products and to put the company back on the list of the top 10 pharmaceutical companies in the world, as well as to increase its R&D capacity. Although no specific plans were defined to increase employment in the longer term, over the years ABB Italia has increased the number of employees in its ‘Power systems’ division where almost all of the Elsag Bailey resources were transferred. Because of its success in expanding its business, ABB Italia hired 500 new employees in 2007 across the company as a whole and expected to hire about another 600 workers in 2008. According to the CEO of Bayer, Werner Wenning, in March 2006, although no precise plans were made regarding job cuts, experience of other mergers indicated possible job losses of about 10% of the workforce. The expectation was that some 6,000 jobs would be lost globally, which led German Chancellor Angela Merkel to intervene and ask Bayer not to cut jobs in Germany. Since the extension of share ownership, production in the company has expanded as a result of investment by Sorbes AG, the company’s profitability has increased and AS Repo Vabrikud has become the biggest producer of melamine-faced chipboard in the Baltic region and one of the biggest exporters in Estonia. Sorbes AG has continued to invest in the company, planning for further growth in the future. Few cases occur where the terms and conditions of employment worsened as a result of the merger, such as in respect of Tallink’s acquisition of Silja Oy Ab in Finland. However, according to the trade unions (although not the management), in the great majority of cases, employment terms and conditions seem to have remained much the same after the acquisition as before – in some cases, with companies taking special care not to antagonise employees when rationalisation measures are underway or planned. The two companies, Boots, a British company which had previously begun to expand internationally, and Alliance Unichem, established as Unichem in the UK in the 1930s and merged in 1997 with the French company Alliance Santé, announced a merger in October 2005. The companies eventually merged in July 2006, naming the extended company Alliance Boots. In April 2008, the company was acquired by Kohlberg Kravis Roberts, a US private equity company. The focus here is on the initial merger. In Italy, the trade unions were informed by ABB about the acquisition of Elsag Bailey, as were the EWCs in its plants. Moreover, ABB was subject to the so-called ‘Prodi protocol’, under which it was required to keep employment levels unchanged for the first five years following the acquisition, unless a specific agreement could be made with trade unions over job cuts. The motivation for the acquisition on the part of Sonae Distribuição was to expand its operations by taking over attractive sites with a relatively skilled workforce and at the same time to be able to spread overhead costs over a larger operation. The results of the acquisition have exceeded the prior expectations, with both turnover and employment amounting to around double the initial estimate, largely because of the competitive nature of operations and their location. At present, Hella has more than 70 manufacturing plants worldwide. In January 2006, Mittal Steel, the Indian-owned steel multinational, launched a bid for Arcelor, the steel company formed several years earlier by the merger of Usinor in France, Arbed in Luxembourg and Aceralia in Spain. In June 2006, the companies reached agreement on the terms of the takeover and by the end of July Mittal had acquired a 92% share in Arcelor. In all, Mittal paid some €27 billion, partly in shares and cash. In July 1999, the French car company Renault acquired Automobile Dacia, a car producer owned by the Romanian state. At the time of the acquisition, Dacia and its subsidiaries employed some 27,560 people, while Renault employed over 133,000 people in its various plants. The cost of the acquisition was only USD 50 million (about €36 million as at 6 January 2009). In Romania, the sale of Dacia to the French car manufacturing company Renault has perhaps had the most pronounced effect in strengthening the domestic sector. It has, therefore, resulted in the design and quality of the cars produced improving dramatically, extensive training of staff, an enhanced sales network and a doubling of car production in three years. Apart from this, however, it has stimulated increased inflows of foreign direct investment across the whole car industry in the country, contributed considerably to net exports and, accordingly, boosted Romania’s growth performance and real income levels. After the acquisition of MN, the Orlen Group became the largest oil refiner in central and eastern Europe and invested in the modernisation of the MN refinery. In addition, the network of petrol stations in Lithuania and Latvia is in the process of being expanded further, while energy partnerships have been negotiated with Russian companies. Overall, the incorporation of MN into the Orlen Group has strengthened the oil refining sector in Lithuania. When Celebi took over BAH and its 500 employees, the trade unions concerned and the works councils of both Budapest Airport and BAH were consulted during the tender process. The terms and conditions of employment of all BAH employees after the purchase were governed by the collective agreement then in force where can i buy a business plan, which was valid up to September 2008. Part of the agreement with the trade unions was that all BAH employees should receive a performance bonus equivalent to three months’ pay following the deal. Greece: Aluminium de Grèce and Mytilineos Group Thirdly, the wider effects on the economy are of concern, with regard to the extent to which the merger led to an improvement of the performance of the sector concerned in the country, or region, in question, and how far this benefited the national or local economy. Mergers are a major feature of market economies which have potentially conflicting effects on competition. According to conventional economic theory, they tend to increase the degree of monopoly power and so reduce competition and its beneficial effects on economic efficiency. However, in reality proofreading services for students uk, in an monopolistic world where size matters, they can increase the effective degree of competition. In other words, in markets where competition takes place between relatively few large producers, mergers can be an important means of increasing the economic and financial strength of smaller companies and enabling them to compete on more equal terms with larger companies. As such i defend my master thesis, mergers can create a countervailing force to combat the dominant position of the latter and therefore put pressure on them to seek ways of continuously improving their efficiency, as much as competition between a large number of small companies is supposed to do in competitive markets. GO has pursued its policy of modernisation and has continued to invest in updating services. Its initial goals have largely been met and the wide range of services provided has increased the company’s profitability. Expansion has continued through a new submarine cable that will connect Malta to Sicily. Furthermore, between 2005 and 2008, GO acquired holdings through TECOM in telecommunications providers in the Middle East, Tunisia and Greece. For those workers made redundant, the company arranged a voluntary training programme concentrating on practical re-employment issues, which seems to have helped the workers concerned find new jobs more quickly. Renault’s reason for purchasing Dacia was to use it as a lower-priced brand to sell in developing countries and to market vehicles made to European standards at competitive prices. The intention was to upgrade both the existing plant by installing modern technology and the cars produced so that they would meet international quality standards. The aim of the merger was also to modernise and extend the sales network. A central objective was to manufacture a new stylish and reliable family car for launch in 2004 and to use this as a spearhead to enter emerging markets. Bauer Publishing’s main reason for acquiring Interia.pl was to expand its multimedia activities and add a web portal to its newspaper (the company publishes 32 newspapers) and radio businesses (Bauer acquired the RMF FM broadcaster in 2006). The company aimed to exploit the opportunities offered by the internet and to take advantage of the potential economies of operating across three different media. In some countries, however, legislation requires employee representatives to be consulted in privatisation cases, as in Slovakia or Slovenia. Legislation on consultation also exists in the Netherlands, in the form of the Social and Economic Council (Sociaal Economische Raad, SER ) merger code, so that the central works council in ABN AMRO was, accordingly, consulted at an early stage and was continuously involved in the process leading up to the acquisition. According to a press release issued by Bayer in March 2008, however, 90% of the jobs cut in Germany will be made without forced redundancies ‘in a socially responsible manner’ – which means offering severance pay above the statutory amount – although works council members have voiced concerns about whether workers have always left their jobs voluntarily. Moreover, works council members claim that they had to put pressure on Bayer to enter negotiations on the job losses and to award compensation for the workers affected. Developments in the steel industry and pressure from trade unions and the Walloon regional government led Mittal to reassess the case for closing the plants. In 2008, it agreed to reopen a blast furnace closed in 2005 at a site in Seraing and to maintain ‘hot phase’ production up until 2012, the expressed aim being to keep steel-making in Belgium for as long as possible by developing new techniques. The jobs to be lost were therefore maintained and 180 new jobs were created. At the same time, terms and conditions of employment have been maintained, as initially agreed by Mittal. Hungary: Budapest Airport Rt and BAA/Celebi Ground Handling Inc./HOCHTIEF AirPort The takeover was successful in meeting Mittal’s objectives of strengthening its global position in the industry. Since the takeover, the company has acquired a number of other steel companies around the world in countries like Austria, Estonia, Italy, Mexico, Slovakia sample essays written by students, Turkey, the UK and Uruguay. At the time of the announcement, Bayer employed some 82,600 people worldwide, while Schering had a global workforce of about 25,000 people. The purchase of Schering for a sum of €16.3 billion was financed in part by the sale of two Bayer subsidiaries – H.C.Starck and Wolff Walsrode. Trade unions played no part in the decision-making process, although they were consulted in both companies a few days after the merger was announced. All of the trade unions involved were in fact in favour of the acquisition going ahead. Hella first acquired a 51% stake in SA, which was subsequently increased to 92% and then to 100%. Immediately following the acquisition, Hella launched an investment programme to the value of €9 million) in Saturnus SA. Expansion of employment was not explicitly planned but the market for banking and financial services is growing, which is leading to the creation of new jobs in the sector, particularly jobs which tend to require relatively high-level qualifications. Tallink Silja Oy belongs to the Estonian AS Tallink Group, which is the market leader in cruise and passenger transport on its Estonian, Finnish, German, Latvian and Swedish routes and a significant freight shipping company in the Baltic region. European Restructuring Monitor entries: 3 October 2005, 28 August 2006 and 8 September 2006. At the time when it was privatised, Budapest Airport employed about 2,000 people and was valued at around €1,850 million. When Celebi acquired BAH, it gained around 500 employees. HOCHTIEF purchased the company from BAA for around the same price. The regional government of Lower Austria and the regional office of the Public Employment Service (Arbeitsmarktservice, AMS) set up a re-employment scheme for all 54 employees concerned with funds of up to €270,000. Initial attempts to privatise the company were contested by employee representatives. The Budapest Airport Works Council challenged successive privatisation attempts in the Budapest Labour Court on the grounds that, among other complaints, it had not been informed or appropriately consulted prior to the publication of the invitation to tender. The court upheld the works council’s claim and ruled the tender to be invalid on two separate occasions. After the ruling, the privatisation authority took care to involve employee representatives in subsequent negotiations with potential buyers. Their involvement, however, was limited to being consulted as required by law. For Ericsson, the purchase was part of its strategic objective of growing faster than the market and maintaining profitability in line with the rest of the industry. Between 2005 and 2007, the company’s acquisitions amounted to some €4.3 billion. Even where jobs in the merged company are lost, however, the ones remaining tend to be more stable and less vulnerable than they were previously because of the company’s increased economic strength. In a number of cases, this has also had wider beneficial effects on the local or even national economy, such as in respect of Renault’s takeover of Dacia in Romania or the expansion of melamine-faced chipboard production in Estonia. The acquisition has had no material effect on MN staff, as they were protected by the collective agreement in force at the time of the purchase. No changes in pay scales or working hours and no cuts in employment have been introduced. Six employees, however, refused to join the new company and were dismissed with severance pay. In January 2008, Bauer Publishing, a German company specialising in the publication of books, periodicals and newspapers, expanded into the Polish publishing market by acquiring Interia.pl, a Polish company specialising in providing web portals. The Irish case, which can be included under this heading, was somewhat different from other cases. It involved the Trustee Savings Bank (TSB), which was state-owned but a viable and financially-sound enterprise, being acquired by Irish Life and Permanent, which was itself publicly owned in the past. Although the acquisition led to some rationalisation of operations and initial job losses, like the other cases outlined above, it also led to significant job creation in the long-term as the new business under the name Permanent TSB was expanded. It became apparent at the time of the takeover that the new owner did not have a detailed strategy to follow in the aftermath of the event – according to the company, the acquisition was made too quickly to allow for the creation of such a forward-looking strategy. However, some plans were formed, especially in terms of expanding ČPP’s registered capital threefold to emphasise its financial strength and its ability to meet its long-term liabilities. Other plans by the company included retaining ČPP’s position in the motor insurance market and not to change its name. No major changes occurred in the company’s management structure. No trade unions existed in either Interia.pl or Bauer and worker representation in both companies was rather limited. Accordingly, no consultation took place with staff over the transaction in either company. The main purpose of the merger was to rationalise the operations of the three banks, to unite their activities and to achieve a large market share as a result, as well as to establish a joint modern information system and e-banking facilities. Jobs losses from restructuring involving mergers or acquisitions, 2002–2007 (%) The main reason for the takeover was to strengthen SE’s position in the domestic energy market, by improving its efficiency through the knowledge gained and expanding its financial resources for further development. Major restructuring, which had already been carried out from 2003 to 2005, had reduced operating costs, in part by cutting employment by 20%, and the company was reasonably profitable at the time of the sale. A number of the other cases also involve a company that is insolvent, or close to becoming insolvent, being taken over by a stronger company, thus enabling the former company to remain in business rather than closing, as would happen in an apocryphal competitive market, and the latter company to expand its operations. Jobs are maintained, or more precisely fewer jobs are lost, and the prospect emerges of increases in the efficiency of the sector concerned if production techniques and ways of working are transferred from the stronger company to the weaker one. Accordingly, in this scenario, there seem to be only winners and no losers. Although competition in the sector concerned might decline, the longer-term effects of this on efficiency tend to be intangible and difficult to identify. On the other hand, as noted at the outset, competition in some sectors is more likely to increase than to decline as a result of a merger because of the nature of competition and its focus on quality and innovation in addition to price. At the same time, the acquisition has led to the development of the region’s road network, and the company has contributed considerably to Romanian net exports and the state budget. Additionally, it has improved Romania’s image abroad by demonstrating the stability of the business environment and by providing an example for foreign investors interested in developing related businesses. The reductions in employment were achieved partly by persuading older workers to take early retirement and partly through collective redundancies, with the rate of severance pay being higher than the statutory level because of state subsidies. In 2008, over two years after the acquisition, 25 new jobs were created for machine operators on the production line. Following the acquisition, the Mytilineos Group has continued to expand its operations by extending its interests in the metal industry and recently expressed its intention to enter the energy market by acquiring recently privatised companies in Greece. Such a move would give the company the means of producing the energy needed to operate its plants in the aluminium and other metal industries and to control costs that have been rising markedly in recent times. The group is, therefore, participating in tenders issued by the Greek government for the rights to construct and operate energy generation plants. The various terms and conditions of employment were harmonised following the merger, based on the best practices of the three companies, although this did not result in major changes. The acquisition involved restructuring of Dacia and its subsidiaries, which were largely car component manufacturers, to modernise plants and methods of production. The plan was to reduce the number of staff to a minimum of 16,280 employees, representing a cut of almost 11,300 jobs, over 6,000 of which were to be in Automobile Dacia. The process was to take place in 20 phases every three months, beginning in December 1999 and finishing in September 2004. The merger was intended to lead to a streamlining of operations and a reduction of over-capacity. Frenzel announced the need for job cuts from the outset, without specifying exact numbers. In the end, 54 employees, all of them low-qualified workers on the production line and most of them young men, lost their jobs and had to accept compulsory redundancy. France: Neuf Telecom and Cegetel The extension of share ownership was expected to lead to an expansion of production through investment in new capacity, although it was not planned to lead to any creation of new jobs. The reduction in employment was, accordingly, not out of line with what was intended at the time of the transaction. The Estonian Unemployment Insurance Fund (Töötukassa ) helped the workers concerned to find new jobs and arranged meetings with potential new employers. In 2005, Mytilineos Group, a collective of Greek businesses operating in the metal industry, acquired Aluminium de Grèce, the leading Greek producer of aluminium and a member of the Alcan group, the major multinational producer of aluminium. Aluminium de Grèce is located in Boeotia, bordering the Attica region in central Greece, where much of the country’s metal industry is concentrated. The Mytilineos Group, which operates in Greece, Cyprus and the Balkan states, is involved in a wide range of activities, most of them connected with the metal industry but including the manufacture of defence equipment and motor vehicles. While jobs involved in these activities, such as administrative, back office, bookkeeping and IT roles, staff numbers have been reduced by about 30 people on a full-time equivalent basis, jobs in sales have increased by around 50 positions. About 20% of the job losses have been achieved by means other than redundancies. Since the acquisition, Ericsson has acquired Redback Networks thesis statement writing, a US company with IP-technique for communication, Tandberg Television, a Norwegian company, and Entrisphere, a US company specialising in fibre technology and high definition television through broadband and other IP-based services, all in 2007. Furthermore, in 2008, it acquired LHS, a German software and service company supplying invoice systems. In addition, it has also taken over numerous smaller companies. Neither the trade unions nor other employee representatives were consulted about the extension of share ownership or played any part in the decision-making process leading up to the transaction, nor, despite the lack of consultation, was there any protest from the workforce. The reason behind the merger was to enable the R&D activities of the two companies to be rationalised at the global level and concentrate them in three main sites, namely in Berlin in northeastern Germany, Wuppertal in western Germany and Berkeley in the USA, while closing plants in West Haven and in a subsidiary of Schering in Richmond in the US. It was also planned to close a manufacturing plant in Indiana in the US and one in Filago in northern Italy and to reduce administrative costs by merging functions and shedding jobs at Schering’s headquarters in Berlin in Germany. Despite these losses, the consortium members all expected a growth in business in the long run as a result of having a stronger market position, although the chances of this leading to an expansion of jobs were considered to be relatively small. The level of control exercised by Hella over HLS has increased considerably over time, with both sales and purchases controlled by the parent company. Almost all of HLS production is exported, while 80% of inputs are imported, about 40% of these coming from other parts of the group. Nevertheless, HLS still has established strong links with the local community by purchasing various goods and services from local suppliers. In this regard, HLS management estimate that for every two additional jobs created in the company, one job has been created externally. The main objective of the merger was to reduce personnel costs, which made redundancies inevitable. A rough estimate made by management before the negotiations took place with employee representatives was that some 180 full-time equivalent jobs would be lost and that redundancies would be put into effect immediately once the negotiations ended. In the event, many of the workers made redundant were older high-wage employees, many of them bilingual Finnish-Swedish speakers, as well as a number of executives essay on my ambition, especially in Silja Oy Ab. The Times, ‘Boots merger is a matter of chemistry’, 2 October 2005. In Germany, co-determination rights meant that representatives of the German Mining, Chemicals and Energy Industrial Union (Industriegewerkschaft Bergbau, Chemie, Energie, IG BCE ) had a place on the board of Schering and, like other board members, were informed before the decision to merge was made and the works council was also consulted. Ireland: Irish Life and Permanent and Trustee Savings Bank Trade unions in the two companies were not consulted before the acquisition was agreed and were not involved in the decision-making process. They were simply informed of the event after the agreement had been signed. The only role they played was to make sure that legislation on safeguarding workers’ rights in the event of a transfer of undertakings was respected and the employees concerned enjoyed the benefits they were entitled to. Although some rationalisation of bank branches has occurred in certain areas (announced in 2005), and is still ongoing holiday essays, involving a proposed reduction of 200–300 jobs through voluntary redundancies and natural wastage, mainly among branch managers and staff, the company has increased jobs significantly. The company is changing the management structure in some of its branches by ‘twinning’ up to 40 branches out of a total of about 100, which means that one person will manage two branches each, while rationalising other aspects of branch activity. Employment is estimated to be well over 5,000 workers, over 30% higher than when the merger took place. The bid was initially contested by Arcelor, supported by the French and Luxembourg governments which were opposed to the takeover, as was the Belgian government but much less so. The French and Spanish trade unions as well as the European Metalworkers’ Federation (EMF ) were also strongly opposed to the bid, fearing substantial job losses as a result of restructuring. The various Belgian trade unions were less hostile since Arcelor had already decided to close the Seraing blast furnace in Liège. The trade unions involved included: the Confederation of Christian Trade Unions (Confédération des Syndicats Chrétiens/Algemeen Christelijk Vakverbond, CSC /ACV ), the Federation of Liberal Trade Unions of Belgium (Centrale Générale des Syndicats Libéraux de Belgique/Algemene Centrale der Liberale Vakbonden van België, CGSLB /ACLVB ) and the Belgian General Confederation of Labour (Fédération Générale du Travail de Belgique/Algemeen Belgisch Vakverbond, FGTB/ABVV ). Since Austria Frost was insolvent, Frenzel saw a good opportunity for expanding its business at a relatively low price and, in particular, extending its range of products into deep-frozen desserts and instant meals, mainly for sale in Germany, as well as for acquiring specialist knowledge on the preparation of deep-frozen food by the steaming method. The reason behind the acquisition was to restructure activities in the acquired company and to expand operations, although no formal plans were set for expanding employment as such. Hella guaranteed that the number of employees would not be reduced by more than about 10% within the first two years of the acquisition. As it has turned out, HLS now employs about 900 people – around 70% more than at the time of the acquisition – and as a result of recent expansion in production facilities the workforce is expected to grow by another 150 people in the next two years. The Independent, ‘Alliance Boots agrees £10.6 billion private equity takeover’, 20 April 2007; ‘Unions criticise Alliance Boots bosses for “cashing in on buyout”’, 10 May 2007. The transaction seems to have had the desired results for both companies. Neither has been involved in another merger since, although another Belgian manufacturer of vinyl – namely Domo – recently approached IVC about the possibility of being taken over; however, IVC rejected this proposal. As a consequence, the vinyl division of Domo stopped production in September 2008. The acquisition of TSB gave Irish Life access to a clearing bank and its network of branches, as well as an extended customer base. The first phase of the process is regarded as having been completed successfully. Of the 1,700 employees who were 58 years old or over, some 1,470 accepted early retirement. Older workers, were, therefore, disproportionately represented among the employees leaving the company. Moreover, no workers have been dismissed and staff have been assigned to new positions voluntarily. The expectation at the time of the acquisition was that some rationalisation of activities would occur but that this would lead to an overall expansion in employment. It was also intended to harmonise operations across the two companies as well as terms and conditions of employment. In general, this seems to have happened and the objectives of the merger seem to have been attained by Irish Life, which views the acquisition of TSB as being very successful. As indicated above, the effects on employment of the mergers or acquisitions reviewed in the different countries vary from case to case. In many instances, they have resulted in job losses, sometimes on a large scale. This was the case as a result of the Bayer acquisition of Schering where, because of the scale of the companies involved and the scope for rationalisation, about 5,350 jobs were planned to be cut, some 3,150 of them in Europe. This prompted the German Chancellor to request the company to minimise job losses in Germany. Furthermore, in the case of the Statoil-Norsk Hydro merger in Norway, planned redundancies affected almost 3,500 jobs. The case concerned should be relatively large … and, if possible, … a case that is especially interesting and/or which attracted attention at the time for various possible reasons – because, for example, it involved the takeover of a major domestic company by a foreign-owned one, because of its size, because it was contested or perhaps because of all of these reasons and more. This report explores the consequences of mergers and acquisitions for the companies and employees involved, as well as for the wider economy, on the basis of in-depth company case studies in 25 EU Member States and Norway. The study aims to summarise the features of the mergers or acquisitions covered and their effects. The case studies present details of the companies concerned, their size in terms of employment and nationality, their sector of activity and a brief review of developments leading up to the merger. In addition, the case studies explore the companies’ reasons for merging, the policy followed after the event, the impact on workers, as well as the extent to which workers were consulted in the lead-up to the merger. In December 2006, the Polish oil company PKN Orlen (Polski Koncern Naftowy Orlen, Orlen ) acquired Mažeikiai Oil Refinery (Mažeikių Nafta, MN ), a state-owned producer and distributor of fuel and petroleum products, for about €1.8 billion. At the time, MN employed around 3,300 people and Orlen just under 4,800 people. Trade unions representing the workforce and members of the SE Supervisory Board were consulted over the sale and discussions were held with them throughout the acquisition process, although their effect on the decisions made was marginal. In any case, they were not opposed to the takeover. The trade unions representing the staff of the three banks had little involvement in the decision-making process leading up to the merger. They were, however, informed of the intention to merge over a year before the merger actually took place and were generally in favour of it going ahead. The credit crisis has resulted in dramatic changes for the whole financial sector, although in retrospect, it appears that Fortis was not big enough to take over ABN AMRO and it is generally recognised that the price paid was too much. Accordingly, the acquisition led to a decline in the financial position of the three banks rather than strengthening it. The main motivation behind the acquisition was strategic. By combining the experience and capital of the two companies, the aim was to create a more efficient and financially stronger organisation, favourably positioned both to dominate the domestic market and to pursue opportunities for long-term growth abroad. The acquisition of the Hydro oil and gas division meant that the new company would be one of the largest deep-sea oil and gas producers and would be better equipped to meet challenges in the energy market. The strategy, moreover, was a long-term one foreseeing the importance of expanding outside Norway as North Sea oil and gas reserves were gradually being depleted. The subsequent takeover of the company by Kohlberg Kravis Roberts, a New York-based private equity company, which specialises in acquiring companies that are underperforming, suggests, however, that the merger had not led to a sufficient increase in profitability. The concern after the latest acquisition is that the new owner’s focus on short-term profits will see further rationalisation of operations and a possible reduction in the Boots chain of retail chemist outlets as well as in R&D activity. It is unclear why BAA acquired Budapest Airport only to sell it some 18 months later. For the Hungarian government, it represented a means of obtaining cash to reduce its borrowing requirement. For Celebi, the purchase of BAH represented a means of entering the European market. For HOCHTIEF, the motivation for acquiring Budapest Airport was to expand its business and to add to its portfolio of airports. The cases reviewed, therefore, cover a number of acquisitions of previously state-owned companies in the new EU Member States (NMS) that were effectively initiated by the government of the country in question in order to privatise the business. The motivation in this regard is generally to find a suitable, usually foreign-owned, company to take over the company in question in order to develop its potential, to modernise its working methods, to invest in new plants and equipment, to redesign the product range and to extend its markets. This was the case, in particular, in respect of the privatisation of Slovak Power Plants (Slovenské elektrárne, a.s. SE), an electricity generating company in Slovakia, Mažeikių Nafta (MN), a state oil company in Lithuania, Automobile Dacia, a car manufacturer in Romania, Maltacom, the state-owned telephone company in Malta, and Budapest Airport in Hungary. In the last two cases, an additional reason for privatisation was a concern to reduce the public sector borrowing requirement through the money received from the sale of the companies. ABB, a large Swiss multinational company operating in the electromechanical industry, announced its intention to acquire Elsag Bailey from the Iri-Finmeccanica group, an Italian public enterprise owned by the state, in 1998 and completed the purchase during 1999. Elsag Bailey specialised in the manufacture of control systems for electricity generation, transmission and distribution, products also produced by the ABB group. However, its products and services extended much further, ranging from transformers and switchgear to systems for automating the production process, including robots and the associated software. ABB itself had previously been formed as a result of the merger between the Swedish company Allmänna Svenska Elektriska Aktiebolaget (ASEA) and the Swiss company Brown, Boveri and Cie (BBC). Alliance Unichem justified the merger at the time by stating that it would enable the enlarged company to ‘enhance (its) offering to the independent (retail) chemist’, according to the Executive Deputy Chair of Alliance UniChem, Stefano Pessina. For Boots, it reduced the company’s reliance on retail outlets at a time when cheap healthcare products were increasingly being offered by large supermarkets. In addition, the merger created the potential for cost savings in the form of 1,000 job cuts or 1% of the total workforce announced initially. Due to co-determination rights, representatives of IG BCE had a place on the board of Schering. Like other board members, they were informed before the decision on the takeover was made and voted in favour of the merger. The works council was also consulted but was not involved in the decision-making process. In November 2005, Frenzel, a German company in the food-processing industry critical thinking activities adults, announced its acquisition of Austria Frost, an Austrian company operating in the same industry and located in Lower Austria (Niederösterreich ), north of Vienna, and owned by the 11er Group. The merger was completed at the beginning of 2006 and the company’s name was changed to Frenzel Austria Frost. Both companies specialised in the processing, preserving and freezing of fruit and vegetables. Mittal initially undertook to maintain the Arcelor strategy in Belgium of shifting production to coastal plants and closing the ‘hot phase’ and blast furnaces in the Liège region by 2009, involving direct job losses of about 2,700 and some 2 scientific review papers,280 jobs from the closure of ‘cold phase’ plants, with many more indirect job losses. The motivation behind the merger was to create a strong financial group to facilitate expansion into the broader banking and financial market of the Balkan states and southeastern Europe. Laiki Bank had developed a strategy to expand its business interests abroad through acquisitions in foreign markets, although this was constrained by the companies relatively small size. The merger was a means of overcoming this constraint as well as a response to the competitive challenges arising from market liberalisation and intensification of international competitive pressures. Marfin Financial Group had also been following a policy of rapid expansion, mainly in Cyprus and Greece. The main reasons for the success of Akzo were the presence of a well planned integration plan and the rapid implementation of that plan. Unlike BMW, which took no steps to integrate Rover in the initial two years, Akzo planned on a total integration in the first three years. They were able to find a balance between the cultural and linguistic differences between the two companies and were thus able to avoid communication problems. The author believes that all of MacDonald and Beavis’s (2001) key characteristics for a successful integration process namely a comprehensive integration plan, rigorous cost/benefit/risk management control mechanisms, dedicated leadership did exist in this deal. As a result of this successful deal, AkzoNobel is very well positioned now with market leadership positions in many markets, excellent geographic spread of sales and profitability and strong ability to outspend the competition in technology and innovation without negatively affecting the profitability[key-11]. The Rover Company was a British Car manufacturing company founded in 1878 as Starley & Sutton Co. of Coventry and originally produced bicycles and motorbikes. It produced its first car in 1904 under its now famous marque of the Viking Longship. After a string of mergers, nationalisation and takeovers, it became a part of the British Leyland Motor Corporation in 1968. The group was sold to British Aerospace in 1988 and in 1994, the control of the group was passed to BMW of Germany. Another important problem for this deal was the linguistic differences between the two companies. Although BMW’s top management could do business in English, the engineers and the middle managers were unable to do so. This created a lack of communication problem which eventually delayed the integration process. There were also substantial differences between the business culture of BMW and Rover. As Batcheler(2001) points out, the German direct approach was in contrast to the more relaxed approach followed by the British. [key-8] KPMG. Unlocking Shareholders value – the keys to success. Mergers and Acquisitions – A global research report, 1999. KPMG, based upon detailed empirical research, identified six factors that lead to successful mergers. These factors are: proper initial synergy evaluation, well thought out integration project planning, due diligence, gathering a capable management team, resolving cultural issues and most importantly, good and transparent communications. ICI was formed when four British chemical companies merged in 1926. By 1970s, it had expanded into continental Europe and the USA with a diverse variety of products ranging from heavy chemicals to pharmaceuticals. It continued to grow meteorically throughout the 80s, however, in 1993, owing to shrinking customer base and tough competition from abroad, it began slimming down and sold off its pharmaceutical business as Zeneca. On January 2, 2008, following the initial announcement in August, 2007, ICI was taken over by AkzoNobel N.V. 2.1 BMW AG. – The Rover Company [key-7] DePamphilis, D.M. Mergers, Acquisitions, and other restructuring activities: An integrated approach to process, tools, cases, and solutions, 5th Edition. Elsivier Academic Press; 2010. [key-18] Sirower, M.L. The Synergy Trap. How Companies Lose the Acquisition Game. The Free Press, New York; 1997. A merger adds value only if the merging companies are worth more than each one of them. This section focuses on understanding the objectives behind the merger and acquisition activities and how they add value to the firms. The author aims to use the literature developed here to analyse the industrial case studies in the next section. [key-19] Sudarsanam, S. The Essence of Mergers and Acquisitions, Financial Times/ Prentice Hall; 1995. [key-3] Banal-Estañol, A. & Seldeslachts, J. Merger failures. WZB, Markets and Political Economy Working Paper No. SP II 2005-09 2007. From the study of mergers and acquisitions here, the author has been able to understand the key factors necessary for a such a deal and the how the theory developed in the literature review relates to the practical real world problems. [key-5] Brealey, R.A. Myers, S.C. & Allen, F. Principles of Corporate Finance, 8th edition. McGraw-Hill; 2008. 1 Literature Review
[key-14] Pansari. Akzo Nobel Case Study. November 2009. In August 2005, German adidas-Salomon AG announced plans to acquire Reebok at an estimated value of € 3.1 billion ($3.78 billion). At the time, Adidas had a market capitalization of about $8.4 billion, and reported net income of $423 million a year earlier on sales of $8.1 billion. Reebok reported net income of $209 million on sales of about $4 billion. While analysts opined that the merger made sense, the purpose of the merger was very clear. Both companies competed for No. 2 and No. 3 positions following Nike (NKE). Adidas and Reebok – Two mega brands, with great strengths On January 31, 2006, adidas closed its acquisition of Reebok International Ltd. The combination provided the new adidas Group with a footprint of around €9.5 billion ($11.8 billion) in the global athletic footwear, apparel and hardware markets.
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