(From top) Strong men: Naresh Goyal, chairman of Jet Airways and Subroto Roy, chairman of the Sahara Group

Mergers in India have moved to centrestage today, with the recent action in the air. The Competition Commission of India has announced that it will introduce measures to critically scrutinise all mergers. The Union Aviation Minister has had to come out with a statement that the recent Jet-Sahara merger will not create a monopolistic monster in the sky. Both Ernst & Young and Kotak Mahindra Capital are tomtomming that they are topping the Bloomberg League Tables, the first in terms of the number of deals (50) and the latter in total deal value ($2.9 billion).

The Leftists are looking at the smaller picture. The Centre of Indian Trade Unions (CITU) has asked the government to protect the interests of the employees of Air Sahara.

The Jet brass has indicated that the Sahara folks will have to shape up or ship out. The airline has about 5,000 employees across the country, against Jet’s 7,000. Even the Sahara pilots, much in demand because of a talent crisis in the sector, are getting together to ensure that their seniority and payscales are not affected in the new entity.

Why are the pilots worried? They can walk out any day and get another job. Very probably they will get a handsome raise to boot. The reason is that any merger or take-over creates uncertainty. Air Sahara has only around 200 pilots. True, the Sahara Group has promised to absorb the unwanted in some of their other companies. “But the very fact that you are unwanted can be traumatic,” says Mumbai-based HR consultant Shashi Rao.

For mergers and acquisitions to succeed, organisational cultures must be integrated properly. Many managements try and do it. But they often don’t realise that it is not a one-shot job; proper integration could take years. Improperly handled, there could be a host of problems. These range from anxiety and loss of motivation to conflicts, physical illness and even psychological setbacks.

The real problem, she adds, is not so much with the company being taken over. HR specialists are now realising that an equally critical issue is the staff at the company doing the take-over. Winners are not necessarily always winners. In the US, a large auto components company took over a smaller one. The two CFOs worked out all the details. They knew that, at the end of the day, one would have to go. But imagine the shock for the CFO of the company doing the take-over when he was shown the door.

Whenever a merger takes place, a lot of people become redundant. You don’t need two sales teams, two audit departments, two CFOs, two CEOs and the rest of the paraphernalia. If you are equitable you must very often let go of your own staff, if those in the company being taken over are better. If you need to be seen as equitable, you must let go of your own staff even if everything is equal.

Today, the HR focus in the Jet-Sahara merger is on the employees of the latter airline. But the real problem will be with the employees of Jet, mainly because none of them think they have a problem.

Problem areas

Underlying theories in merger and acquisition (M&A) literature

Anxiety theory: Uncertainty and anticipated negative impact on career and job leads to low productivity and self-centred behaviour.

Social identity theory: Loss of old organisational identity leads to sense of loss, anger, and grief; and denial and refusal to change.

Acculturation theory: Contact with or adjustment to different organisational cultures leads to acculturative stress and resistance and inter-organisational tension and conflict.

Role conflict theory: Ambiguous roles leads to low productivity and low job satisfaction.

Source: Adapted from Understanding employee responses to post-merger organisational

Change processes: An integrative framework by Myeong-Gu Seo