A merger occurs when two or more companies combined their business and assets to convert them in a new company (or to one of themselves). On the other hand, an acquisition occurs when one company acquires no of shares in another to get control of that company. The shareholders of the acquired company are paid off and the acquirer becomes owner of all or a substantial part of the assets of the acquired company .In merger one of the two companies losses its old identity to make a new one (Kithinji and Waweru, 2007). The profitability and efficiency of merged organization is higher than non merged organizations and they are in strong position (Amir, Diamantoudi and Xue, 2008). Merger or acquisition creates real potential for explosive growth and enhanced profitability by making appreciation of people, who involved themselves in its success or failure through their contribution (Daniel and Metcalf, 2001)
Barros (2003) identified through research study that almost 63 percent of M&A failed due to problems related to the management of people. As compared to dealing with systems and structural issues the ability to manage people may, in reality, be more important (Lindgren and Spangberg, 1981). The human-related problems has been attributed the cause of failure (Cartwright and Cooper 1990) also found that for one-third to one-half of all merger failures are due to employee problems.
Successful management of people-related issues leads to value creation. To make HRM (Human resource Management) as an effective strategic partner there is a need to involve them in negotiation period and formulation of people management polices to overcome their resistance towards of M&A (Tanure, 2007).The changes in the general procedures and practices followed by the acquired companies and also due to the growing competition between the employees of the merged parties, Human resources management is problematic within an M&A environment. M&A works as a threat to employee jobs (Georgakopoulou, 2000).
A study conducted by Marks and Cutcliffe (1988) found that corporate executives generally neglect the human aspect in mergers process, because they did not realize that the merger might have a significant negative effect on employee’s behavior and they show resistance against it. The issues of human resource management are overlooked and are often considered irrelevant in strategic planning process (Napier 1989; Buono and Bowditch 1989). The study conducted on strategies of forty-four Canadian companies revealed that better understanding and management of employees’ issues in integration phase increases the chances of M&A success (Love, 2000).. Negative employee feelings and behavior are typical responses to threatening situations (Dyer, 1983).
Merger and acquisition have varying implications and challenges for employees such as job losses, intra wage disparity and employee low commitment to work in post- consolidated banks. Employees resist these negative implications of...