The merger and acquisition deal

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Method

Applied method

The choice of method derives from the nature of the study. This thesis has adopted a case study analysis research strategy. A research question that aims to research how many key individuals who resign from an acquired organization, in relation to the merger and acquisition process and its aftermath, creates for a study of an occurrence. Yin (2003) argues that such a study includes a quantita-tive data gathering followed by an analysis of the bare facts (hard data). Should the investigation instead aim to understand the potential measures that could prevent such resignations then the study can benefit from the language nuances being given room in the empirical findings. This is defended in Yin’s (2003) ac-counting for how to choose the applied method, and according to his argu-ments case studies is, to this purpose and research questions, superior to other qualitative methods, due to access to suitable interviewees and lack of control over events that are subject to the study. The meaning of this condition is gained if one compares the extremes of the chemist and the historian, where the chemist in a laboratory setting can perform experiments where he or she can completely isolate the behaviors which are to be the focus of the investiga-tion. The historian, in contrast, has most likely no access to, or control over, the behavioral events and can only rely on documents and artifacts when conduct-ing his or her investigation. In this aspect Yin (2003) argues that the case study approach is very similar to the history approach as a research strategy, but it adds two sources of empirical information that the historian normally do not have access to, namely direct observations of the events and interviews with the people who are involved in the events that are the focus of the investigation.
A third condition, not mentioned above, considers whether or not the event, which is used to study the research problem, is contemporary. Again, the chem-ist and the historian will help to clarify the meaning. The experiment is an event that happens in the now and the historian research an event that as already taken place. One could argue that the case study in this thesis is actually created to shed light on a contemporary problem NCC has acknowledged. The oppor-tunity to participate in an acquisition, which was previously finalized, and the fusion work in an experimental approach did seem to prevent itself early in the thesis work, but was ended by the previous owner. On top of that, a major strength of the case study research strategy is its potential to use a number of different sources to shed light on a problem by studying it from numerous as-pects (Marshall and Rossman, 1999).

Research approach

A researcher need to set out the path to conclusion before the study can start, meaning how the researcher reasons to reach his or her conclusion. There are two main reasoning paths from where researchers tend to conduct their study. Inductive reasoning relates the empirical outcomes to existing theories while collecting empirical material (Rossman & Rallis, 2003). The researcher builds the theories based on the observations he or she makes. Cooper & Schindler (2001, p.35) defines inductive reasoning as to draw a conclusion from one or more par-ticular facts or pieces of empirical information. The conclusion explains the facts, and the facts support the conclusion. The same authors do however raise a warning, and declare that inductive reasoning only offer an explanation of a problem, and there might be other explanations that match the fact equally. It is important that the inductive researcher is prepared to stand for and defend it (Cooper & Schindler, 2001)
Alvesson & Sköldberg (1994) write that by adopting the second main approach, deductive reasoning, and the researcher aims to confirm whether existing theo-ries and generalizations (or theories derived from those) in fact are valid. The same authors point out that not only does the researcher find support in exist-ing theories for development of hypothesis, but also when choosing which variables to include in the investigation. The benefit of this approach lies, of course, in the refinement of existing theories and therefore serving an opportu-nity to increase the collective understanding about a problem.
This thesis has chosen to adopt both a theory building process – the inductive reasoning, as well as a theory testing process – the deductive reasoning, but for different phases of the analysis. This is derived from the structure of the re-search questions, and creates a way of gathering the pieces, left over from the deductive results. The goal is to minimize the danger that the researcher who uses this approach is blind to unanticipated factors that may exist, such as con-ditional variables or new constructs (Ali and Birley, 1999). Deductive reasoning will imply the conclusion and represent a proof (Cooper & Schindler, 2001, p.34). This being said, we are aware that using inductive reasoning as a compliment will result in only one solution to the problem and that there might be several others. The research approach, when the researcher combines induction and deduction and thus uses theory as a source of inspiration in the analysis, is re-ferred to as an abductive approach by Alvesson and Sköldberg (1994). Our am-bition to suggest possible human resource influences in the NCC merger and acquisition process and its aftermath is fulfilled by using the abductive ap-proach.

Methodology approach

This thesis aims to provide an in-depth view of human resource management in relation to the complex environment created in conjunction to an integration of organizations preceding a merger or acquisition. There are a great many meth-ods to gather empirical material for the research, and they tend to be classified in either of the two main approaches. The researcher must, before choosing approach, consider the purpose of the investigation (Thurén, 2003).
The quantitative approach involves gathering empirical data, based on prede-fined variables, thus allowing for a statistical analysis, and is typically concen-trated on finding and confirming relationships between those variables (Chris-tensen, Andersson, Engdahl, & Haglund, 2001). The idea of the quantitative ap-proach is to allow for a generalization about a problem and a population using the empirical findings made from a sample (Hyde, 2000). This does however, put some restriction to the complexity of the problem which serves as focus of the investigation.
Important to this thesis qualitative methodology approach is what follows from it structure based upon making one or a few observations and that each obser-vation can consist of several different aspects of the issue or problem (Ghauri, Grönhaug & Kristianslund, 1995). The qualitative approach can thus be justified, for use in this thesis, by the depth of the problem it can contribute with by il-luminating the problem from more than the sides decided by predefined vari-ables. Hyde (2000) explains the qualitative approach as seeking to identify un-derlying concepts and the relationship between them.

Realization of the study

The conducting of a study, from a broader view, is the process of going from a starting point of an initial set of questions to be answered, to conclusions about the initial research questions. Thus the realization of the study involves con-structing appropriate questions, finding relevant theoretical as well as empirical information, and deciding how to analyze the results. The structure of a thesis can help the investigation by building in a research question focus, to assure that the conclusions are relevant.

Gathering of material

Yin (2003) argue that there are six different sources, which can be used to build a case, and that using multiple sources affects the quality of the case study in a positive way. The sources are:
1. Documents (e.g. letters, meeting minutes, progress reports)
2. Archival records (e.g. survey data, organizational charts, service records)
3. Interviews
4. Direct observations (field visit)
5. Participant-observation (e.g. serving as staff or decision maker in an or-ganization that is being studied)
6. Physical artifacts (e.g. tools, machines)
After discussions with our tutor at the university and our mentor at the host or-ganization, we have decided that that this thesis will benefit most from using documents, direct observations and interviews as sources. Our primary source is semi-structured interviews, which refers to when an interview structure is planned but gives room for follow up questions and flexibility of adjusting the structure to best fit the interviewee (Yin, 2003). Justification of the choice of primary source is largely due to the possibility to target them directly to the case study topic, but the danger with asking people what happened is that the infor-mation gets skewed. Yin (2003) argue that the fact that interviewees might pro-vide inaccurate information, due to poor recollection or to bias responses can, and should, be addressed using multiple sources and triangulate the most accu-rate answer. This is why our second most used source is documents to confirm much of the data presented in the case descriptions. The strengths with docu-ments are that they offer accuracy to the empirical data in the form of names and date references, and be reviewed repeatedly (Yin, 2003). There might be weaknesses with regards to the retrievability and possibly a biased selectivity, but the gains from using documents for triangulation vastly outweighs those concerns. Also, we feel confident that our interviews will provide us with valid and relevant information. We are aware of that we do not possess the same un-derstanding of how to structure an interview that a reporter or a psychologist has, who both study interview technique and practice it in their workday. This is why we feel that the quality of this thesis is improved by having Maria Spak, psychologist at Nässjö vårdcentral, involved in the development of the thesis in-terview guide.
The interviews were taped in MP3 format and printed out transcribed into word documents. Both the recordings and the transcripts were used when presenting the data according to a predefined structure, decided by the composition of the research questions. The transcripts were sent out to the each and every one of the interviewees, for confirmation of the content, thus increasing the reliability of the gathered data.
Our third source, direct observations, provides us with other dimensions to the study, such as gaining a deeper understanding the organization, its industry and our research topic. We will go on field trips to the headquarter complex of NCC and TeliaSonera, in conjunction with the interviews, and visit the process indi-viduals, who is one of the main target groups for using this thesis, in order to observe them in their daily working surroundings. We will also review case studies, used in the NCC management educations, in order to reach a deeper understanding of the industry itself, and we classify this somewhere in between our document source and direct observations. We feel that even though direct observations are considered very costly, primarily due to how time-consuming they are, they absolutely raise the quality of the study and are therefore neces-sary.

Selection of respondents

There is a strong link established between a researcher and an organization that commissions his or her thesis. This allows for a potentially better access to re-spondents and other sources of empirical data. However, it also presents a di-lemma if the researcher is forced to choose between improving the academic quality of the thesis or provide a value to the organization. This is something that we discussed with our university tutor from the very beginning before en-gaging in this study.
The choice of interviewees is a collaborative work resulting from discussions between ourselves and our mentor at NCC. They have been chosen to reflect all possible aspects of the scope of the thesis study, as well as in order to provide a foundation for triangulation of data. The diagram (see Figure 3-1) illustrates how the process individuals are in a position to illuminate different aspects of how human resource management has influenced the merger and acquisition and its aftermath in the NCC cases. What cases they represent is accounted for in the presentation of the interviewees in the empirical findings.
No interviewee declined, or was in any way unable, to participate in our data gathering. Concerning who to interview first, we are bounded a little by the cal-endars of the interviewees, but we have chosen to mix the representatives but to focus the interviews with the key individual representatives early in the data gathering, and to focus on the process representatives as late as possible. The reason why we will do it this way, is that we believe it will unfold what hap-pened and how it was perceived prior to our conversations with the process in-dividuals who can account for why and hint what could have been done better from a process perspective.
Sounding board
This thesis will use a sounding board to gain deeper understanding of the hu-man resource aspects of the merger and acquisition process and its aftermath.
The unfolding of interviews will also be invaluable to our last interview with one of TeliaSonera’s most senior managers in human resource related activities. B Abrahamsson was chosen due to the fact that he is recognized, within the Swedish telecom industry, as an expert in the human resource management as-pects that relates to the merger and acquisition process and its aftermath. By providing aspects from a different industry, B Abrahamsson acts as a sounding board for the thesis’s interpretations of the research questions as well as the theoretical frame of reference. The pre-understanding we gain from talking with the key individuals will provide a good foundation for making the best use of all the process focused interviews, including the sounding board interview. Since the empirical data gathered from this interview is completely independent from the NCC cases, it will be presented in a separate chapter.

Analysis and interpretation

After having discussed with our university tutor, we have decided that the structure of the analysis of the case descriptions with be done in a traditional manner, comparing theory and empirical data, but parallel to that analysis the relevant sounding board data will be scrutinized similarly, see Figure 1-1 The trapezoid (adapted from Davidsson, 2001)). The theoretical frame of reference will thus be compared with all empirical findings, and presented according to the sub-heading structure decided by the research questions.
All other material that can be considered unessential with reference to the pur-pose will be eliminated from the gathered data. One could argue that the ration-ale of this study is revelatory by nature and that the subject is somewhat unex-plored, and that the study would benefit from a single case analysis (Yin, 2003), but our definition is that the scenario that is subject to our analysis is a re-occurring phenomenon in business and that this analysis will benefit most from a multiple-case approach, with the aim to draw generic conclusions. This study will thus illuminate the research problem of how to infuse the merger and ac-quisition process and its aftermath with human resource management, from a key individual perspective, using one hostile takeover, one merger, and one ac-quisition as basis for a three-case analysis. The three cases are: the forced JCC acquisition of ABV in 1988 when NCC was formed, the merger between Siab and NCC in 1997, and the acquisition of Anjobygg in 2001; and the single unit of analysis that will be utilize is the individual employee perspective of the merger and acquisition process and its aftermath. This thesis will, using its theo-retical frame of reference, attempt to build hypotheses in the form of models that can be compared with the findings from the three cases combined.
The final aspect of the realization of the study concerns any problems with the gathering of empirical material. There lays a difficulty in being certain that the questions for the respondents are defined correctly, and actually fit the purpose of this thesis. In order to properly address this issue, we have discussed our po-tential case with our university tutor, our mentor at NCC, as well as with a pro-fessional psychologist to ensure that our strategy will provide us with a solid base for our coming analysis. The fact that documentation can be very difficult to retrieve (Yin, 2003) is helped by us having a rapport relatively high in the command structure of the organization we analyze. That interviewees’ answers may vary in length and depth, can somewhat be influenced by our interview technique which is accounted for in detail in the interview guide. The guide demonstrates how to get the interviewee to consider the answer by providing closed questions that show different aspects of the statement the interviewee just reached in their digression, encouraged by the original semi-structured in-terview question.

Access

We have discussed what the ideal empirical gathering would look like, with our university tutor, and specifically about interview requirements. It was made clear to us that our case study would be best served by either five in-depth interviews
– lasting at least 2h, or ten interviews made up to cover multiple aspect of the research problem – lasting around 1h. We conferred with our mentor at NCC and agreed that our privileged situation with considerable access to nearly eve-ryone within the organization made it possible for us to interview a great num-ber of people with equal representation from the process side1 as and employee side2. Therefore, we have chosen to, at NCC, interview four employees who prior to the acquisitions held the positions of chief executive officer, chief fi-nancial officer, human resource management, and regional manager of the ac-quired organization; and five process people (the current director of human re-sources, the dean of the NCC university, one of the individuals in charge of the integration project when NCC merged with Siab, and a member of the corporate merger and acquisition team. We will also interview one person with extensive experience from the human resource management field in the telecom sector.
All of the above mentioned interviews were conducted with the support of our interview guide (see appendix) using open-ended questions, for roughly one hour each on the interviewee’s office environment. Yin (2003), explain that the ideal case study structure of an interview is conducted as a conversation (open-ended) as opposed to the structured queries used in interviews for surveys. Open-ended questions are typically structured in a “how”, “why” or “please ex-plain” style, and more about this technique can be read about in our interview guide. The idea with the interview technique used for this case study is to use the interviewees’ view of a passed event to illuminate our research problem. One of the interviews was done by phone, but the remaining took place in of-fices and conference rooms where the interviewees normally spend their work days.

Empirical findings

All of the individuals, who we will interview for the compiling of case study data, have an exquisite background which is far to rich to be adequately ac-counted for in the short presentations to follow. Hopefully, all who read this, including the individuals themselves, will excuse that only a fraction of their relevant background is accounted for in this thesis.
Interviewed individuals
Bengt Lundstedt (2006-04-24, duration of interview 95 minutes). He shares, in this thesis, his experiences from the Siab-NCC merger when he held the position of Controller at Siab and was offered to become Controller at NCC Housing Sweden, reporting to the chief financial officer of NCC Construction and the chief executive officer of NCC Housing Sweden. B Lundstedt is in this thesis considered as one of the representatives for the key individuals within an ac-quired organization.
Björn Wootz (2006-04-25, duration of interview 78 minutes). He was hired 16 years ago in conjunction with the ABV-JCC acquisition 1989. The Group chief executive officer, Torsten Eriksson, had identified that the integration of the two organizational cultures of ABV and JCC demanded more focused resources than had been utilized up till then, and asked if B Wootz was interested in help-ing out. He is still working with NCC and is now the Dean of the NCC University, the education department of NCC. B Wootz reports to Alf Göransson, Group chief executive officer, and to Mats Pettersson, director of human resources NCC Construction; and he is in this thesis considered as one of the representa-tives of the merger and acquisition process experienced individuals.
Arne Bergström (2006-04-25, duration of interview 86 minutes). He was working at ABV when he was approached by Siab during the ABV and JCC was in the midst of integrating and left for a human resource position at Siab which he ac-cepted. During the Siab-NCC merger he was appointed as human resource manager within the new sub-entity NCC Housing Sweden A Bergström is in our study considered as one of the representatives for the key individuals.
Peter Gjörup (2006-04-26, duration of interview 61 minutes). He started working for ABV in 1984 and when JCC acquired ABV in 1988 he assumed the position of site manager for NCC in the north region. P Gjörup left NCC 1996 for a re-gional manager position at Siab, but found himself working for NCC again, one year later, but this time as a regional manager. He is in this thesis considered as one of the representatives for the key individuals of an acquired organization.
Mats Pettersson (2006-04-27, duration of interview 41 minutes). He holds the po-sition of director of human resources NCC Construction. M Pettersson provided us with insights into how the human resources at NCC are involved in the merger and acquisition process and he is considered, in this thesis, as a repre-sentative of the individuals with extensive experience from with the merger and acquisition process.
Göran Svensson (2006-05-03, duration of interview 66 minutes). He was the owner and chief executive officer of Anjobygg, now a sub-entity of NCC Con-struction, when he sold his organization to NCC 2003. In this thesis G Svensson shares his experiences from that process and its aftermath, as well as sharing his general views about changing one’s professional role like he has done; and he is, by us, considered to be a representative for the key individuals of an ac-quired organization.
Kristina Lager (2006-05-11, duration of interview 73 minutes). She has worked with various human resources related tasks since she started working with ABV in 1982, spanning from e.g. attitude research and career development to the in-ternal communication flow. The fact that K Lager has worked with these and re-lated roles during all three of our cases make her a representative of the indi-viduals with extensive experience from with the merger and acquisition process; and in this thesis K Lager shares her views both of what happened during the three cases as well as her ideas on how it might work better.
Mattias Lundgren (2006-05-11, duration of interview 120 minutes). He is our mentor at NCC who suggested this task for our thesis. M Lundgren is working within the corporate merger and acquisition team at NCC and is, during this the-sis is being written, in the midst of reviewing the organization’s merger and ac-quisition processes. M Lundgren is in this thesis considered as a representative of the individuals with extensive experience from with the merger and acquisi-tion process.
Jan Svensson (2006-05-11, duration of interview 45 minutes). He was one of the people in charge of the integration project during the Siab-NCC merger. He has held management positions through a vast number of mergers and acquisitions, and has most recently worked as the chief executive officer of NCC Construc-tion in Norway and is currently the chief executive officer of NCC Purchasing Group. In this thesis J Svensson provides insights to the practical aspects of the cases we study, as well as lists suggestions on how the human resource should be integrated in the process, in this view. In this thesis, J Svensson is considered as a representative of the individuals with extensive experience from with the merger and acquisition process.

JCC takeover of ABV – Case one

JCC, which was the construction organization within Johnsson Group, wanted to become introduced on the publicly traded stock market, but could not due to a too low ownership distribution. This was the largest contributor when the deci-sion was made to through a hostile takeover in 1988 acquire the larger, but pub-licly traded, organization ABV. The new mother corporation, noted on the stock market, changed name from ABV to Nordstjernan, which was given a very large sub entity that was named NCC, consisting of the two merged organizations. Both ABV and JCC were the products of preceding mergers and acquisitions, with roots dating back one hundred years, and both held primary specialization towards roads concrete and asphalt, but the new organization was built to ex-pand into other markets (www.ncc.se).
Aftermath
A Bergström was one of the key individuals who left ABV when it was acquired by JCC. He was simply more employable during the time of uncertainty than he had been when things where normal, according to himself. A Bergström had newly been appointed to human resource manager at ABV when he was pre-sented with the news of the acquisition, and it was not too difficult for Siab to recruit him. During the period 1988-90 more than one hundred previous ABV employees were seeking employment at Siab. The most cited reason was re-ferred to culture clashes between ABV and JCC. A Bergström even received a call from a market manager who assured A Bergström that by hiring him Siab would gain all his location managers, team leaders, construction workers, to-gether with all the NCC customers within that market and area.
K Lager comments that the case with a groups leaving for another organization has been occurring in relation to nearly all merger and acquisition deals. The loyalty is very tight within the work group and towards the people you work with, but not so much towards the organization. Thus, if a manager assumes a position with another organization it is often the case that the people in his or her team, who feel stronger ties with their manager than with the overall organi-zation, follows with him, or her.
No detailed assessment of the organizational cultures was carried out, as this capability was introduced in NCC 1995 with the launch of HKI (document source), other than the defining of the cultures done by B Wootz. On top of that, the organizational aspect of combining ABV and JCC was unsuccessful, from an integration point of view. This was generally manifested by that a man-ager, with a history with ABV, tended to have his or her closest staff made up of former ABV employees says K Lager. It took a long time for the organizations to actually integrate, and particularly many of the ABV managers found their way to Siab during the integration phase. K Lager recalls how it felt coming from ABV, which was owned largely by its management in contrast with JCC, which was family owned, and the hierarchal control within JCC rubbed off on new organization’s management culture. K Lager says that it was quite a chock and our comments concerning the 1900’s century feeling, was not appreciated. One could argue that both the employee survey tool, HKI (translated to human capital index) and the NCC University, which was founded 1990, were in some regards an outcome of the lessons learned from the takeover this case describe.

Table of Contents
1 Introduction
1.1 Background
1.2 Problem Discussion
1.3 Philosophy of science
1.4 Thesis content outline
2 Theoretical frame of reference
2.1 The merger and acquisition deal
2.2 Human Resource Management
2.3 Summary of theory
3 Method
3.1 Applied method
3.2 Research approach
3.3 Methodology approach
3.4 Realization of the study
4 Empirical findings
4.1 Interviewed individuals
4.2 JCC takeover of ABV – Case one
4.3 NCC merge with Siab – Case two
4.4 NCC acquire Anjobygg – Case three
4.5 Cross-case – The deal process
4.6 Cross-case – Human resource management
5 Empirical findings – Telecom Sounding Board
5.1 The merger and acquisition process
5.2 Managing the workforce
6 Analysis
6.1 The merger and acquisition process
6.2 The aftermath
6.3 Improving the process
7 Conclusion
8 Final discussion
References
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