Managing Consultancy and Change

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Executive Summary

The merger is one of the organisation’s corporate strategies with another firm that ultimately becomes a single entity. Mergers have a significant impact on the organisation’s financial performance and improve the efficiency of the business. Qatar Petroleum had decided to conduct a merger with a large overseas multi-national company; however, it lacks the information regarding the merger in terms of change management and its implication. The report was based on analysing the implications of the merger on operations and efficiency, a set of criteria for selecting an appropriate merger partner and key change management activities once the merger is announced. The implication of mergers is that organisations gain knowledge, expertise and physical assets that contribute to improving 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 critical change management requirements are bringing cultural changes, aligning top leaders, inspiring people, developing strategies and HR restructuring. The set of criteria required by the organisation is to select a partner with similar strategic goals and objectives, determine whether culture is compatible, and determine the benefits that would eliminate Qatar Petroleum weaknesses.

Contents

Introduction. 4

Implications of Merger on Operations and Efficiency. 5

Set of Criteria for Selecting a Merger Partner 6

Key Change Management 7

Key Challenges and Opportunities. 8

Recommendations. 9

Conclusion. 10

References. 11

Appendix 1: Gantt chart For Change Management regarding Merger 13

Appendix 2: Self Reflection. 14

Introduction

The merger is one of the organisation’s corporate strategies 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 companies. According to the study of Ferreira et al. (2014), mergers have a significant impact on the financial performance of the organisation as well as improving the efficiency of the business. With respect to the case, Qatar Petroleum is the state-owned organisation in Qatar that primarily deals with oil & gas explorations and other interests.  The company was established in 1974 and is considered the third-largest company in the world regarding oil and gas reserves (Qatar Petroleum, 2018). The company had decided to conduct a merger with a large overseas multi-national company; however, it lacks the information regarding the 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 the merger on operations and efficiency, a set of criteria for selecting an appropriate merger partner and key change management activities once the merger is announced.

Implications of Merger on Operations and Efficiency

The implications of the merger on operations and efficiency of Qatar Petroleum depends upon the nature of the other company. Such as, Qatar Petroleum decided to merge with a Logistics company for overall improving its supply chain that would ultimately result in improving the operations and efficiency of its distribution of oil & gas, among other products. 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 Akinbuli and Kelilume (2013) study, the impact of mergers can drive profitability and growth to the organisation. 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 influence the overall operations of the company. Information technology, information system and management information system are affected by a 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 information that further contributes towards the innovation of the product and services.

Moreover, Zheng et al. (2016) has highlighted in their study that merger among the company’s supports 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 mergers have 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 enhance customer’s satisfaction. Another benefit of the merger is that the company can gain highly skilled employees, whereas the least performing employees are terminated, which improves operations and productivity. On the contrary, the study of Jetley, G. and Ji, X., (2010) has highlighted that failed mergers can also negatively impact the company’s performance, operations and efficiency. A merger may fail due to a 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 the desired target in terms of profitability and cost-saving.

Set of Criteria for Selecting a Merger Partner

There are various characteristics that are needed to be analysed by Qatar Petroleum for selecting an appropriate partner for conducting a 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 the goals and objectives of the merger. There are various sets of criteria that need to be analysed to select the appropriate partner for the merger. The first criteria of choosing a partner for the merger is the strategic aims. Both the organisations 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 organisations is compatible or not. Similarly, the study of Marks and Mirvis (2011) had highlighted that the mergers of the company’s resulted in causing a 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 organisations is an important set of criteria for Qatar Petroleum for completing the merger.

Another essential criterion for Qatar Petroleum in conducting the merger is its strength, weakness, opportunities and threats. The SWOT analysis would enable the company to identify its weaknesses and threats while also analysing the merger benefits to address its shortcomings.  Since the company has a weakness in its quality evaluation department; therefore, the merger should have the benefit of having a strong evaluation department that would overall eliminate the weakness. Qatar Petroleum needs to identify the expected benefits of the merger by outlining the factors that would improve Qatar Petroleum’s operations and productivity. The additional set of criteria for selecting an appropriate company for a merger is 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, which would contribute to having a clear and same direction for the organisation.

Key Change Management

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 a successful merger. According to the study of Kansal and Chandani (2014), leaders and managers are faced with challenges when conducting mergers or acquisitions of other companies. 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 prioritise of the key change management is cultural change. The reason for highlighting cultural change as the key change management is due to Drori, Wrzesniewski and Ellis (2011) highlighting that companies experience problems due to culture. The culture difference between the merging organisations is referred to as a culture clash that causes conflicts and inequality among the organisation’s people. Therefore, Qatar Petroleum should focus on developing a new culture that would be suitable for both organisations. The steps taken for adapting to the new culture are that the leaders may inspire the organisation’s people to accept the new norms and values. To develop the culture, leaders must spend a lot 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 who is the organisation’s controller after the merger. The third key change management is the development and implementation of strategies regarding the vision and mission of the company, which would provide directions to all the members of the organisation after the merger. The fourth key change management is HR restructuring, as the employees are concerned with career opportunities, new roles and responsibilities, and employee transfer. Therefore, HR is required to communicate, train, counsel and provide other professional help to the employees after the merger (Kansal and Chandani, 2014).

Key Challenges and Opportunities

The decision of Qatar Petroleum to merge with a large multinational overseas company has both challenges and opportunities. Based on Allahar (2015) study, there are various challenges faced by the company when conducting a merger with an overseas multinational company. The first issue faced by the company that had also been 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. It causes conflicts, demotivation, job insecurity and a high level of stress among the workers. The leaders and managers must address this issue for bringing the merger of the two companies into a single entity. The second issue identified is downsizing as the merger of two companies results in causing a high number of staff, in which the leaders and HR managers are required to cut some of its staff. This overall causes job insecurity and a high level of stress among the workers that negatively impact the overall company’s performance. Allahar (2015) study 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 Qatar Petroleum in conducting mergers with overseas multinational firms. The merger would ultimately improve the operations and efficiency of the company through acquiring highly skilled labour of the company and other assets such as property, plant, equipment, and others. It also provides the opportunity to the company to minimise its cost by cutting the employees with lower performance. The acquisition of the overseas multinational company would also improve the distribution network of Qatar Petroleum that would ultimately enhance its supply chain. It would also enable the company to compete in the international market while also gaining an advantage among the other global competitors.

Recommendations

As Qatar Petroleum has decided to merge with another overseas multinational company, a few suggestions have been highlighted for improving the effectiveness of its merger. The first step for 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 must motivate, listen, and encourage the employees to adapt to the change by communicating effectively. The company must develop a culture that is compatible with both the firms that would also address the cultural issues faced after the merger. Moreover, the company needs to align the top leaders of the company to identify who is controlling and directing the firm’s operations.

Conclusion

The strategy merger is one of the effective strategies that organisations often use to compete in the competitive market and improve their financial performance and growth. Qatar Petroleum is a state-owned oil & the gas company overall decided to merge with a multinational overseas company. The report was based on understanding the implications of mergers on operations and efficiency, the key change management required and identifying the challenges and opportunities of the merger. Mergers imply that it plays a significant impact on 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 to the R&D department. The company also gains other company assets that support gaining assets in terms of human resources, physical resources, and capabilities that contribute to gaining a competitive advantage. However, the organisations face various challenges in mergers that consist of cultural management, job insecurity, low motivation, and others. Therefore, organisations are required to bring changes to their management for successfully merging with another company. The key change management requirements are bringing cultural changes, aligning top leaders, inspiring people, developing strategies and HR restructuring.

References

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.

Appendix 1: Gantt chart For Change Management regarding Merger

Appendix 2: Self Reflection

This task has significantly contributed to my learning on change management and what critical changes are required when organizations merge. This task has also contributed towards my searching skills as a large amount of information needed to be searched from the internet regarding mergers and its challenges and opportunities. Moreover, the task also required to conduct deep analysis as to what issues the leaders are faced with while conducting mergers and the critical change management that is needed for successfully carrying out the merge