Regulatory issues and post-acquisition issues in acquisition- AstraZeneca and Shire - Essay Example

REGULATORY ISSUES THAT MAY IMPACT THE ACQUISITION AND STEPS TO MINIMISE THE IMPACT OF REGULATORY ISSUES AstraZeneca would also face regulatory issueswhile acquiring Shire. After acquisition, AstraZeneca would have more than 30% of the voting rights and, therefore, AstraZeneca would also have to make cash offer to Shire at the highest price paid by any offeror in the last 12 months (Freshfields Bruckhas Deringer, 2006). So, according to this situation, rule 9 will be applied to AstraZeneca. The background of this rule is that as shareholders have bought shares of a company having different management and different objectives; according to Panel, the firm might not remain as attractive to the shareholders as it was previously because of the changes in management and changes in objectives.

Therefore, AstraZeneca should try to involve people that were previously in the management of Shire after acquisition and try to have if not all, then some of the most important objectives of the previous firm so that the impact of this issue can be minimised and the firm would remain attractive for the shareholders of the company. The other regulatory issue that AstraZeneca could face is from The Office of Fair Trading (OFT) to protect the consumer and competitors. OFT is a not for profit organisation which enforces the competition law, as well as the consumer protection law in United Kingdom.

If after acquisition, the market share of the firm increases to 25% or more then OFT, being the United Kingdom’s economic regulator would intervene and stop the acquisition. If AstraZeneca acquires Shire, then the new market share of AstraZeneca would not be more than 25% as there are still several other competitors in the market and the market is saturated rather than dominated by few firms. Therefore, OFT show allow AstraZeneca to go ahead with the acquisition. key post-acquisition issues Integration approach: Integration approach is one of the most important factors that influence the success and failure of mergers and acquisition; therefore, it is important for the management to select the right integration approach to make the acquisition successful.

If appropriate integration approach is selected, it can be fruitful for the acquisition, however, if proper integration approach is not selected, it could lead to failure and conflict. There are two important central dimensions that are to be understood for a better integration approach; need for organisational autonomy and need for strategic interdependence. Considering these two dimensions there are four integration approaches that firms could use: 1. Preservation: there are only few changes to the acquirer firm. 2. Holdings: autonomy is allowed by the acquiring company only to a little extent; however, the target company is not integrated into the acquiring company. 3. Symbiotic: the target company is integrated to the acquiring firm with the intention to achieve synergies.

Although it is the most difficult to implement, it could have great returns if implemented properly. 4. Absorption approach: the target company is completely absorbed by the acquiring company. Integration approach to be used by AstraZeneca AstraZeneca should use the absorption approach as this is the most appropriate approach used by firms when they are going for horizontal integration, i.e. acquiring a competitor or another firm that operates at the same level of value chain. Using absorption approach, AstraZeneca would be able to maximise potential of the acquisition and make the most of the resources that both firms can share.

However, if AstraZeneca had acquired another firm offering different kinds of services, the company should have used the preservation approach. Also the other advantage to use absorption approach is that the speed of absorption integration approach is fast and therefore there would not be too many delays from acquisition. It would be beneficial for the company to get into rhythm as quickly as possible so that everyone could focus on achieving long term goals that has been set after the acquisitions.

Factors influencing the success of Post-acquisition success and Recommendations to overcome the critical factors There can be several factors that could influence the success of Post-acquisition of the company and some of the most important factors have been discussed below: Integration management Acquisition would mean integration of two companies, two organisations having different cultures, different kinds of leaders, different leadership styles, different management approaches and having different organisational structures, therefore, it is important for the acquiring firm to make sure that they appoint an integration manager because integration increases the workload of the managers and hiring an integration manager can increase the chances of successful acquisition and allow the managers to successfully complete their tasks.

Communication Communication is one of the important factors that would play a critical part in the success of acquisition; according to the annual report (2010), there has been an increase in the senior leader communication level in comparison to previous year (AstraZeneca, 2010). It is important for the management to communicate the vision, mission and objectives after the acquisition so that employees know what is expected from them and where the firm would be in future. Understanding where the synergies lie The firm should understand and know the areas where they can gain the most benefits and where the synergies lie so that the firm is able to make the most of the acquisition.

As AstraZeneca have always focused on creating highest value (AstraZeneca, 2010), identifying areas where synergies lie would help the company to further enhance the overall value of the organisation. Make people priority AstraZeneca has always focused on retaining and acquiring the best talent for the company (AstraZeneca, 2010) and, therefore, it is important for the management to prioritise human resource of the firm in order to retain the human resource of both the firms. It has been found that management is too busy in legal aspect and documentation after acquisition.

However, one important factor that has been overlooked after acquisition is to prioritise human resource of the organisation (Leis, 2000) Employees would have the fear of losing job and, therefore, it is recommended that management reduces the job fear from their mind so that they could again be productive which would be helpful for the success of the acquisition. Consider acquisition as a continual process rather than an event In order to make the acquisition successful, it is important that the management considers the process of acquisition as a continuous process and it would take some time for the company to achieve its optimal level after acquisition.

It is important for the management to not become impatient and considers the acquisition process as an event because as another company has been acquired, therefore, it would take some time for everyone to get familiarised with the changes. Important decisions to be taken swiftly Certain decisions are to be taken swiftly and delaying these decisions could bring uncertainty after the acquisition, therefore, the management should be prompt in making their decisions. MANAGING OPERATIONAL CHALLENGES In order to ensure that the acquired firm is able to get absorbed in the appropriate manner, the management should integrate the operations of both the companies.

Operational strategy of the firm should be prepared keeping the strengths and weaknesses of the new resources that the firm has to have higher productivity. AstraZeneca has always focused on streamlining its operations and to reduce costs (AstraZeneca, 2010), therefore, the firm would be able to appropriately restructure the operations to maximise profitability. As two firms would have different cultures, it is important to integrate the cultures and ensure that a better and positive organisational culture is formed.

HUMAN RESOURCE CHALLENGES One of the challenges that the firm faces after acquisition is regarding managing of human resource. Human resource is the most important asset of the organisation and the success of any organisation depends on how the firm makes use of its human resource. Some of the challenges related to human resource faced by AstraZeneca are discussed below: Incentives and Rewards Incentives and rewards should be given to employees so that their motivation level increases and they are ready for a fresh start to make the acquisition successful.

AstraZeneca ensures that they motivate its employees by providing different monetary, as well as non-monetary benefits (AstraZeneca, 2010); therefore, after acquisition considering the history of the company, the management of AstraZeneca would offer attractive incentives and rewards for its employees. Ensuring job security The company has always emphasised on retaining the best talent for the organisation (AstraZeneca, 2010) and after acquisition the position of some employees might be overlapped; therefore, it is important for the management to give the employees job security.

Dismissing employee would leave a fear in the minds of others as well; therefore, it is preferable to not dismiss any employee. To have the optimum level of productivity, the organisation must give employees job security and even few words from the CEO of the organisation would do the job in improving the motivation level of employees. Employee counselling Because some employees might be loyal to their previous organisation and to make them productive with the new organisation, the management should do counselling of employees and explain them that the acquisition is in favour of the employees, as well as the organisation, and everyone would be benefitted by acquisition (DiGeorgio, 2002).

recommendations on how AstraZeneca Plc should proceed AstraZeneca should consider different aspects before acquiring the firm. However, once the firm has been acquired, AstraZeneca needs to plan short term, as well as long term, goals and then continuously monitor the goals achieved so that they can track how successful the acquisition has been. Also AstraZeneca should make sure that they provide job security to employees so that their motivation level increases, as well as communicate the vision, mission and objectives of the organisation so that everyone knows what the organisation would like to achieve in future.

References AstraZeneca, 2010. How Does Health Connect Us All, Annual Report. [Online] Available at http://www.astrazeneca-annualreports.com/AZ_AR_100311_single.pdf [Accessed 29 February 2012] DiGeorgio, R., 2002. Making mergers and acquisitions work: What we know and don’t know - Part II, Journal of Change Management, Vol. 3, no. 3, pp. 259–274. Freshfields Bruckhas Deringer, 2006. The City Code on Takeovers and Mergers. [Online] Available at http://www.freshfields.com/publications/pdfs/2006/15139.

pdf [Accessed 26 February 2012] Leis, D., 2000. Mergers and Acquisitions – Strategies for Managing Change. [Online] Available at http://www.avanttconsulting.com/articles/cmn.pdf [Accessed 26 February 2012]