BRIEF DESCRIPTION

I am Mridul Grover, a first year student of Xavier

School of Human Resource Management (XUB-
XIMB). My professional tenure of 3 years has
exposed me to various work profiles, designations and
Industries. I am fond of writing, playing chess and
solo travelling.
When I came across Inscribe challenge, I found the
‘Challenges and Benefits of Inorganic growth of
Business’ to be a very interesting and emerging topic.
In order to increase my knowledge base, I decided to
participate in this prestigious competition.
 Challenges and Benefits of Inorganic growth of Business
Abstract:
The purpose of this paper is to study the concept of Inorganic growth of business. The objective is to explore the
challenges and benefits of Inorganic growth of business. In the process, it will throw a light on problems in terms
of human resources, Funds, operations etc. Further a few case studies will also be analyzed.
Mergers and Acquisition (M&A) activities seem to be an easy process but it involves many intricacies. There are
three stages of M&A that should be envisaged i.e. Pre merger, Transition Period and post-merger each stage has
its own advantages and challenges. The process is extremely fragile, one wrong decision or step can ruin all the
advantages or the whole process of merging can backfire.

Introduction:
There are two major strategies to expand the business. Following are those two ways:
1. Organic growth – It happens when a firm grows from the efficient and effective use of its resources and energy.
When a company expands by using its own capital, human resource and other internal factors then it is said to be
growing organically.
2. Inorganic growth – It happens when a company acquires or merges with some other company in order to
increase its presence across the various sectors.
Further, Merger and Acquisitions are the terms used interchangeably but these terms have a minute difference.
Mergers refers to amalgamation of two or more companies to form an entirely new entity with new name. Merger
helps in creating synergies. It is done on amicable terms. Both the parties come together with a consensus to form
a stronger entity they tend u combine their resources and energy to dominate the market.
Acquisitions are done on hostile terms. When one entity is not ready to submerge into other but due to
circumstances like increasing debts, lost market value etc. it has to get submerged into buying entity then it refers
to 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

Concept and types of Mergers

1. Horizontal Mergers: When two business of same sector combines to serve same sector. It is done to capture
larger pie of competition or to outreach the various parts of a region. For example Airtel merges with
Telenor in Feb 2017.
2. Vertical Mergers: When a company combines with its distributors or suppliers, it is done to cut the
manufacturing cost and to integrate the process under one umbrella in order to make it more effective. For
example if an ecommerce company merges with a logistic company.
3. Conglomerate Merger: when a company a merges with other company B to operate entirely in different
sector. It is done to establish a foothold in a certain profit making sector in which company A has less or
no experience at all. For example Ola merges with foodpanda.
4. Reverse Takeover: When a Private sector purchases a public sector company.
Benefits of Inorganic Growth

1. Wider Pool of assets: M&A gives an access to larger pool of assets immediately. For an ex. If an aviation
industry acquires a food industry than it will have a control over the assets from two different sector that
they might integrate by serving the food on their flight or they might operate those individually.
2. Competent workforce: A merger give access to a wider and competent workforce the employer exercises
an option to lay off unnecessary or incompetent person and retain a talented and competent person.
3. Larger control of market share: An acquisition and merger gives an opportunity to capture larger chunk
of market and immediately provide a loyal customer base of Target Company to the acquiring company.
4. Immediate entry in new segment: M&A gives an immediate entry to the acquiring company into new
segment if the merger or acquisition between two companies is altogether in different sector.

Problems and challenges Faced

1. Inability to agree on terms and conditions: During the inception phase of a merger the senior management
of both parties decide a few clauses and conditions of deal which sometimes act as a roadblock for further
proceedings because of their inability to reach mutual consensus.
2. Managing human capital: It generally strikes as a most difficult challenge. The questions that arises here
are which talent vertical needs maximum workforce? How to combine top management employees? What
criteria should be opted to fill a vacant position? Is there any job profile opened due to merger?
Mostly the talent which is retained is due to political motivation. For an example If a company A merges
with a company B then company A will tend to retain the key employees of company B but these
employees might have some colleagues attached to them so in this case whole bunch of employees has to
be retained. The concepts like competency mapping generally fails here.
3. Unrealistic vision or superficial merger: If a firm has not a clear vision or reason to merge with other
company then that merger oftenly ends at a very bad note as there will be lack of mission, vision and
values which further will ignite frustration among employees and in turn it will increase turnover
4. Different motives: Sometimes the two merging entities have different motive altogether hence when they
are merged they work for different purposes. For example Diamler Benz and Chrysler Chrysler's focus on
accommodating customers with lower incomes did not fit with Daimler-Benz's luxury car making business
model
5. Conflicting cultures: The misfit of culture, working environment and the way the work is done among two
companies also poses challenge to a merger.
6. Technological Misfit : Each company has its own technology and technical ways to deal with everyday
work and issues even the small things like ERP system differs from company to company that also brings
a challenge to merger
7. Improper Implementation: Shortcomings in implementation and integration process creates lots of
challenges and difficult situations for the further process. Even if the smallest learning is left to be shared
among two entities can create a havoc.
8. External changes: Sometimes the factors determining the external environment and market demand
changes post merger that factors are hard to predict and usually impedes the purpose of merger.
9. Lowered commitment and disloyalty: When the employees are laid off during and post-merger then it
creates a sense of insecurity and dissatisfaction among remaining employees of the company. They feel
confused about their role in new environment and the importance or value they bring to the table for the
merged entity.