Introduction to the Topic

M&As are one of the major aspects of modern corporate finance world and are defined as consolidation of companies. They are strategies for organisational growth even during recession times (Baghai et al., 2008; Epstein, 2004; Fairfield-Sonn & Ogilvie, 2002; Saksonova & Kantane, 2016; Steynberg & Veldsman, 2011). Differentiating the two terms, one can define a merger as the consolidation of two or more previously separate entities into a single organisation, whereas an acquisition refers to a company taken over by another company and in which the buyer maintains control (Saksonova & Kantane, 2016). Several authors believe that M&As enable organisations to adapt more effectively to changing global conditions (Alam & Ng, 2014; Hutzschenreuter et al., 2014; Saksonova & Kantane, 2016; Srivastava & Prakash, 2014; Wagner & de Hilal, 2014).

Empirical evidence supports that some mergers are successful and some others often fail (Epstein, 2004; Gall, 1991; Mottola et al., 1997). There is a high failure rate of about 50%-75% (Shrivastava, 1986) and this is primarily due to strategic, operational and financial problems and challenges (Antila & Kakkonen, 2008; Konstantopoulos et al., 2009; Mavrides & Hadjichristodoulou, 2008; Shook & Roth, 2011). M&As often result in significant changes in the employees’ lives (Cartwright & Cooper, 1992) and have a significant emotional impact on them (Bansal, 2015; Chiriac & Georgescu, 2015; Jayesh, 2013; Newton, 2015).

Following a merger or an acquisition, there is usually a high risk of employee turnover and this is one of the most serious problems a company could face, since it can lead to the failure of the implementation process (Appelbaum et al., 2007). Keeping high-performing employees in the period following M&As is not an easy task and it is often a primary concern for the HR people (Erickson, 2015). M&As create a dramatic change within an organisation which often leads to high-performing employees leaving the organisation (Hubbard, 1999; Marks, 2006). M&As usually take place between unequal parties, thus creating a feeling of insecurity among employees, and this increases their intention to leave the new entity. The heightened uncertainty often leads to high employee turnover (Lawlor, 2013; Lupina-Wagener, 2013; Riviezzo, 2013; Wagner & de Hilal, 2014). Morrell et al. (2004) stipulate that the drastic organisational changes lead to employee turnover especially among talented and high-performing employees (Bertoncelj & Kovac 2007; Bruner 2005; Galpin & Herndon, 2000; Wu & Zang, 2007).

Often the greater the change, the greater the chance to have higher employee turnover which is often unavoidable (Appelbaum et al., 2007). Abbasi and Hollman (2000) identify two categories of employee turnover: involuntary and voluntary. The first one refers to dismissals and the second to resignations. Very often voluntary turnover is not only negative for the company because of the loss of intellectual capital but because the employees are often hired by competitors (Ferguson & Brohaugh, 2009). The turnover rates are higher immediately after the merger or acquisition and last up to a period of three years. However, M&As can create instability for many years with the acquired company often losing around 10% of their executives every year (Krug, 2009).

Appelbaum et al. (2007) raise the question of how employee turnover can be effectively controlled and even predicted. There is a need for organisations going through M&As to have an integration plan which is strategically designed (Durryl, 2016), and it is also important to ensure that employee retention is an integral part of such a plan. Having a strategic integration plan can directly influence the success or failure of the entire process (Gberevbie, 2010; Ghosh et al., 2012). Other researchers state that a strategic integration plan should aim at employee improvement and stability in order to keep talented people on board (Dutta, 2004; Gberevbie, 2010; Guthrie, 2000; Ramlall, 2003). In the post-merger phase, the aim is to absorb all employees and avoid employee turnover (Fairfield-Sonn & Ogilvie, 2002; Kusstatscher & Cooper, 2005; Marks, 2006; Nikandrou & Papalexandris, 2007). Saunders et al. (2009) emphasise the need to identify the employees’ concerns during M&As, and help them achieve an emotional balance otherwise turnovers begin to occur (Naz & Nasim, 2015). Morrell et al. (2004) stipulate that in an effort to prevent avoidable turnover, human resource managers need to play an active role in the planning and implementation stages of the M&A process (Morrell 2004, Ahmad 2015). Several studies support the important role HRM plays in the successful implementation of M&As (Antila & Kakkonen, 2008; Bansal, 2015; Charoensukmongkol, 2016; Jayesh, 2013; Konstantopoulos et al., 2009; Newton, 2015; Shook & Roth, 2011).

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