A STUDY ON ACCEPTANCE LEVEL OF CULTURE IN MERGER AND ACQUISITION

Submitted in partial fulfillment of the requirement for the award of the degree MASTER OF BUSINESS ADMINISTRATION OF BANGALORE UNIVERSITY

BY-Lakshmi B.R REG NO-06KXCM6050 Under the guidance of Mrs K. Aparna Rao

SURANA COLLEGE PG CENTRE #17, KENGERI SATELLITE TOWN, BANGALORE-560060 2006-2008

Declaration

I hereby declare that this dissertation ACCEPTANCE LEVEL OF CULTURE IN MERGER AND ACQUISITION submitted by me to the Bangalore University in the partial fulfillment of requirements of Masters in Business Administration program is a bonified work carried out by me under the guidance of Mrs. Aparna rao. This has not been submitted earlier in any other university for any other institutes for award of any degree/diploma or certificate any time.

PLACE: Bangalore DATE:

Lakshmi B.R 06KXCM6050

ACKNWOLEDGEMENT

I wish to express my heartfelt gratitude In all earnestness to the following persons without whose support and guidance this study would have not been a success. I would like to extend my sincere thanks to Dr. v. Prabhudev, Director SURANA PG CENTER, for his support to carry out the project. I like to express my thanks to Mrs. K Aparna Rao for her support to carry out the project work. I like to express my thanks to Mrs Sowmya Rani sales manager, ING Vysya life insurance Ltd for her support to carry out the project work. I am thankful to ING Vysya life insurance Ltd for giving me an opportunity to carry out my project in their organizations. I also thank all the faculty members of Surana PG center for the great support to carry out my project. I thank my friends and all who have helped me directly and indirectly to complete the project work successfully. I am also glad to express my sincere appreciation and thanks for all the support given by my parents. Finally I wish to express my gratitude to all the employees of the organization who co-operated to give me all the necessary details to finish my project.

PLACE: Bangalore DATE:

Lakshmi B.R 06KXCM6050

TABLE OF CONTENTS

CHAPTER NO

TITLE

PAGE N0

INTRODUCTION TO CULTURE

2 - 22

RESEARCH DESIGN

23-25

COMPANY PROFILE

26-43

ANALYSIS AND INTERPRETATION

44-53

FINDINGS SUGGESTIONS AND CONCLUSIONS

54-56

LIST OF TABLES

TABLE NO
1

TABLE NAME
Acceptance level of employee regarding merger

PAGE NO
44

2 3

Adoption to merger Change in working culture after merger

45 46

Change in working culture after merger

47

Organizations importance to culture

48

Quality of training after merger

49

Relationship with top management before merger

50

Relationship with top mangement after merger

51

Participation level before merger

52

LIST OF GRAPHS TABLE NO GRAPH NAME PAGE NO

Acceptance level of employee regarding merger

44

2 3

Adoption to merger Change in working culture after merger

45 46

Change in working culture after merger

47

Organizations importance to culture

48

Quality of training after merger

49

Relationship with top management before merger

50

Relationship with top mangement after merger

51

Participation level before merger

52

EXECUTIVE SUMMARY

Executive Summary
Even companies that appear to be very similar can have different corporate cultures -- and those cultures can be hard to integrate when companies merge or are acquired. Managing cultural changes is critical to the success of a merger or acquisition. The question is what culture is, how to assess it, and how to integrate two different corporate cultures.

Make no mistake about it: These are the go-go years for mergers and acquisitions. But however adept top executives have been in working the art of the deal, many are now singing the post-M&A blues. Merging balance sheets, it turns out, is far easier than merging cultures. By some estimates, 85 percent of failed acquisitions are attributable to mismanagement of cultural issues. Smart companies know that cultural due diligence is every bit as important as careful financial analysis. They know that the values an organization holds are imbedded in organizational strategy exercising a kind of gravitational pull on decision-making. Without understanding the often hidden and implied values that drive decision-making at every level, the chances are great that a merger or acquisition will quickly be awash in misunderstanding, confusion, and conflict. The good news is that while culture is usually not changed quickly, there are ways to understand the legacy cultures of merged and acquired organizations and to create a new culture for supporting the new enterprises strategies.

CHAPTER - 1 INTRODUCTION

CHAPTER 1 INTRODUCTION TO CULTURE

Culture is the pattern of norms, values, beliefs, and attitudes that influence individual and group behavior within an organization. Originating with the founders of the organization, these norms, values, and beliefs are shaped and honed over time by senior executives and other stakeholders. These values filter down through the organization, further refined and modified in the day-to-day priorities and actions of all the managers and employees in the business. They then circle back up the organization, reinforcing and refining the thinking of senior managers.

Culture is "the way things are done". It includes factors such as: * Treating of customers. * The type and level of participation in decision-making * The level, speed, and process of decision-making * The level of formality and controls * Performance rewards * Risk tolerance * Quality and cost orientation Corporate culture is not an independent variable in the business equation. Rather, culture exists, or should exist, to support the business strategy. If culture is how we get things done, strategy shows us what needs to be done. Culture, to borrow Obi Won's description of "the force," is the power that binds us together. Organizationally, it provides a common thread for day-to-day activities and offers consistency in a turbulent environment. Differences in the two organizational cultures involved in a merger or acquisition and how they are managed are crucial to the success or failure of the process. An organizational culture is comprised of the patterns of shared beliefs and values that give the members of an institution meaning, and provide them with the rules for behavior in their organization. The culture is not generally recognized within organizations, because basic assumptions and preferences guiding thought and action tend to operate at a preconscious level. Nevertheless, this preconscious level affects many areas within the organization, including, performance, cooperation, decision making, control, communication, commitment, perception and justification of behavior. Strong versus Weak Cultures Three elements determine the strength of corporate culture.

1 The number of shared beliefs, values, and assumptions. Higher the number of shared assumptions, thicker will be the culture. In thin cultures, there are few commonly held assumptions and values. 2 Number of employees who accept, rejects, or share in the basic beliefs, values, and assumptions. If employee acceptance is high, a strong corporate culture will emerge. 3 The higher the number of shared beliefs, values and assumptions, the stronger the culture of the organization. In addition, a homogenous and tenured workforce contributes to cultural strength: surviving the good and bad times together makes the employees a close-knit group. Finally, a smaller, centrally located organization is likely to have a stronger organizational culture than one which is larger and geographically dispersed since employee interaction is more frequent and informal in a smaller and centrally located organization. Once a corporate culture is established, it provides employees with identity and stability, which in turn provide the corporation with commitment. On the other hand, a strong culture, with well-ordered values, beliefs, and assumptions may hinder efforts at change, especially in a merger or takeover. Much will depend on the type of merger and the compatibility between the two organizations cultures. During mergers, companies frequently direct their energy to strategic and financial issues, neglecting HR issues. Types of Organizational Cultures

Four main types of organizational culture are summarized below:

1. Power Cultures:

In organizations with power cultures, power rests either with the president, the founder, or a small core group of key managers. This type of culture is most common in small organizations.

Employees are motivated by feelings of loyalty towards the owner or their Supervisor, these types of organizations foster a sense of tradition in both the physical and spiritual sense. Power cultures tend to have inequitable compensation systems and other benefits based on favoritism and loyalty, as well as performance.
2. Role Cultures:

Role cultures are highly autocratic. There is a clear division of labour, and authority figures are clearly defined. Rules and procedures are also clearly defined, and a good employee is one who abides by them. Organizational power is defined by position and status. These organizations respond slowly to change; they are predictable and risk averse. This type of culture for example thrives in industries which employ mass production techniques, in automobile manufacturing.
3. Task/Achievement Cultures:

Task/achievement cultures emphasize accomplishment of the task; research and development is an example. The employees usually work in teams, and the emphasis is on what is achieved rather than how it is achieved. Employees are flexible, creative, and highly autonomous.
4. Person/Support Cultures:

Organizations with a person/support culture have minimal structure and serve to nurture personal growth and development. They are egalitarian in principle, and decision making is conducted on a shared collective basis. This type of culture is rarely found in profit making corporations; it is more typical of professional partnerships such as law firms. Cultural Compatibility: When an organization acquires or merges with another, the contract may take one of three possible forms depending on the nature of the two cultures, the motive for and the objective and power dynamics of the combination. The

success of a merger or acquisition depends, on the cultural compatibility of the two organizations. Cultural compatibility is compared with marriages. They are: The Open Marriage

In an open marriage, the acquiring firm accepts the acquired firms differences in personality, or organizational culture, unequivocally. The acquiring firm allows the acquired firm to operate as an autonomous business unit but usually intervenes to maintain financial control by integrating reporting systems and procedures. The strategy used by the acquirer in this type of acquisition is noninterference. Traditional or Redesign Marriage

In traditional or redesign marriages, the acquirer sees its role as being to dominate and redesign the acquired organization. These types of acquisitions implement wide-scale and radical changes in the acquired company. Their success depends on the acquiring firms ability to displace and replace the acquired firms culture. In essence, this is a win/lose situation. The Modern or Collaborative Marriage

Successful modern, or collaborative, mergers and acquisitions rely on an integration of operations in which the equality of both organizations is recognized. The essence of the collaborative marriage is shared learning. In contrast to traditional marriages, which centre on destroying and displacing one culture in favor of another, collaborative marriages seek to positively build on and integrate the two to create a best of both worlds culture. In collaborative marriages the two organizations are in a win-win situation.

Acculturation

Regardless of the cultural fit, all mergers and acquisitions will involve some conflict and turbulence during a necessary process of acculturation. The Conflict Stage

While the two firms try to overcome their difficulties, each firm, depending on the merger type, the amount of contact each has with the other, and its cultural strength, will compete for resources and try to protect its turf and cultural norms. The Adaptation Stage

Conflict between the two organizations will eventually be resolved either positively or negatively. In a positive adaptation, agreement will be reached concerning operational and cultural elements [that] will be preserved and [those] which will be changed. In a negative adaptation, the conflict will be manifested as Employee dissatisfaction and high turnover rates, can result in operational under performance.

Modes of Acculturation There are four different modes of acculturation: 1. Assimilation Assimilation is the most common method of acculturation and results in one firm, usually the acquired firm, relinquishing its culture willingly and taking on that of the acquiring firm. Thus, the acquiring firm undergoes no cultural loss or change. Generally, the acquired organization has had a weak, dysfunctional, or undesired culture. Therefore, the new culture usually dominates and there is little conflict. 2. Integration If the cultures are integrated, the acquired firm can maintain many of its cultural characteristics. Ideally, the merged firm retains the best cultural elements from both firms. During integration, conflict is heightened initially, as two cultures

compete and negotiate but it is reduced substantially upon agreement by both parties. 3. Separation If the acquired firm has a strong corporate culture and wishes to function as a separate entity under the umbrella of the acquiring firm, it may refuse to adopt the culture of the acquiring firm. Substantial conflict may be engendered and implementation will be difficult. 4. Enculturation Enculturation is the least desirable possibility. It occurs when the culture of the acquired firm is weak, but it is unwilling to adopt the culture of the acquiring firm. A high level of conflict, confusion, and alienation is the result . Human Resource Implications Mergers and acquisitions can be threatening for employees and produce anxiety and stress. Many researchers have found identifiable patterns of emotional reactions experienced by employees during a merger or acquisition; they have labeled this phenomenon the merger-emotions syndrome. There are identifiable patterns of emotional reactions during a merger. Acceptance Relief Interest Liking Denial Enjoyment Fear Anger Sadness

The Merger-Emotions Syndrome:

 Denial. At first employees reacted to the announced merger with denial. They say it must be just a rumor. Fear. When the merger becomes a reality, employees become fearful of the unknown. Anger. Once employees feel that they are unable to prevent the merger or acquisition from taking place, they begin to express anger towards those who are responsible. In many instances, employees feel like they have been sold out after providing the company with loyal service. Sadness. Employees begin to grieve the loss of corporate identity and reminisce about the good old days before the merger. Acceptance. Once a sufficient mourning period has elapsed, employees begin to recognize that to fight the situation would be useless, and they begin to become hopeful about their new situation. Relief. Employees begin to realize that the situation is not as inauspicious as they had envisioned and that the new employees they interact with are not as bad as they had predicted. Interest. Once people become secure with their new positions or with the organization, they begin to look for positive factors and for the benefits they can achieve through the new entity. They begin to perceive the new situation as a challenge in which they can prove to their organization their abilities and worth. Liking. Employees discover new opportunities that they had not envisioned before and begin to like their new situations. Enjoyment. Employees discover that the new situation is working out well and feel more secure and comfortable.

Introduction to Mergers and Acquisition

Background
History of merger and acquisition: During the licensing era, several companies had indulged in unrelated diversifications depending on the availability of the licenses. The companies thrived in spite of their inefficiencies because the total capacity in the industry was restricted due to licensing. The policy of decontrol and liberalization coupled with globalization of the economy has exposed the corporate sector to severe domestic and global competition. The Indian companies have just been getting gripped by this unavoidable fever for apparently right reasons.

Distinction between Mergers and Acquisitions Although they are often uttered in the same breath and used as though they were synonymous, the terms merger and acquisition mean slightly different things. When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded. In the pure sense of the term, a merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals." Both companies' stocks are surrendered and new company stock is issued in its place. In practice, however, actual mergers of equals don't happen very often. Usually, one company will buy another and, as part of the deal's terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it's technically an acquisition. Being bought out often carries negative connotations, therefore, by describing the deal as a merger, deal makers and top managers try to make the takeover more palatable. A purchase deal will also be called a merger when both CEOs agree that joining together is in the best interest of both of their companies. But when the deal is unfriendly - that is, when the target company does not want to be purchased - it is always regarded as an acquisition. Whether a purchase is considered a merger or an acquisition really depends on whether the purchase is friendly or hostile and how it is announced. In other words, the real difference lies in how the purchase is communicated to and received by the target company's board of directors, employees and shareholders. The scenario in the US:

Merger activities have been classified by various authors into so called waves by clustering activities of the US business during various periods. Weston has identified three major periods of merger movements while studying the business behavior of the US companies and the environment after these waves have taken place. First wave (1898-1903)

During this period, market was giving way to partial monopoly structure. Corporate laws were relaxed and hence effective mergers took place. The main reasons for the mergers were: Expand operations Economies of scale and To counter competition

Transport networks and national markets were developed which increased the possibility of achieving the economies of size through mergers.

Second wave (1926-1929)

Many mergers during the second wave essentially had the shape of vertical integration: To achieve technical gains from integration To avoid dependence on other firms for raw materials To consolidate sales and distribution networks Third wave (1940-1947)

This period saw the disappearance of at least 2500 firms and the growth of the eight largest steel corporations in the US. No pervasive motive could be identified. Various factors like circumventing fiats, high taxes during the war period, managerial reorganizations, product diversifications, etc lead to 4th wave.

Fourth wave (1980-1990)

In the 1980s and 1990s, companies in the US responded to a common set of environmental/ macro factors by opting for restructuring exercises. These were mainly due to three macro trends: Globalization of markets Deregulation of financial and real estate sectors Increasing threat of take over bids.

Merger:
A merger is a tool used by companies for the purpose of expanding their operations often aiming at an increase of their long term profitability. There are 15 different types of actions that a company can take when deciding to move forward using M&A. Usually mergers occur in a consensual (occurring by mutual consent) setting where executives from the target company help those from the purchaser in a due diligence process to ensure that the deal is beneficial to both parties. Acquisitions can also happen through a hostile takeover by purchasing the majority of outstanding shares of a company in the open market against the wishes of the target's board. In the United States, business laws vary from state to state whereby some companies have limited protection against hostile takeovers. One form of protection against a hostile takeover is the shareholder rights plan, otherwise known as the "poison pill". Historically, mergers have often failed to add significantly to the value of the acquiring firm's shares. Corporate mergers may be aimed at reducing market competition, cutting costs (for example, laying off employees, operating at a more technologically efficient scale, etc.), reducing taxes, removing management, "empire building" by the acquiring managers, or other purposes which may or may not be consistent with public policy or public welfare. Thus they can be heavily regulated, for example, in the U.S. requiring approval by both the Federal Trade Commission and the Department of Justice.

The U.S. began their regulation on mergers in 1890 with the implementation of the Sherman Act. It was meant to prevent any attempt to monopolize or to conspire to restrict trade. However, based on the loose interpretation of the standard "Rule of Reason", it was up to the judges in the U.S. Supreme Court whether to rule leniently (as with U.S. Steel in 1920) or strictly (as with Alcoa in 1945).

Classifications of mergers
Horizontal mergers take place where the two merging companies produce similar product in the same industry. Vertical mergers occur when two firms, each working at different stages in the production of the same good, combine. Co generic mergers occur where two merging firms are in the same general industry, but they have no mutual buyer/customer or supplier relationship, such as a merger between a bank and a leasing company. Example: Prudential's acquisition of Bache & Company. Conglomerate mergers take place when the two firms operate in different industries. Reverse merger is used as a way of going public without the expense and time required by an IPO. The contract vehicle for achieving a merger is a "merger sub". The occurrence of a merger often raises concerns in antitrust circles. Devices such as the Herfindahl index can analyze the impact of a merger on a market and what, if any, action could prevent it. Regulatory bodies such as the European Commission, the United States Department of Justice and the U.S. Federal Trade Commission may investigate anti-trust cases for monopolies dangers, and have the power to block mergers.

Accretive mergers are those in which an acquiring company's earnings per share (EPS) increase. An alternative way of calculating this is if a company with a high price to earnings ratio (P/E) acquires one with a low P/E.

Dilutive mergers are the opposite of above, whereby a company's EPS decreases. The company will be one with a low P/E acquiring one with a high P/E.

The completion of a merger does not ensure the success of the resulting organization; indeed, many mergers (in some industries, the majority) result in a net loss of value due to problems. Correcting problems caused by incompatibilitywhether of technology, equipment, or corporate culture diverts resources away from new investment, and these problems may be exacerbated by inadequate research or by concealment of losses or liabilities by one of the partners. Overlapping subsidiaries or redundant staff may be allowed to continue, creating inefficiency, and conversely the new management may cut too many operations or personnel, losing expertise and disrupting employee culture. These problems are similar to those encountered in takeovers. For the merger not to be considered a failure, it must increase shareholder value faster than if the companies were separate, or prevent the deterioration of shareholder value more than if the companies were separate.

Acquisition:
An acquisition, also known as a takeover, is the buying of one company (the target) by another. An acquisition may be friendly or hostile. In the former case, the companies cooperate in negotiations; in the latter case, the takeover target is unwilling to be bought or the target's board has no prior knowledge of the offer. Acquisition usually refers to a purchase of a smaller firm by a larger one. Sometimes, however, a smaller firm will acquire management control of a larger or longer established company and keep its name for the combined entity. This is known as a reverse takeover.

Types of acquisition The buyer buys the shares, and therefore control, of the target company being purchased. Ownership control of the company in turn conveys effective control over the assets of the company, but since the company is acquired intact as a going business, this form of transaction carries with it all of the liabilities accrued by that business over its past and all of the risks that company faces in its commercial environment. The buyer buys the assets of the target company. The cash the target receives from the sell-off is paid back to its shareholders by dividend or through liquidation. This type of transaction leaves the target company as an empty shell, if the buyer buys out the entire assets. A buyer often structures the transaction as an asset purchase to "cherry-pick" the assets that it wants and leave out the assets and liabilities that it does not. This can be particularly important where foreseeable liabilities may include future, unquantified damage awards such as those that could arise from litigation over defective products, employee benefits or terminations, or environmental damage. A disadvantage of this structure is the tax that many jurisdictions, particularly outside the United States, impose on transfers of the individual assets, whereas stock transactions can frequently be structured as like-kind The terms "demerger", "spin-off" and "spin-out" are sometimes used to indicate a situation where one company splits into two, generating a second company separately listed on a stock exchange. Motives behind M&A These motives are considered to add shareholder value: Synergy: This refers to the fact that the combined company can often reduce duplicate departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing profit.

Increased revenue/Increased Market Share: This motive assumes that the company will be absorbing a major competitor and thus increase its power (by capturing increased market share) to set prices. Cross selling: For example, a bank buying a stock broker could then sell its banking products to the stock broker's customers, while the broker can sign up the bank's customers for brokerage accounts. Or, a manufacturer can acquire and sell complementary products. Economies of Scale: For example, managerial economies such as the increased opportunity of managerial specialization. Another example are purchasing economies due to increased order size and associated bulk-buying discounts. Taxes: A profitable company can buy a loss maker to use the target's loss as their advantage by reducing their tax liability. In the United States and many other countries, rules are in place to limit the ability of profitable companies to "shop" for loss making companies, limiting the tax motive of an acquiring company. Geographical or other diversification: This is designed to smooth the earnings results of a company, which over the long term smoothens the stock price of a company, giving conservative investors more confidence in investing in the company. However, this does not always deliver value to shareholders (see below). Resource transfer: Resources are unevenly distributed across firms (Barney, 1991) and the interaction of target and acquiring firm resources can create value through either overcoming information asymmetry or by combining scarce resources. Assessing the culture While organizational culture is unquestionably the soft side of business reality, we know it can be a real M&A buster. To ensure that the force is always with you

in your M&A efforts, it is critical to understand and assess the current culture of both companies involved in the M&A process. Yet too often the issues of culture take a back seat to financial issues as accountants and lawyers do their jobs. In many cases, cultural due diligence is virtually ignored -- but ignorance is perilous. More specifically, attention must also be paid to the following issues during the due diligence process: * Management approach * Budget and projections conventions and strategies for long-range planning * Management reports and reporting procedures * Organizational and human resource structures * Manufacturing and procurement processes * Engineering and research and development infrastructure These, and the balance among these factors, will also help define. These, and the balance among these factors, will also help define and assess the culture of an organization. It is important to remember that the purpose of cultural due diligence is not to eliminate culture clash -- an unlikely event even in the best of circumstances. Nor is the purpose to find a perfect fit between two organizations. But, while a wide gap is unhealthy, the best mergers occur when a fair amount of culture differentiation prompts debate about what is best for the combined organization. Ideally, these discussions are well underway before the merger occurs.

Understanding values Values -- those that are both explicitly stated as well as those that are implicitly held -- are a key element in assessing culture in an organization. In an M&A situation it is key that both types are examined and intimately understood.

The strategy of an organization is a gold mine for the discovery of explicit values within an organization. For example, what does the mission statement say about the organization and its goals? What values are manifest in strategic statements dealing with future markets, future products, capabilities, and financial expectations? What does the annual report emphasize? Such statements speak volumes about the culture of the organization. Values and beliefs should express the most fundamental underpinnings of how a business is to conduct itself when dealing with employees and the outside world. Here are some examples of companies' stated values and beliefs: * "We believe in honesty and integrity in all of our personal and business dealings." Cultural integration Once you develop an understanding of the current culture and have compared that with the goals of the merged organization, it is time to think through what it will take to implement that strategy. This process requires consideration of a number of issues, including organizational structure, operating and decisionmaking apparatus, reward systems, and people-related issues. Integration of corporate cultures in an M&A environment is not easy. Project plans are extensive in scope. While each plan will be developed around unique needs, these plans do have a number of elements in common. Managers will need to: Establish the strategic context early on. The strategic context can be formulated by asking -- and answering -- some very basic questions about the strategic direction of the merged enterprise. For example: What should the integrated company look like in two or three years? What are the products and markets that will receive the highest emphasis and resources? What are the barriers to the success of this new enterprise? What will cause us to succeed? What infrastructure and skills do we need to support our competitive advantage? What

is the driving force (key strategic concept) that drives strategic decisions around products and markets? By addressing these issues, companies will be able to formulate the strategy of the new enterprise and ultimately return higher value to their customers and establish themselves as a powerful competitor in their markets. * Communicate to all constituencies, including employees, suppliers, customers, and shareholders. Concepts such as values and beliefs provide a description of acceptable ways to interact with both internal and external constituencies. These are the foundations upon which business is conducted and, though difficult to explain, these sometimes amorphous concepts must be clearly communicated. Processes on the other hand such as decision-making is to be pushed up or down in the organization which might be bit easier to communicate. But ease of communication is not the deciding factor. Rather, all values and beliefs as well as the processes having to do with culture must be communicated throughout the organization. Communications is an important element for managing a company's culture in preparation for M&A activities. But it is even more important in the period leading up to and following closure of a deal. Fortunately, the task is made easier by the fact that most people want to support and contribute to the goals of the organization -- they simply need sufficient understanding of what the goals are and how they can behave to support them. Management behavior -- the "body language" of an organization -- is another form of communication that often gets overlooked in an M&A situation. It is, however, a critical element of managing culture. The literature is replete with examples of companies in which managers act in a manner completely contrary to written values and beliefs. This sends a mixed signal that typically results in no change. Actions speak louder than words, especially in M&A situations. In today's technologically advanced world, communicating strategy and supporting culture have become multi-media events. Utilize traditional media

such as newsletters, but also take advantage of new technologies such as corporate intranets, kiosks, and videos. By using all these resources, companies can increase the number of people they reach, increase the repetition of the message, and enhance the likelihood that the message will be understood and accepted. * Identify and resolve important cultural differences early. Differences in culture and values often lie beneath the surface and are not identified until it is too late. For example, the defense industry has experienced almost unprecedented consolidation during the past decade. The number of companies accounting for two-thirds of all defense sales shrank from 15 in 1990 to just six in 1998. In a few cases, such as when Boeing acquired McDonnell Douglas, the cultural upheaval was reduced. But many of these consolidations were not smooth. In some cases, companies acquired a variety of defense operations in an effort to achieve critical mass and remain a defense player. However, despite what may be defensible strategy investors have punished the top-tier defense companies. There is a long list of reasons why the investor community has turned on the defense industry, but one of the most commonly cited reasons is that the companies failed to integrate the diverse cultures that existed in the industry before consolidation. These were highly competitive companies that, although they looked similar, had very different operating systems, decision-making processes, and management styles. In many cases, the combined operations were effectively non-functional. Indian scenario: During the licensing era, several companies had indulged in unrelated diversifications depending on the availability of the licenses. The companies thrived in spite of their in efficiencies because the total capacity in the industry was restricted due to licensing. The companies, over a period of time, became unwieldy conglomerates with a sub optimal portfolio of assorted businesses. The policy of decontrol and liberalization coupled with globalization of economy has

exposed to the corporate sector to serve domestic and global competition. This has been further accentuated by the recessionary trends which resulted in falling demand, which in turn resulted in over capacity in several sectors of economy. The industry is currently passing through a transitionary phase of restructuring. Companies are currently engaged in efforts to consolidate themselves in areas of their core competence and disinvest those businesses where they do not have any competitive advantage. The actual wave in the Indian context, however, started after 1994 when the necessity of formulating a new takeover code was felt by the regulatory authorities. Prior to 1994, the Murugappa group, the chabbria group and the RPG group, sought to build industrial practice of building a conglomerate of diverse businesses into one group. In recent times, M&A have attempted to restructure firms and achieve economies of scale to deal with an increasingly competitive environment.

EFFECTS OF MEREGERS AND ACQUISITION AND REMIDIES: Stages in the Merger-Emotions Syndrome The merger-emotions syndrome provides management and researchers with the opportunity of pinpointing the emotional stage of the employees of an acquired corporation. Management should recognize that these emotions exist among the employees and deal with them as expeditiously as possible. At a minimum, managers should provide positive feedback to employees, emphasizing that their performance is commendable under the stressful situation brought about by the acquisition, in order to alleviate negative work related feelings. Employee Stress Even the best-orchestrated mergers can be threatening, unsettling, and stressful for some employees. Some common merger stressors include uncertainty, insecurity, and fears concerning job loss, job changes, job transfers,

compensation changes, and power, status, and prestige changes. They can lead, in turn, to organizational outcomes such as absenteeism, poor performance, and higher employee turn over. To alleviate merger stress, stress management plan be implemented, with the following strategies: Merger Stress Audit A merger stress audit assesses employees perceptions of the merger. Management uses it to identify collective concerns and implement programs to alleviate them. Realistic Merger Previews A realistic merger preview informs employees about what to expect once the acquisition takes place, in order to help them through the transition. It can be provided through various media (for example, a video, booklets, or presentations) and should include information about the following: Organizational goals, missions, and markets Management style and organizational culture Work schedules, benefits, and compensation Equipment, resources, and information flow Job security Career paths Training and development Performance evaluation. Individual Counseling

Because any major departure from our normal lifestyle acts as a trigger for stress and insecure feelings, counseling on an individual basis to help employees overcome merger stress and fear and to suggest coping strategies may help alleviate negative reactions. Moreover, since acquisitions provide different opportunities for career mobility, counseling can direct employee energies towards new career paths and reaffirm employee commitment to the new organization. Merger Stress Management Training Voluntary stress management training might be provided on a group basis. Employees would share their fears and concerns and would be guided through methods and processes to alleviate these dysfunctional stress responses. Communication During mergers and acquisitions, employees are often kept in the dark about the sale of the corporation. They often hear about the acquisition on a less than timely basis, through the press or through the corporate grapevine. This can lead to a distorted or misrepresented picture of the acquisitions ramifications and to counterproductive activities by employees, who may be anxious about possible job losses. There fore, wherever possible, corporations should aim to inform all employees at the same time, concurrently [with] or in advance of any press release or radio announcement. As mentioned, upon notification of the acquisition, employees will likely experience shock, disbelief and grief. followed by resentment, anger or depression. During this period, management must continue to listen to and communicate with employees and relay accurate and comprehensive information as expeditiously as possible. However, information should not exceed the information actually known by management. It is far safer for management to acknowledge the lack of information than to give responses that may later prove to be incorrect. Management should also indicate that when more information is available, it will be passed on to the employees. Any layoffs or downsizing should be conducted

as soon as possible to alleviate anxiety and reduce rumors and to allow employees to return to business as usual. Job Satisfaction Employee job satisfaction before and after the combination on the following criteria: pay levels, employee benefits, job security, communication levels, participation in the decision-making process, opportunity for professional growth, development of personal job skills, promotion potential, and overall job satisfaction in the decision-making process were particularly affected. Likewise, in the acquiring companies managers felt that job satisfaction decreased in most instances, but not to the extent as in the acquired companies. Satisfaction was reported to have increased in the acquiring companies in two areas: opportunity for professional growth and promotion potential. Thus, job satisfaction decreased for both the acquired and the acquiring organization after an acquisition, perhaps because of the ambiguity and uncertainty of job retention felt both by employees and by managers. The Them-Us Syndrome After the acquisition has been formally announced, employees of both organizations tend to adopt a them and us stance, particularly in the acquired organization, if employees have perceived the acquisition as a loss. A merger can emphasize or even exaggerate the differences in status between employees; the resultant structure is often a constant reminder of who the winners and who the losers are. Differences in organizational cultures including management styles can lead to competition between employee groups. Distorted perceptions and hostile feelings toward the other group become common and responsibility for why things were not going as well as they should, why communications were so poor, or why I or my boss was not fairly treated [ are] routinely attributed to the other side. This can be described as the arm wrestling phase.

CHAPTER- 2 DESIGN OF THE STUDY

CHAPTER 2
Research Design TITLE:
ACCEPTANCE OF CULTURE IN MERGER AND AQUISITION STATEMENT OF PROBLEM: Over the past two decades, cross-border or international mergers and acquisitions (IM&A s) have become the preferred method of foreign direct investment (FDI). The trend shows that IM & As go both ways: toward developing countries and from them, reshaping the worlds economic boundaries. The high rate of failures has been associated mainly to the fact that M&As are still designed with business and financial fit as primary conditions, leaving psychological and cultural issues as secondary concerns. The wider cultural gap and the current trend of IM&As between developed and developing countries increases the urgency of understanding the effects of culture on the dynamics of

IM&As and on issues such as corporate governance and local adaptation strategy. The present research is designed in response to this shortcoming. It examines the effects of culture on the outcome of IM&As and the variation of these effects during the different phases of an IM&A. The research focuses on the international aspect of cultural differencesthe differentiating factor between domestic mergers and acquisitions (M&As) and IM&As. It measures success from an organizations internal perspective, comparing what the IM&A, at inception, was expected to achieve and what it achieved several years later. This approach is different from the standard one of measuring success based on market reaction to the IM&Aan external measure. Review of literature Despite two decades of increasing M&A activity, both within and across countries, researchers have neglected cultural factors or have treated organizational culture and national culture as one factor. Moreover, none of the studies have focused on the role of national culture in an IM&A process. Cultural factors in IM&As can be studied at both the organizational and the national levels. These two levels of culture should be treated as separate variables to show how they relate to other aspects of IM&As (e.g., organizational structure, performance, and acculturation). Various studies have shown that most researchers (1) have treated organizational and national culture as one factor in their analyses; (2) have concluded that culture clash results in a decline in shareholder value at the buying firm, it affects organizational restructuring, it causes a deterioration of operating performance at the acquired firm, it lowers employee commitment and cooperation, and it results in greater turnover among acquired managers. In summary researchers consider cultural synergy an important success factor. However, most researchers have treated culture at the organizational level and discussed success factors of cultural integration in M&As with the exception of few who have treated culture at the national level but have analyzed IM&As and trends in a specific region. A few researchers who acknowledge that national and

organizational cultures act at different levels still include them in their analysis as one factor. Acculturation takes place at two levels, national and organizationala concept that has been called a double-layered acculturation process. However, they consider both levels of culture as part of the leaders mindset, with a major impact on the acculturation course leading to the eventual success or failure of the merger. In summary, researchers seeking to understand the process and outcome of the IM&A with culture. While cultural fit has been acknowledged to be a potentially important factor in M&As, the concept is ill defined, with no distinction drawn between the national and corporate levels of culture.

NEED FOR THE STUDY: To know the various aspects associated with acceptance level of culture in merger in acquisition in ING Vysya Ltd and the impact on the condition of the environment in the organization. OBJECTIVE OF THE STUDY: The present study is envisaged with the following objectives:
1. Peoples perceptions and interpretations of their environment and, therefore,

their rationality, are affected by cultural factors.

2. Cultural differences affect our view of business and management and,

consequently, the outcome of IM&As.

3. Cultural differences may be an asset. 4. National cultural differences should be accounted for and planned for so as to

reduce the risk of failure and increase the chances of success. PRIMARY DATA COLLECTION

1. Interaction with employees in ING bank Ltd and management and the employees 2. Questionnaire SECONADRY DATA COLLECTION Web sites Journals News papers Company manuals

FORMULA USED: (NO OF EMPLOYEES/TOTAL SAMPLE SIZE) * 100

LIMITATIONS Time constraint is the main limitation associated with the particular study Non availability of certain information may also prove to be a limitation associated with the study Employees could not fill the questionnaire properly due to time constraint

CHAPTER- 3 COMPANY PROFILE

CHAPTER 3
COMPANY PROFILE
ING Vysya Life Insurance Company Limited (the Company) entered the private life insurance industry in India in September 2001, and in a span of 5 years has established itself as a distinctive life insurance brand with an innovative, attractive and customer friendly product portfolio and a professional advisor sales force. It has a dedicated and committed advisor sales force of over 21,000 people, working from 140 branches located in 74 major cities across the country and over 3,000 employees. It also distributes products in close cooperation with the ING Vysya Bank network. The Company has a customer base of over 4,50,000 & is headquartered at Bangalore. In 2005, ING Vysya Life earned a total income in excess of Rs. 400 crore and also has a share capital of Rs. 440 crore. The Company aims to make customers look at life insurance afresh, not just as a tax saving device but as a means to add protection to life. The one thing we hold in highest esteem is 'life' itself. We believe in enhancing the very quality of life, in addition to safeguarding an individual's security. Our core values are therefore defined as Professional, Entrepreneurial, Trustworthy, Approachable and Caring.

The Companys portfolio offers products that cater to every financial requirement, at any life stage. We believe in continuously developing customer-driven products and services and value being accessible and responsive to the needs of our customers. In fact, the company has developed the Life Maker. A simple method which can be used to choose a plan most suitable to a specific customer based on his needs, requirements and current life stage. This tool helps you build a complete financial plan for life, whether the requirement is Protection, Savings or Investment, Retirement.

Corporate Objective At ING Vysya Life, we strongly believe that as life is different at every stage, life insurance must offer flexibility and choice to go with that stage. We are fully prepared and committed to guide you on insurance products and services through our well-trained advisors, backed by competent marketing and customer services, in the best possible way. It is our aim to become one of the top private life insurance companies in India and to become a cornerstone of INGs integrated financial services business in India. Our Mission To set the standard in helping our customers manage their financial future. MILESTONES The origin of the erstwhile Vysya Bank was pretty humble. It was in the year 1930 that a team of visionaries came together to found a bank that would extend a helping hand to those who werent privileged enough to enjoy banking services. Since then the bank has grown in size and stature to encompass every area of present day banking activity and has carved a distinct identity of being Indias Premier Private Sector Bank.

In 1980, the bank completed 50 years of service to the nation; the bank made rapid strides to reach the coveted position of being the number one private sector bank. In 1990, the bank completed its Diamond Jubilee year. At the Diamond Jubilee Celebrations, the then Finance Minister Prof. Madhu Dandavate, had termed the performance of the bank Stupendous. The 75th anniversary, the platinum jubilee of the bank was celebrated during 2005.

The long journey of 75 years has had several mile stones. 1930 1948 1985 1987 1988 1990 1992 1993 1996 Set up in Bangalore Scheduled Bank Largest Private Sector Bank The Vysya Bank Leasing Ltd Commenced Pioneered the concept of company branding Credit Cards Promoted Vysya Bank Housing Ltd Deposits cross Rs.1000 crores Number of Branches crossed 300 Two National Awards by Gem and Jewellery Export Promotion Council for excellent performance in Export Promotion 1998 Golden Peacock Award for the Best HR Practices by Institute of Directors. Rated as best Domestic Bank in India by Global Finance (International Financial Journal-June 1998) 2000 RBI clears setting up of ING Vysya Life Insurance Company

2001 2002 2002

ING Vysya commenced life insurance business ING takes over the management of the bank from October 7th, 2002 RBI clears the new name of the bank a ING Vysya Bank Ltd

Partners A glance at our equity partners: ING Group Exide Industries Limited Gujarat Ambuja Cements Limited Enam Group

PRODUCT PROFILE
PROTECTION
Conquering Life ING Term Life ING Term Life Plus

SAVING
Reassuring Life Creating Life Safal Jeevan

Creating Life Money Back Safal Jeevan Money Back ING Life Plus ING Positive Plus ING Creating Star

INVESTMENTS
Rewarding Life Powering Life New Freedom plan New One Life Platinum Life New Fulfilling Life High Fulfilling Life ING Life Plus ING guaranteed Growth

RETIREMENT
Best Years New Future Perfect

RIDER
Term Rider Waiver of Premium Rider Accidental Death Rider

Accidental Death, Disability & Dismemberment Rider

Board of Directors
Mr. Rajan Raheja, Chairman of the Board. Mr. Kshitij Jain, Managing Director & Chief Executive Officer. Mr. N.N. Joshi, Director. Mr. Satish Raheja, Director. Mr. Rajesh Kapadia, Director. Mr. S.B. Ganguly, Director. Mr. Ron Van Oijen, Director. Senior Management Team Kshitij Jain, Managing Director & CEO. Amit Gupta, Director - Marketing & Communication. Hemamalini Ramakrishnan, Director Human Resources.

ORGANIZATION CHART

CEO

Senior Executive Secretary

VP Sales

VP-Alternate Channels

Director Employee Benefits AVP NPD CFO VP-Sales Controller VP HR

VP Marketing COO

CORPORATE SOCIAL RESPONSIBILITY

The bank as a part of its corporate social responsibility has undertaken many purposeful activities. However, these are channelized at a group level under the ING VYSYA FOUNDATION. ING VYSYA FOUNDATION It was set up almost three years ago actively supported by the three business units of ING Vysya (ING Vysya Bank, ING Vysya Mutual Fund and ING Vysya Life Insurance) to promote its responsibility. The mandate for this foundation is to promote primary education for under privileged children. In a country with an estimated 50 million children deprived of basic primary education and health care, enormous support, dedication and firm belief is necessary to make a difference and to change the scenario. The foundations effort has very successful in reaching out to underprivileged children and providing them with a platform to learn, grow and achieve. The foundations major program towards the same is the ING CHANCES FOR CHILDREN. This program is done throughout the globe and has been joined

forces with UNICEF (United Nations Childrens Fund), to achieve the target of giving 50000 children access to education. The program will be supporting educational projects in India, Brazil and Ethiopia. The partnership with UNICEF will also enable the local ING business units to team up with local UNICEF offices and take advantage of each others unique positions at a community level. The main targets of this program are: To provide primary education to 50000 children over a period of three years. To improve the quality of education in the communities in which ING businesses are active. To involve as many of the ING Groups 115000 employees as possible, either as ambassadors, volunteers or both

INDUSTRY POFILE
Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the insured individual's or individuals' death or when the policy matures. In return, the policy owner (or policy payer) agrees to pay a stipulated amount called a premium at regular intervals or in lump sums (so-called "paid up" insurance). There may be designs in some countries where: (Assets, Bills, and death expenses plus catering for after funeral expenses should be included in Policy Premium. Anyone whose assets equal more than the value of their primary residence should not be compensated beyond that value in case they cannot sell their house. In the case of those whose lost their spouse should be compensated also for one full year the wages of their spouse which would or should be included to avoid lawsuits.) However in the United States, the predominant form simply specifies a lump sum to be paid on the insured's demise. As with most insurance policies, life insurance is a contract between the insurer and the policy owner (policyholder) whereby a benefit is paid to the designated Beneficiary (or Beneficiaries) if an insured event occurs which is covered by the

policy. To be a life policy the insured event must be based upon life (or lives) of the people named in the policy. Insured events that may be covered include: Death Accidental death Sickness

Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; for example claims relating to suicide (after 2 years suicide has to be paid in full)(in India after one year Suicide is covered), fraud, war, riot and civil commotion. Life based contracts tend to fall into two major categories: Protection policies - designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance. Investment policies -the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US anyway) are whole life, universal life and variable life policies. Principles of insurance Commercially insurable risks typically share some common characteristics. A large number of homogeneous exposure units. The vast majority of insurance policies are provided for individual members of very large classes. Lloyd's of London is famous for insuring the life or health of actors, actresses and sports figures. Large commercial property policies may insure exceptional properties for which there are no homogeneous exposure units.

Definite Loss The event that gives rise to the loss that is subject to insurance should, at least in principle, take place at a known time, in a known place, and from a known cause. The classic example is death of an insured on a life insurance policy. Large Loss The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. Calculable Loss Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim . TYPES OF INSURANCE Below is the list of the many different types of insurance based on the coverage: Life & Annuity Coverages Health Coverages Disability Coverages Property & Casualty Coverages Liability Coverages Credit Coverages Other Types of Coverages

Types of insurance companies Insurance companies may be classified as

Life insurance companies, which sell life insurance, annuities and pensions products. Non-life or general insurance companies, which sell other types of insurance.

Brief History of Insurance Sector In India The insurance sector in India has become a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost 190 years. The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are: 1912 - The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928 - The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938 - Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956 - 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are: 1907 - The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business.

1957 - General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968 - The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972 - The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.

Insurance Sector Reforms In 1993, Malhotra Committee- headed by former Finance Secretary and RBI Governor R.N. Malhotra- was formed to evaluate the Indian insurance industry and recommend its future direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. The reforms were aimed at creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognizing that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms.

In 1994, the committee submitted the report and some of the key recommendations included:

Structure: Government stake in the insurance Companies to be brought down to 50%. Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations. All the insurance companies should be given greater freedom to operate. Competition: Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the sector. No Company should deal in both Life and General Insurance through a single entity. Foreign companies may be allowed to enter the industry in collaboration with the domestic companies. Postal Life Insurance should be allowed to operate in the rural market. Only one State Level Life Insurance Company should be allowed to operate in each state. Regulatory body: The Insurance Act should be changed. An Insurance Regulatory body should be set up. Controller of Insurance- a part of the Finance Ministry- should be made independent Investments: Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50%. GIC and its subsidiaries are not to hold more than 5% in any company (there current holdings to be brought down to this level over a period of time) Customer service: LIC should pay interest on delays in payments beyond 30 days. Insurance companies must be encouraged to set up unit linked pension plans. Computerization of operations and updating of technology are to be carried out in the insurance industry. The committee emphasized that in order to improve the customer services and increase the coverage of insurance policies, industry should be opened up to competition. But at the same time, the committee felt the

need to exercise caution as any failure on the part of new players could ruin the public confidence in the industry. Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs.100 crores. The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body- The Insurance Regulatory and Development Authority. Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies. Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations. The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products. Present Scenario The Government of India liberalised the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Under the current guidelines, there is a 26 percent equity cap for foreign partners in an insurance company. There is a proposal to increase this limit to 49 percent. The opening up of the sector is likely to lead to greater spread and deepening of insurance in India and this may also include restructuring and revitalizing of the public sector companies. In the private sector 12 life insurance and 8 general insurance companies have been registered. A host of private Insurance

companies operating in both life and non-life segments have started selling their insurance policies since 2001. Non-Life Insurance Market In December 2000, the GIC subsidiaries were restructured as independent insurance companies. At the same time, GIC was converted into a national reinsurer. In July 2002, Parliament passed a bill, delinking the four subsidiaries from GIC. Presently there are 12 general insurance companies with 4 public sector companies and 8 private insurers. Although the public sector companies still dominate the general insurance business, the private players are slowly gaining a foothold. According to estimates, private insurance companies have a 10 percent share of the market, up from 4 percent in 2001. In the first half of 2002, the private companies booked premiums worth Rs 6.34 billion. Most of the new entrants reported losses in the first year of their operation in 2001. With a large capital outlay and long gestation periods, infrastructure projects are fraught with a multitude of risks throughout the development, construction and operation stages. These include risks associated with project implementation, including geological risks, maintenance, commercial and political risks. Without covering these risks the financial institutions are not willing to commit funds to the sector, especially because the financing of most private projects is on a limited or non- recourse basis. Insurance companies not only provide risk cover to infrastructure projects, they also contribute long-term funds. In fact, insurance companies are an ideal source of long term debt and equity for infrastructure projects. With long term liability, they get a good asset- liability match by investing their funds in such projects. IRDA regulations require insurance companies to invest not less than 15 percent of their funds in infrastructure and social sectors. International Insurance companies also invest their funds in such projects.

Insurance costs constitute roughly around 1.2- 2 percent of the total project costs. Under the existing norms, insurance premium payments are treated as part of the fixed costs. Consequently they are treated as pass-through costs for tariff calculations. Premium rates of most general insurance policies come under the purview of the government appointed Tariff Advisory Committee. For Projects costing up to Rs 1 Billion, the Tariff Advisory Committee sets the premium rates, for Projects between Rs 1 billion and Rs 15 billion, the rates are set in keeping with the committee's guidelines; and projects above Rs 15 billion are subjected to reinsurance pricing. It is the last segment that has a number of additional products and competitive pricing. Insurance, like project finance, is extended by a consortium. Normally one insurer takes the lead, shouldering about 40-50 per cent of the risk and receiving a proportionate percentage of the premium. The other companies share the remaining risk and premium. The policies are renewed usually on an annual basis through the invitation of bids. Re-insurance business Insurance companies retain only a part of the risk (less than 10 per cent) assumed by them, which can be safely borne from their own funds. The balance risk is re-insured with other insurers. In effect, therefore, re-insurance is insurer's insurance. It forms the backbone of the insurance business. It helps to provide a better spread of risk in the international market, allows primary insurers to accept risks beyond their capacity settle accumulated losses arising from catastrophic events and still maintain their financial stability. While GIC's subsidiaries look after general insurance, GIC itself has been the major reinsurer. Currently, all insurance companies have to give 20 per cent of their reinsurance business to GIC. The aim is to ensure that GIC's role as the national reinsurer remains unhindered. However, GIC reinsures the amount further with international companies such as Swissre (Switzerland), Munichre

(Germany), and Royale (UK). Reinsurance premiums have seen an exorbitant increase in recent years, following the rise in threat perceptions globally.

Life Insurance Market The Life Insurance market in India is an underdeveloped market that was only tapped by the state owned LIC till the entry of private insurers. The penetration of life insurance products was 19 percent of the total 400 million of the insurable population. The state owned LIC sold insurance as a tax instrument, not as a product giving protection. Most customers were under- insured with no flexibility or transparency in the products. With the entry of the private insurers the rules of the game have changed. The 12 private insurers in the life insurance market have already grabbed nearly 9 percent of the market in terms of premium income. The new business premium of the 12 private players has tripled to Rs 1000 crore in 2002- 03 over last year. Meanwhile, state owned LIC's new premium business has fallen. Indians, who have always seen life insurance as a tax saving device, are now suddenly turning to the private sector and snapping up the new innovative products on offer.The growing popularity of the private insurers shows in other ways. They are coining money in new niches that they have introduced. The state owned companies still dominate segments like endowments and money back policies. But in the annuity or pension products business, the private insurers have already wrested over 33 percent of the market. And in the popular unit-linked insurance schemes they have a virtual monopoly, with over 90 percent of the customers. The private insurers also seem to be scoring big in other ways- they are persuading people to take out bigger policies. For instance, the average size of a life insurance policy before privatization was around Rs 50,000. That has risen to about Rs 80,000. But the private insurers are ahead in this game and the

average size of their policies is around Rs 1.1 lakh to Rs 1.2 lakh- way bigger than the industry average. Buoyed by their quicker than expected success, nearly all private insurers are fast- forwarding the second phase of their expansion plans. No doubt the aggressive stance of private insurers is already paying rich dividends. But a rejuvenated LIC is also trying to fight back to woo new customers. Benefits of Life Insurance Apart from the insurance coverage there are many other advantages with a life insurance policy. Policy owner 1. Can avail loans from banks and other financial institutions with a life insurance policy. 2. Can avail tax benefits as per Income tax department of Indias rules with an investment in life insurance policy. 3. It is also a good investment method for future needs. 4. Above all the policy owner gets life insurance coverage for the insured period. Life Insurance - Indian Scenario Life insurance in India was nationalized in 1956 by incorporating Life Insurance Corporation of India and all private life insurance companies were taken over by LIC. Again in 2000 Govt. of India passed a new insurance bill Insurance Regulatory and Development Authority Act and appointed a new insurance regulator Insurance Regulatory and Development Authority to issue license to private insurance companies. This again opened door to private players and major Indian financial companies tied up with global insurance giants to get more share in Indian life insurance market. But still Life Insurance Corporation is the biggest player mainly due to the fact that it is backed by Govt. of India. Life Insurance Companies in India 1. Life Insurance Corporation of India (LIC)

2. ICICI Prudential Life Insurance 3. Bajaj Allianz Life 4. Birla Sun life 5. HDFC Standard Life 6. Tata AIG Life 7. Kotak Mahindra 8. Aviva Life Insurance 9. Reliance Life Insurance 10. MetLife India 11. Max Newyork Major Players in Indian Life Insurance Sector Life insurance Corporation of India continues to be the dominant life insurer in India with 2048 fully computerized branches, 100 divisional offices and 7 zonal offices. All divisional offices are interconnected with Metro Area Network and LIC has tied up with some banks to offer online premium collection in selected cities. Also LIC has info kiosks, Interactive Voice Response System (IVRS) and Info centers in major cities like Mumbai, Delhi, Chennai, Bangalore, Hyderabad, Ahmadabad and Pune. In private sector ICICI Prudential Life Insurance is the no.1 player. It is a joint venture between ICICI Bank, Indias no.1 private bank and Prudential, a leading international financial services group company from United Kingdom. Today ICICI Prudential has around 1,20,000 insurance advisors all over India 8 bank assurance partners and 200 corporate agent tie-ups. Future of Indian Life Insurance Segment Indian Life Insurance Segment is growing at a rapid rate due to more liberal approach from Govt. of India and due to the upward trends in Indian economy and share market. More financial groups and banks including global players are eyeing the Indian Life Insurance Market.

CHAPTER- 4 DATA ANALYSIS AND INTERPRETATION

CHAPTER 4
ANALYSIS AND INTERPRETATION
Table no 1 Acceptance level of employee regarding merger Scale
Poor Very poor Good Very good Excellent

No of employees
0 2 21 7 0

Percentage
0 6.67 70 23.33 0

From the above graph we can interpret among 30 employees 70% i.e. 21 of them have felt that merger is a good decision and have accepted it. 7 of them among 30 i.e. 23.33% have felt its very good working with this global environment. Very least i.e. only 6.67% i.e. 2 of them among 30 have not able to accept that the merger which is really a small amount which is negligible which can be sorted out with personnel counseling and make them understand why was the merger needed. None among the 30 employees have shown poor and excellent in the acceptance of merger. Table No 2 Adoption to merger

Scale
Immediate After sometime Not adopted

No of employees
2 28 0

Percentage
6.67 93.33 0

From the above graph we can analyze that among 30 employees 93.33% employees i.e. 28 members needed time to get into the new culture including the entry and exit in the daily activity which will be having a enormous amount of change in the global culture when compared to Indian scenario. Very least No of employees have adopted immediately who have the idea of global scenario i.e.2 among 30 which shows a percentage of 6.67%. No employee till now has left without adopting to the global merger.

Table no 3 Change in working culture after merger

Scale
Rapid Not much Not at all

No of employees
20 10 0

Percentage
66.67 33.33 0

From the above graph we can interpret that among 30 employees 20 employees i.e.66.67% of employees have noticed a rapid change in the working culture after merger where as 10 people which shows a percentage of 33.33% felt not much of change in the working culture. Majority of them have felt the change because they have seen the typical Indian scenario in working where in after merger its a global scenario in the working culture.

Table no 4 Acceptance by customers towards merger

Scale
Poor Very poor Good Very good

No of employees
2 2 21 5

Percentage
6.67 6.67 70 16.66

Excellent

The above graph shows the response of customers regarding the merger which is felt by employees seeing the customers before and after. Among 30 employees 21 of them i.e.70% have felt that customers have accepted the drastic change in the culture which usually make feels customers very difficult to accept. Where as rating of poor and very poor is represented by 6.67% i.e.2 employees each.5 employees i.e.16.66% have shown a response of very good towards the customers acceptance. Table no 5 Organizations importance to culture

Scale
Poor Very poor Good Very good Excellent

No of employees
0 1 19 9 1

Percentage
0 3.33 63.33 30 3.34

This graph depicts the organizations importance to culture which is purely a personnel feeling of employees which is obtained by the on going activities in the organization. Among 30 employees very high percentage of 63.33% i.e.19 employees have felt good that organization has given importance to culture. Next rating is among 30 employees 9 of them i.e. 30% have felt that organization is giving very good importance towards culture. Where as very poor and excellent is felt by 1 employee which shows a percentage of 3.33%. This shows that organization has not rooted out the basic culture of the oragnization.

Table no 6 Quality of training after merger

Scale
Poor Very poor Good Very good Excellent

No of employees
0 8 16 5 1

Percentage
0 26.67 53.33 16.67 3.33

The graph depicts the quality training program given to the employees after the merger. Among 30 employees 16 employees i.e. 53.33% have felt that quality of training was good, 8 i.e. 26.67% have felt quality of training was very poor, 5 i.e. 16.67% have felt very good with the quality of training provided where as 1 i.e. 3.33% have shown that quality of training provided was excellent after the merger. This shows that majority of them have got partially satisfied with the quality of training provided after merger.

Table no 8 Relationship with top management before merger

Scale
Poor Very poor Good Very good Excellent

No of employees
0 2 17 11 0

Percentage
0 6.67 56.67 36.66 0

The above graph depicts the relationship with the top mangement before merger. Among 30 employees a highest no of 17 i.e.56.67% have felt that the relationship with the top mangagement before merger was good, 11 have felt i.e. 36.66% have felt that the realationship with the top mangement was very good with the top management before merger, 2 i.e. 6.67% have shown that there was very poor relationship with top management. This shows that the top management was valuing employees during working and was supporting them when needed. Table no 9 Relationship with top mangement after merger

Scale
Poor Very poor Good Very good

No of employees
1 0 17 11

Percentage
3.33 0 56.67 36.67

Excellent

3.33

The above graph depicts the relationship with the top mangement after merger. Among 30 employees a highest no of 17 i.e.56.67% have felt that the relationship with the top mangagement after merger is good, 11 have felt i.e. 36.66% have felt that the realationship with the top mangement is very good with the top management after merger, rating of poor and excellent is given by 1 employee which gives a percentage of 3.33% after merger. When both the graphs i.e. before and after merger employees are not feeling that much of difference in relationship with top management.

Table no 10 Participation level before merger

Scale
Poor Very poor

No of employees
1 2

Percentage
3.33 6.67

Good Very good Excellent

18 8 1

60 26.67 3.33

Above graph depicts the level of participation of employees before merger. Among 30 employees 18 i.e. 60% have felt that there was good prticipation in the organization, 8 employees i.e. 26.67% have felt very good participation was existing in the organization, 2 employees i.e. 6.67% have felt very poor participation before merger and poor and excellent particiaption which shows a percentage 3.33%. from this we can tell that the employees were given enough oppurtunity to participate in the organization which in turn leads tpo organization and individual development. Table no 11 Participation level after merger

Scale
Poor Very poor Good Very good Excellent

No of employees
0 0 15 14 1

Percentage
0 0 50 46.67 3.33

From the above graph we can predict that drastic increase in participation level of employees is noticed after merger. This is shown in the above graph where as in the previous graph i.e. before merger employees had a little amount of dissatisfaction in the participation level where as now the rating is from good to excellent. Among 30 employees 15 have felt good which 50% of the sample size is. The increase in participation level is seen very well after merger i.e. 46.67% when compared to before merger i.e it was 26.67%. There is a increase of 20% in the participation level in the organization. Excellent remark was shown by 1 employee i.e. 3.33%. After merger concentration was in the participation level of

employees because employees when they feel importance is given for them satisfaction shown towards working is different.

CHAPTER- 5 FINDINGS, SUGGESTIONS, AND CONCLUSION

CHAPTER 5
FINDINGS, SUGGETSIONS AND CONCLUSION FINDINGS:
1. Managers are more comfortable than in high-cultural-distance IM&As. 2. Stronger preference in reducing Regulation gaps between home and host

countries.
3. Stronger preference for subsidiary adaptation to headquarters 4. Importance to National cultural distance is given so that more visibility and

recognition is got in the hands of customers.

5. Cultural distance has a slightly higher effect on investment decisions of

managers.
6. Development of strategies to manage cultural differences. 7. Strongly objectives of an M&A are clearly defined and shared after merger

and acquisition
8. Strategic objectives can be kept at a top executive level; there is agreement

that operational objectives must be shared before the implementation of the merger.

Suggestions:
Cultural Factors and Corporate Governance: In low-cultural-distance IM&A s, managers are more comfortable than in highcultural-distance IM&As. Low CDIs have a stronger preference in reducing
Regulation gaps between home and host countries.

Double Identity and Cultural Adaptation Managers of IM&A s with high CDIs have a stronger preference for subsidiary adaptation to headquarters than managers of IM&As with low CDI. Higher the national cultural distance, the more visible and recognizable will be identity.

National and Organizational Cultures Organizational culture reflects national culture. There are common cultural characteristics among firms of a country, despite differences in their organizational culture. Higher cultural distance has a slightly higher effect on investment decisions of managers from low CDI countries. Cultural Factors in IM&As Success In conclusion, managers of high- CDI IM&As strongly agree that objectives of an IM&A should be clearly defined and shared. While it is understood that strategic objectives can be kept at a top executive level, there is agreement that operational objectives must be shared before the implementation of the merger. This conclusion is also reflected in managers comments. Cultural Factors in Phases of IM&As The higher the cultural distance, the stronger the agreement cultural factors should be accounted for in the due diligence process. It is important for both high- and low-CDI M&A to include cultural factors in designing IM&As structure. It is equally important for both high- and low-CDI M&As to have a strategy and a plan to manage cultural differences. Overall Effects of Cultural Factors in IM&As Lower the cultural distance, the higher the perception of cultural factors risks. Lower cultural distance is an additional advantage (an asset), while higher cultural distance is a disadvantage (or liability).

Conclusion
A proactive strategy for dealing with corporate culture and human resource issues is fundamental to the success of mergers and acquisitions. However, these issues are rarely considered until serious difficulties arise. The personnel function was involved in only one-third of all the mergers and acquisitions he studied: management often fails to acknowledge that culture and human resource issues can actually because Management often fails to acknowledge that culture and human resource issues can actually cause a merger to fail. Acquisition managers must recognize that the role of people in determining merger and acquisition outcomes is in reality not a soft but a hard issue. Without the commitment of those who produce the goods and services, make decisions and conceive strategies, mergers and acquisitions will fail to achieve their synergizing potential as a wealth-creating strategy. This study has highlighted the importance of considering and strategically addressing corporate culture and human resource issues concurrently with financial issues. It has also illustrated the importance of dealing with these issues before, during, and after an acquisition or merger. Careful proactive planning by the acquiring organization to reduce the emotional fallout can ease the transition and reduce the risk of failure for an otherwise advantageous merger. Much of the research on human resource strategies in mergers and acquisitions is reactive and descriptive, and only recently have tools been devised to proactively investigate and alleviate potential obstacles. Moreover, most of the research examines cultural and human resource matters for a relatively short period, but they need to be studied on a longitudinal basis. Caution should therefore be exercised in implementing the recommendations set out here, since they are only general guidelines and are not to be construed as remedies for all the ailments associated with mergers and acquisitions. Each transaction is unique. However, it is to be hoped that future research will provide human resources managers with better insights into both short- and long-term effects of mergers and acquisitions and with solutions to the problems inherent in them

BIBLOGRAPHY

BIBLOGAPHY

Text Books
o o

P.Subba Rao ., Human resource Management Dr. k Ashwathappa, Human resource and personnel management

ICFAI journal for Merger and Acquisition.

Manuals & Records of the ING Vysya Life Insurance Intranet of the Company Websites of ENAM Group, Aditya Birla Cement and Exide Other websites
www.google.com www.ingvysyalife.com www.wikipedia.com www.ingvysyabank.com www.ing.com