Abstract
Thepurpose of this master thesis is twofold. We have studied if and how small companies on the Swedish market, make changes to their number of employees in connection to the process of merging. Following this lead, we have also studied if these companies comment on this in the media.
The master thesis starts with a discussion about general theories of mergers and their relationship to layoffs. In accordance to this, there is the empirical evaluation of 35 merged companies on the Swedish market. Finally, we have looked into whether or not the companies comment on the changes in personnel in the media. The research has been carried out according to the hermeneutic methodology with an explanational and descriptive aim.
We claim that no in-depth research on the Swedish market concerning small companies have been conducted to show exactly how many layoffs that took place in connection to mergers. Showing that this is the case, the master thesis will add another scientific aspect to the field of presently available research.
The findings of the master thesis are that companies do conduct layoffs during the process of mergers and that they do not comment on this in the media. However, we found that some of the companies in our sample actually did increase their number of employees. We have not found any tangible evidence that proves that changes in personnel are a stated reason for mergers. However, it is often a hidden reason or potential benefit of the merger. We believe that this is because of the unwillingness of company executives to admit that changes in personnel i.e. layoffs is the main reason for the merger.
Evaluating our empirical research, it is obvious that the majority of these mergers have lead to a decrease in the number of employees i.e. layoffs. The findings of our research are overwhelming: two-thirds of companies conduct layoffs after a merger. However, they also indicate that one third of the companies increase their personnel after the merger.
From the media research we have been able to draw a surprising conclusion. We expected that companies do not want to comment on their layoffs in the media for reasons of bad publicity but with the same logic companies that increase their personnel would want to make a statement about this. Our findings points to the interesting fact that small companies do not comment on any changes - positive or negative - in their personnel. In spite of this, we firmly believe that companies which experience a positive effect after the mergers and do not publicly comment on this, are ignoring a potential source of improving public relations.
Table of Contents
1. General introduction to the master thesis4
1.1. Structure of the thesis6
1.2. Purpose and limitations6
1.3. Implementation6
2. An introduction to scientific terms7
2.1. The systemic outlook8
2.2. The quantitative and qualitative method9
2.3. Reliability9
2.4. Validity10
2.5. Implications of validity and reliability10
2.6. Epistemology11
2.7. Ontology11
2.8. Methodology12
2.9. The hermeneutic methodology12
2.9.1. Choice14
2.9.2. Method in practice14
3. Introduction to mergers15
3.1. Reasons for mergers16
3.2. Process of mergers17
3.3. Organisational aspects of mergers17
3.3.1. Top executives’ perspective18
3.3.2. Employees’ perspective19
3.4. Current trends concerning mergers and layoffs19
3.5. Post-evaluation of mergers22
3.6. Examples of recent mergers23
4. Introduction to the empirical evaluation24
4.1. Information from Patent och Registreringsverket24
4.2. Market Manager25
4.2.1. SNI-codes25
4.3. The principal behind mergers with absorption25
4.4. The system of the empirical evaluation26
4.5. Results from the empirical evaluation27
4.5.1. Companies that merged during 199527
4.5.2. Companies that merged during 199629
4.5.3. The six industrial sectors31
4.5.4. All companies in the study36
4.5.5. Merged companies, excluding mergers done through absorption37
4.6. Average number of employees39
4.7. Six selected companies39
4.8. Conclusions of the empirical research40
5. Mergers in a media context41
5.1. Media research in practice41
5.2. Media-examples of the current merger-trend42
5.3. Evaluation of the media research45
5.3.1. Evaluation of the information in the annual reports45
5.3.2. Evaluation of the information presented in BolagsFakta48
5.3.3. Evaluation of the articles in Dagens Industri and Finanstidningen49
5.3.3. Evaluation of the articles in Mediearkivet50
5.4. Conclusions of the media research52
5.5. Alternative theory and criticism of our results53
6. Conclusions54
6.1 Recommendations for future research56
References57
Appendix:
1.Presentation of the empirical research
2.From Market Manager: SNI-codes
3.From Market Manager: information concerning the merger between GE Capital
Nordic AB and GE Capital Equipment Finance AB
1. General introduction to the master thesis
Mergers is a phenomenon that have become more frequent during the last few years. The general theoretical interest in mergers have been concerned with if companies decide to merge to increase their market share by merging with a competitor; to obtain much-needed physical resources, such as land, plant or people, or to enter a complementary line of business. It is easy to find studies that deal with these issues.
Mergers have many implications for the organisation: one of them is the changes in personnel. Whatever the reason, one outcome is certain: changes in personnel affect the employees of the merged companies - they become victims or winners. Whatever the reasons for the mergers, do the companies make comments in the media on the changes in personnel? This question intrigued us and accordingly we decided to explore it in this master thesis.
We claim that companies that conduct a merger and thereafter increase the number of their personnel would gain value from commenting on this in the media. If so, they could gain publicity and increase their capital of goodwill after the merger. They could also create a greater awareness about their need for more personnel and a positive picture of their company as an expanding business. However, do companies actually do this in reality? In our master thesis, we have not tried to measure this effect but we might have provided some ideas for future research in order to quantify and qualify these effects. However, we have left the reader with a few interesting thoughts concerning why companies do not use the full potential of the media. Maybe it is because they do not have the resources or strategies to publicly comment on the changes in personnel ? Is it because companies do not think that their changes in personnel are worth mentioning to the public?
This value is even greater for a small company since they usually can not afford to spend much money on marketing space. If a small company decided to merge and increased their personnel after the merger, they could through a single press-release create greater public awareness about the expansive forces within the company. Therefore, small companies that merge have a possibility to enhance their value by choosing to comment on the positive effects after the merger. If they chooses not to do this they will loose out on public relations, low cost advertising and a signal to the work force about their needs for more personnel. However, the question is if small companies are aware of the value of making statements in the media?
Since we claim that the value is greater for small companies - compared to large ones - we have focused on these companies. This is to see if they have chosen to comment on their changes in personnel after the merger, in the media. Our belief is that small companies represent a major force in the economy and it is an important challenge to explore and understand them from the perspective of the media.
If companies only conducted layoffs - and never increased their personnel after mergers - one might understand why they choose not to comment on this in the media. However, if companies experience a positive effect after the mergers and do not comment on this, they are ignoring a potential source of improving public relations. Therefore we will firstly give the reader an understanding and analysis of the effects of the changes in personnel after mergers in small companies based in Sweden’s most intense business area: Stockholm.
When starting the search for “the truth” of what happens with companies’ public relations after a merger, we decided to first study if companies tend to conduct layoffs or increase their personnel after the mergers. When the reader have reached the understanding of how the changes in personnel have been conducted after the merger, she will probably become curios to know if companies tend to comment on this in the media. Continuing the search for “the truth” we have studied if and what comments concerning them that can be found in the media. Because of this, the reader will be faced with an extensive evaluation of the major business- and newspapers in Sweden.
In order to study whether or not companies find any value in commenting on their changes in personnel after their mergers we had to see the problem as an entity. We can not separate the problems concerning changes in personnel in merged companies and the way in which the media have commented on this since no previous study deals with these issues. However we could have studied only the changes in personnel in the hope that future researchers would continue to study the phenomenon in connection to the media. We choose not to.
We have chosen a hermeneutic methodology since we believe it to be the best way of dealing with the phenomenon of mergers. Otherwise: how could we possible interpret the previous scientific research literature and their results without the means of hermeneutic interpretation; how would we have chosen to study the mergers from different perspectives. In conclusion, we actually did interpret the hard data into a phenomenon concerning companies’ changes in personnel and not aimed at just showing the effects after the mergers.
Therefore the reader need to understand that we see mergers, layoffs and the media as an entity and not as separate parts. It is a question of interpretation. Conclusively, the reader need to keep in mind that our theory is that small companies will loose a public relation-value if not commenting on positive effects after a merger. This is highly subjective: how can we quantify this into numbers? The reader should bear in mind our question if companies recognise any value in commenting on their changes in personnel after the merger? This proves to be a question of importance to the hermeneutic researcher since the word value is one of the most interpreted words in the field of business administration.
We are interested in international mergers because we perceive it as a significant part of today’s business environment. Considering the amount and size of the recently announced mergers - in for example the international accountancy and management consultancy firms and the Swedish retail bank and insurance industry - one can almost call it a trend. We will illustrate this trend with a few recent examples from the American banking industry where some gigantic mergers will change the industry forever. Our standpoint is that although one can read about mergers almost everyday, the articles - in both newspapers and scientific journals - tend to convey the picture from a strictly financial perspective. In other words, the articles only deals with financial data and not the consequences that the merger will have on the organisation, more specific on the individuals who work in them. As a result, we think that they lack the very important human perspective of the merger process. We are convinced that the organisational and human implications are essential in order to complete a successful merger.
1.1. Structure of the thesis
The thesis consists of five parts. The first part will provide the reader with a general introduction to the thesis. The second part is about the methodology that we have applied. The third part is entirely devoted to presenting the field of research about mergers and changes in personnel. The fourth part is our contribution to the research field. It presents a thorough analysis of our empirical evaluation. In close connection to this we have the appendix where the reader can find additional information and examples from our research. The fifth part consists of the media analysis. Finally, there is the sixth part where the overall conclusions of the master thesis are presented.
1.2. Purpose and limitations
The purpose of our master thesis is twofold. Firstly, it introduces the field of presently available knowledge concerning mergers. Secondly, it (1) identifies, by means of various post-merger measurements, the changes in personnel after the mergers and (2) it analyses, from the perspective of the media, whether or not and if so what is said about the mergers and the changes in personnel.
On this basis, the overall aim is to see which conclusions that can be drawn about the connection between mergers and changes in personnel. Also, we have investigated if and what comments companies make about this in the media.
The research will be limited to companies situated in the City of Stockholm, with a total share value of 5 million SEK or more and merged in the period of 1994-1996. In order to be able to draw conclusions, we have studied all the companies regardless of industrial sectors. We have studied a sample of 35 of the total population of 74 merged companies. We then subdivided the companies into six industries that are represented by two or more companies. We will limit the media research to include only the major Swedish newspapers.
1.3. Implementation
We started to look into the presently available research literature about mergers in order to try to narrow the topic of our master thesis and also to be able to present the research field. We have found some examples of companies which have gone through the process. These examples illustrate the importance and scope of the implications of a merger on all aspects of a company. For example the merger between ASEA and Brown Boveri resulted in growing market share and profitability.
We started to seek literature in the most common sources i.e. databases, management journals etc. The following articles set us on the right track: Ethical considerations in merger and acquisition management[1] and Organisational departures: the impact of separation anxiety as studied in a mergers and acquisitions simulation[2]. However, the literature show that there are no general studies that have been conducted to study the changes in personnel after mergers. Therefore, we decided to conduct a study that shows the changes in personnel after mergers.
During the work with the master thesis we have met with some problems concerning the process of deciding which approach is the most suitable. For this purpose, consideration was taken to some general approaches.
The purpose can have different aims:
- a descriptive aim has the ambition to illustrate the reality.
- a normative aim suggests that one also wants to express an opinion about how something should be, e.g. to make recommendations about an actors acting.
- an explanatory aim is when one does not only want to write how something is but also why this is so.
- an aim that is directed at understanding supposes that one wants to investigate what the different phenomena means in order to e.g. understand which motives humans have for their actions or how a certain phenomena should be interpreted.
- the aim can also be to develop or further precise the theory. This means that one aims to develop a theory where there is none or if it is presently unsatisfactory.
Our method is characterised by an explanational approach in order to further develop the presently available body of knowledge on the subject. It is also characterised by a certain amount of descriptiveness. The reason for this is that our study is based on both analysis of scientific literature and statistical data.
2. An introduction to scientific terms
The purpose of this chapter is to describe some frequently used scientific methods and by means of these choose - what we consider to be - the appropriate method for our master thesis. This choice will then be explained in order to suit the purpose of the thesis. Furthermore we will address the specific problems that will arise when we start to collect the data for our study. These will concern the problems of definitions, measurement, assumptions and reliability.
The methodology is used to carry out a study, to draw conclusions from it and finally in reaching the goal of the study. It has to fill certain requirements[3]:
- There has to be a connection between the reality and the studied issues.
- One has to make a systemic selection of the information.
- One has to use the information in the best way.
- The results have to be presented in such a way that others will be able to check the conclusions.
- The results should offer new knowledge considering the questions of the society that one is a part of, in order to lead to further research and also to a higher level of understanding.
It is fundamental[4] to continuously investigate the reality so that one is clear about what constitutes reality and what constitutes the experience of this reality, that is called empiricism. Empiricism is what constitutes the reality for each and every individual. Since all individuals possess different personalities their empiricism is unique. It is constituted by upbringing, values, emotions, intellectuality etc.
Methodology is something that connects the studied phenomena with the reality. The reality consists of a broad spectra of structures, in which an individual can be independent, dependent or part of a social construction.
Naturally, one can not apply a single method on such a broad spectra as reality is, so therefore one has to make use of several methods. In this way one can get a better connection between the studied phenomena and the reality.
One can perceive the reality by means of three different outlooks[5]:
- the analytical outlook is based on the assumption that the reality is objective. The knowledge should be independent of the individual. If this outlook is used in a thesis it will include a random sample of tests of the reality and techniques for validity.
- the systemic outlook is based on the assumption that the reality is objectively available. The knowledge is dependent on the system. Used in a thesis this outlook will result in a description of history and case-studies in practice.
- the actor outlook is based on the assumption that reality is a social construction. The knowledge will be dependent on the individual. If applied on a thesis it will mean the use of dialogues and language development.
Comparing these three different outlooks one can see that they differ from each other but nevertheless we feel that some parts of them all fit our thesis. The analytical outlook and its thoughts about objectivity suits our idea since we will use data from annual reports which we consider quite objective since it is regulated by law. The systemic outlook shares some of these thoughts but adds that the reality is objectively available. The actor outlook on the contrary, claims that the knowledge will be dependent on the individual since no one can ever completely get rid off one’s pre-knowledge. Finally, we came to the conclusion that the analytical outlook with some traces of the systemic outlook is the most appropriate for our needs. This is because we will base our thesis on an extensive study of the literature about our issues and complement this by doing an empirical studies.