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Case Analysis Report: Management Issues in Mergers Report

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Updated: Jul 1st, 2019

Executive Summary

Performance of an organisation may be enhanced in a variety of alternatives. Formation of mergers is one of these alternatives that can help to increase the trading price of organisational shares, efficiency ratios, and increased value of a company in share markets. Bancolumbia utilised this strategy to enhance its organisational transformation. Mergers bring different organisations together with different organisational cultures and ways of accomplishing tasks.

Consequently, various management issues arise during mergers. This paper utilises Bancolumbia as the case study to analyse such issues, discuss key decision criteria, prescribe alternatives, provide recommendations, and prescribe an action and implementation plan to handle management issues associated with the formation of mergers.

Problem Statement

Bancolumbia conducted two of the largest mergers that had been experienced in Columbia with a period of less than 10 years under the leadership of Jorge Londono as the CEO. The success of these mergers as an organisational transformation strategy was dependent on the roles played by the persons charged with the entire process, factors such as organisational communication, and the leadership strategies deployed to enhance the overall collective transformation process. The main problem was to utilise organisational communication through leadership strategies to enhance the success of the new merger, which brought together persons who were inspired by different organisational cultures.

Supporting Evidence

Bancolumbia merged with Corfinsara and Conavi in 2004. The rationale for this merger was based on the argument that a merger can exercise competitiveness based on the advantages associated with economies of scale (Richard Ivey School of Business 3). In Columbia, this case was perhaps crucial since the era of 1990s saw the country experience an economic downturn resulting to decreasing financial entities to about 37 percent in 1995 through 1999 and to 62 percent in 2006 (Richard Ivey School of Business 2).

The reduction evidences that the only organisations that would survive the impacts of economic downturns were the prominent ones. Consolidation was a strategy that would see the organisations acquire more clientele levels. Consequently, a new trend emerged in the banking industry focusing on having fewer but bigger banking institutions. The success of this strategy for the case of the merger between Conavi, Bancolumbia, and Corfinsara was realised through communication to shareholders about its value in enhancing the success of the company.

Key Decision Criteria

Conavi, Bancolumbia, and Corfinsara’s merger decision criteria was based on the slogan “being one, we are more” (Richard Ivey School of Business 5). Realisation of this slogan led to the convening of a meeting by top executives of the three companies at Sata Marta. The main issue at hand was to determine the values, mission, and vision of the merged entity. Training and performance team did the facilitation of merger.

According to Richard Ivey School of Business this entangled offering technical advice to all parties involved in the merger on how to “ generate dynamics that would make people think on how to build a new organisation” (6). Arguably, the decision-making criteria on the approaches adopted in making the merger effective were based on communication strategies that would help to resolve a stalemate that would arise in case the parties, which perceived their organisational culture, would be eroded.

Alternatives Analysis

Although the analysis of a merger is based on the impacts that it would have on the overall performance of the merged organisation in terms of market divide and efficiency ratio, management needs to consider other issues that would to make the merger successful. Such issues include how to respond to questions that would emanate from workers who would be subjected to the changing working environment, new working processes and procedures, and addressing issues of layoffs and degrees of contributions of every company on the daily business of the merger.

Richard Ivey School of Business Reports, “Bancolumbia accounted for 75.5%, Corfinsara 12.7%, and 11.8% for Conavi” (7). Resolution of the challenges associated with change of work environment requires effective organisational communication. Analysis of the legal implication of a merger is also a critical alternative analytic aspect in the evaluation of decisions to form a merger.

For instance, in the case of the merger between, Conavi, Bancolumbia, and Corfinsara, employees were concerned that the merger would result in their layoffs. Such unsatisfied employees would file legal petitions against the merger decision made by their respective organisations. Consideration of how this effort would influence the performance of the merger both in the short and in the end is essential.

Recommendations

In the resolution of dominant challenges associated with organisational changes encountered in mergers such as those experienced in the merger between Conavi, Bancolumbia, and Corfinsara, it is recommended that, amid consideration of any other effort to enhance the success of the strategy, the merger should treat employees as the most crucial resource available for enhancing the success of the merger.

This provision would put more emphasis on the organisational communication through adopting a communication strategy having the following elements:

  1. Incorporating the needs of different organisations’ stakeholders such as employees, managers, customers, and investors among others
  2. Providing information on who would be making decisions that would influence customers and employees either directly and indirectly
  3. Help in monitoring issues and needs handled during the integration process
  4. Prepare employees for new roles that would arise following the mergers

Action and Implementation Plan

In the implementation of organisational transformation strategy through a merger, an effective action plan is required (Galpin and Herndon 23). As argued before, since a merger involves many organisational changes, communication of such changes is an immense challenge. As evidenced by the merger between Conavi, Bancolumbia, and Corfinsara, to resolve this challenge, the following action and implementation plan for effective organisation communication strategy is proposed.

Building Awareness

The implementation of the plan entails linking various integration alternatives with various strategic plans. The alternatives should reaffirm to the different organisations forming the merger about equal adaptation of organisational values in the merger and communication as advised by Harrison (Para. 3). They should touch issues such as equal participation of the each organisation’s management coupled with the support of the merger so that stakeholders of one organisation do not feel disadvantaged.

Merger Status

This action plan is organisation-specific. It seeks to demonstrate the participation of senior organisational management in the merger process in the effort to bargain for better rewards for each organisation’s stakeholders forming the merger (Watson 16). It also ensures that the rationale for the merger is reaffirmed to all organisation stakeholders besides creating a bigger picture of the merger in the minds of all the stakeholders.

Rollout

The scope of this plan is integration-specific. Its implementation entails the provision of specific information of the likely changes in the work environment showing how such changes would influence workers in the merger organisations. This strategy helps in avoiding situations in which employees would be caught unaware by the changes.

Works Cited

Galpin, Tim, and Mark Herndon. The Complete Guide to Mergers and Acquisitions: Process Tools to Support M & A Integration at Every Level. San Francisco: Jossey-Bass Publishers, 2009. Print.

Harrison, Kim. , 2013. Web.

Richard Ivey School of Business. Bancolombia: Talent, Culture and Value Creation Management in Mergers. Ontario: the University of Western Ontario, 2011. Print.

Watson, Wyatt. Human Capital Index: Human Capital as a Lead Indicator of Shareholder Value. Washington: Rowman & Littlefield, 2002. Print.

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