Merger is one of the corporate strategies in which the organization combines with another firm that ultimately becomes a single entity. Mergers have a significant impact on the financial performance of the organization as well as improving the efficiency of the business. Qatar Petroleum had decided to conduct merger with a large overseas multi-national company; however, lacks the information regarding merger in terms of change management and its implication. The report was based on analysing the implications of merger on operations and efficiency, set of criteria for selecting an appropriate merger partner and key change management activities once the merger is announced. The implication of the mergers is that organizations gains knowledge, expertise and physical assets that contributed towards the improvement of operations and efficiency. However, several challenges are faced in mergers that consist of cultural management, low motivation, resistance to change, job insecurity, management of stress, drainage of talents and many others. The key change management require are bringing cultural changes, aligning top leaders, inspiring people, development of strategies and HR restructuring. The set of criteria that is required by the organization is to select a partyer that has similar strategic goals and objectives, determining whether culture is compatible and also determining the benefits that would eliminate Qatar Petroleum weaknesses.
Merger is one of the corporate strategies in which the organization combines with another firm that ultimately becomes a single entity. The purpose of conducting the merger is that it improves the financial and operations of both the companies. According to the study of Ferreira et al. (2014), mergers have a significant impact on the financial performance of the organization as well as improving the efficiency of the business. With respect to the case, Qatar Petroleum which is state-owned organization in Qatar that primarily deals with oil & gas explorations along with other interests. The company has established in the year 1974 and is considered as the third largest company in the world regarding oil and gas reserves (Qatar Petroleum, 2018). The company had decided to conduct merger with a large overseas multi-national company; however, lacks the information regarding merger in terms of change management and its implication. Thus, the company had come to AFG consultancy to gain strategic and operational advice regarding the merger. The report covers the implications of merger on operations and efficiency, set of criteria for selecting an appropriate merger partner and key change management activities once the merger is announced.
The implications of merger on operations and efficiency of Qatar Petroleum depends upon nature of the other company. Such as, Qatar Petroleum decides to merge with a Logistics company for overall improving it supply chain that would ultimately result in improving the operations and efficiency of its distribution of oil & gas among other products as well. The major driving factor for the economic growth of Qatar is oil and natural gas that has significantly contributed towards the increase of GDP (Qatar Economy Profile, 2018). Based on the study of Akinbuli and Kelilume (2013), the impact of mergers can drive profitability and growth to the organization. The mergers are considered as the best possible solution for the companies surviving in the financial crises. The department functions of the business are significantly affected by mergers that influences on the overall operations of the company. Information technology, information system and management information system are affected by merger that brings improvement to the technology that contributes towards smooth integration and recording time of operations. The functions of the R&D departments are significantly affected by the mergers as it builds knowledge through sharing of each other information that further contributes towards the innovation of the product and services.
Moreover, Zheng et al. (2016) has highlighted in its study that merger among the company’s supports in gaining each other assets which helps in addressing their competitive weakness. The assets consist of the human resources, properties, plants, equipment and capabilities that ultimately enhance the operations and efficiency. Furthermore, the study of Mesarić, Segetlija and Dujak (2015) has indicated that the mergers has a significant influence on the distribution network that overall brings improvements towards the supply chain structure. It improves the geographical reach of the companies while also maintaining on-time deliveries that improves customer’s satisfaction. Another benefit of the merger is that the company is able to gain highly skilled employees whereas the least performing employees are terminated that results in improving the operations and productivity. On the contrary, the study of Jetley, G. and Ji, X., (2010) has highlighted that failed mergers can also bring negative impact on the company’s performance, operations and efficiency. The reasons that a merger may fail is due to culture clash due to corporate culture being dissimilar of the company and its potential partner, high level of debt of the partner company resulting in overpayment and unable to reach to the desired target in terms of profitability and cost saving.
There are various characteristics that are needed to be analysed by Qatar Petroleum for selecting an appropriate partner for conducting merger. According to the study of Marks and Mirvis (2011), most of the merger conducted by the companies fails due to not having a clear view of goals and objectives of the merger. There are various set of criteria that are needed to be analysed for selecting the appropriate partner for merger. The first criteria of selecting a partner for merger is the strategic aims in which both the organizations are required to determine whether the merger would result in achieving the strategic aim that would overall improve the company in terms of performance and operations. The second criterion for selecting a merger partner is to determine whether the culture of the organizations is compatible or not. Similarly, the study of Marks and Mirvis (2011) had highlighted that the mergers of the company’s results in causing clash in the culture. The clash in culture causes demotivation among employees, conflicts, technical issues, disagreement and job dissatisfaction. Therefore, determining the compatibility of the culture among both the organization is important set of criteria for Qatar Petroleum for successfully completing the merger.
Another important criterion for the Qatar Petroleum on conducting the merger is to reflect on its strength, weakness, opportunities and threats. The SWOT analysis would enable the company to identify its weakness and threats while also analysing the merger benefits that would address its weakness and threats. Since, the company has a weakness on its quality evaluation department; therefore, the merger should have a benefit of having a strong evaluation department that would overall eliminate the weakness. Qatar Petroleum needs to clearly identify the expected benefits of the merger by outlining the factors that would contribute towards the improvement of Qatar Petroleum’s operations and productivity. The additional set of criteria for selecting an appropriate company for merger is the trustfulness and mission alignment. According to the study of Kansal and Chandani (2014), the companies involved in the merger needs to have trust among each other for building knowledge and increased collaboration. Moreover, the mission of both the companies needs to be aligned with each other that would contribute having a clear and same direction for the organization.
Since the company Qatar Petroleum had decided to merge with a large overseas multi-national company, it is imperative to bring change to its management activities for successful merger. According to the study of Kansal and Chandani (2014), leaders and management are faced with challenges when conducting mergers or acquisition of other company. The challenges consist of cultural management, low motivation, resistance to change, job insecurity, management of stress, drainage of talents and many others. The first and most prioritize of the key change management is the cultural change. The reason for highlighting cultural change as the key change management due to the study of Drori, Wrzesniewski and Ellis (2011) highlighted that the prime reason that companies experience problem is due to culture. The culture difference between the merging organizations is referred to as culture clash that causes conflicts and inequality among the people of organization. Therefore, Qatar Petroleum should focus on developing a new culture that would be suitable for both the organization. The steps taken for adapting to the new culture is that the leaders may inspire the people of the organization to accept the new norms and values. For developing the culture, leaders are required to spend high amount of time with the people that may help in accepting the culture. The second step for key change management is the alignment of the top leaders which would indicate that who is the controller of the organization after the merger. The third key change management is the development and implementation of strategies regarding vision and mission of the company which would provide directions to all the members of the organization after the merger. The fourth key change management is the HR restructuring as the employees are concerned with the career opportunities, new roles and responsibility and transferring of employees. Therefore, the HR is required to communicate, train, counsel and provide other professional help to the employees after the merger (Kansal and Chandani, 2014).
The decision of Qatar Petroleum merging with a large multinational oversea company has both challenges and opportunities. Based on the study of Allahar (2015), there are various challenges faced by the company when conducting merger with an oversea multinational company as the first issue which is faced by the company that had been also discussed previously is the corporate culture issue. The difference in culture or culture clash is one of the biggest challenges for the leaders to address as it causes conflicts, demotivation, job insecurity and high level of stress among the workers. It is critical for the leaders and management to address this issue for bringing the merger of the two companies into a single entity. The second issue that had been identified is downsizing as the merger of two companies results in causing high number of staff, in which the leaders and HR management are required to cut some of its staff. This overall causes job insecurity and high level of stress among the workers that impact negatively on the performance of the overall company. The study of Allahar (2015) has indicated that another challenge for the leaders is the alignment of structure, strategies and processes with the operating environment. If these particular challenges are not addressed by the leaders and management ultimately causes failure to the merger. On the contrary, the study of Schmidt (2015) had indicated that there are various opportunities available for the Qatar Petroleum in conducting merger with the overseas multinational firm. The merger would ultimately result in improving its operations and efficiency of the company through acquiring highly skilled labour of the company along with other assets such as property, plant, equipment and others. It also provides the opportunity to the company for minimising its cost through cutting the employees that has lower performance. The acquisition of the oversea multinational company would also improve the distribution network of Qatar Petroleum that would ultimately improve its supply chain. It would also enable the company to compete in the international market while also gaining advantage among the other international competitors.
As Qatar Petroleum has decided to merge with another oversea multinational company, there are few suggestions that had been highlighted for improving the effectiveness of its merger. The first step for the Qatar Petroleum is to analyse the potential partner in respect to their financials to determine whether the company is not large in its debt which would cause financial issues after the merger. Before the merger, it is imperative for Qatar Petroleum to effectively communicate to the employees regarding the merger and the needed changes. Therefore, the leaders are required to motivate, listen and encourage the employees to adapt with the change through communicating effectively. The company is required to develop a culture that is compatible with both the firms that would also result in addressing the culture issues faced after the merger. Moreover, the company needs to align the top leaders of the company for identifying who is controlling and directing the operations of the firm.
The strategy merger is one of the effective strategies that are often used by organizations to competing in the competitive market as well as improving their financial performance and growth. Qatar Petroleum is the state-owned oil &gas company that has overall decided to merge with a multinational oversea company. The report was based on understanding the implications of merger on operations and efficiency, the key change management required and identifying the challenges and opportunity of the merger. The implication of merger is that it plays a significant impact on the operations and efficiency. The department functions of the business are highly affected by the merger in which it brings improvement towards the information system and information technology. The merger also contributes towards building knowledge that results in bringing innovation on the R&D department. The company also gains other company assets that supports in gaining assets in terms of human resources, physical resources and capabilities that contributes towards gaining competitive advantage. However, there are various challenges faced by the organizations in merger that consist of cultural management, job insecurity, low motivation and others. Therefore, organizations are required to bring changes to its management for successfully merging with another company. The key change management require are bringing cultural changes, aligning top leaders, inspiring people, development of strategies and HR restructuring.
Akinbuli, S. and Kelilume, I., 2013. The effects of mergers and acquisition on corporate growth and profitability: evidence from Nigeria.
Allahar, H., AN OVERVIEW OF KEY ISSUES IN MERGERS AND ACQUISITIONS: A CASE OF TRINIDAD AND TOBAGO. International Journal of Economics, Commerce and Management, 3(8)
Ferreira, M.P., Santos, J.C., de Almeida, M.I.R. and Reis, N.R., 2014. Mergers & acquisitions research: A bibliometric study of top strategy and international business journals, 1980–2010. Journal of Business Research, 67(12), pp.2550-2558.
Jetley, G. and Ji, X., 2010. The shrinking merger arbitrage spread: Reasons and implications. Financial Analysts Journal, pp.54-68.
Kansal, S. and Chandani, A., 2014. Effective management of change during merger and acquisition. Procedia Economics and Finance, 11, pp.208-217.
Marks, M.L. and Mirvis, P.H., 2011. Merge ahead: A research agenda to increase merger and acquisition success. Journal of business and psychology, 26(2), pp.161-168.
Mesarić, J., Segetlija, Z. and Dujak, D., 2015, June. Effects of acquisitions and mergers on supply chain structure and strategy–Case study approach. In Pre-Conference Proceedings of the 12th International Conference on Logistics & Sustainable Transport 2015 (p. 114).
Qatar Economy Profile. 2018. Qatar Economy Profile 2018. [online] Available at: https://www.indexmundi.com/qatar/economy_profile.html [Accessed 12 Nov. 2018].
Qatar Petroleum. 2018. [online] Available at: https://www.qp.com.qa/en/AboutQP/Pages/AboutUs.aspx [Accessed 12 Nov. 2018].
Schmidt, B., 2015. Costs and benefits of friendly boards during mergers and acquisitions. Journal of Financial Economics, 117(2), pp.424-447.
Zheng, N., Wei, Y., Zhang, Y. and Yang, J., 2016. In search of strategic assets through cross-border merger and acquisitions: Evidence from Chinese multinational enterprises in developed economies. International Business Review, 25(1), pp.177-186.
|Due Diligence- Data Collection|
|Financial Auditing and Analysis|
|Final Due Diligence Report|
|Finalisation of Negotiation|
|Pre-Merger: Communicating to stakeholders|
|Post-Merger: Cultural Change|
|Post-Merger: Alignment of leaders|
|Post-Merger: HR restructuring|
This task has significantly contributed toward my learning on change management as what critical changes are required when organizations merge with each other. This task has also contributed towards my searching skills as large amount of information needed to be searched from the internet regarding merger and its challenges and opportunities. Moreover, the task also required to conduct deep analysis as what issues the leaders are faced with while conducing mergers and the key change management that is needed for successfully carrying out the merg
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