IntroductionMerger & Acquisition transactions are often pursued in order to acquire a larger share of an existing market, enter new markets, eliminate competitors, acquire expertise or assets, transfer skills, save costs, increase efficiencies or capitalise on synergies. It has, however, been found that between 55 % and 70 % of Merger and acquisitions fail to meet their anticipated purpose or they take longer to do so than expected. In fact, recent studies have found that significant percentages of Merger and acquisitions destroy profitability and shareholder value.Merger and acquisitions are complicated transactions involving many risks for all contracting parties often bringing about fairly rapid large-scale change with far-reaching impact. Merchant bankers, auditors, lawyers and tax consultants are retained at great costs to manage certain risks through the negotiation, due diligence, contract drafting and implementation phases of the transaction. During the due diligence phase detailed information is obtained about the parties, and the risks involved in concluding the transaction are evaluated. Traditionally lawyers and auditors are appointed to conduct the legal and financial due diligence investigation. Both these types of due diligences might touch on the people aspects relevant to the transaction but rarely do they include a culture or climate assessment that evaluates the cultural fit between the organisations involved in the transactionbeforeconclusion of the transaction.There is, however, a growing realisation that the successful outcome of merger and acquisition transactions is dependent on wide-scale integration of people and cultures including their processes, systems and practices and that cultural compatibility issues can no longer be ignored. If the people side of Merger and acquisitions and the integration of different cultures are ignored, the merging companies could face many difficulties, including, ultimately not meeting the anticipated purpose of the transaction. A survey of managers and companies involved in more than 1 000 Merger and acquisitions conducted by Best Practices, a USbased consultancy, found that staff productivity dropped by 50% and 47% of people in leadership positions moved on.Some of the other difficulties include: Loss of skilled employees other than employees in leadership positions. This type of loss inevitably involves loss of business know-how that may be difficult to replace or can only be replaced at great cost. Retrenchment of employees causing panic and a loss in motivation, which could in turn also lead to a loss of productivity and a reduction in revenues. Improper or incomplete alignment of employment terms, conditions and benefits leading to anger, resentment and a drop in motivation. Rushed or improper population of new organisational structures. Increase in costs could result if the proper management of change and the implementation of the M&A transaction are delayed. Unhappy customers and the eventual loss of customers. Build-up of resistance to any future change initiatives.Managing change in the highly complex world of Merger and acquisitions is not easy and research has found that so much as 70% of change initiatives are unsuccessful. The fact that the M&A process can sometimes takes as long as 3 to 5 years to be fully affected, adds to the levels of uncertainty, ambiguity or confusion that accompanies such transactions.One of the components of complexity of Merger and acquisitions is organisational culture. Before an M&A transaction is concluded it is important to assess the cultural compatibility of the merging firms. In this regard it is recognised that such formal cultural assessment is usually not possible because the negotiations leading up to the merger have to be kept secret. This creates the risk, however, that the merging parties do not discover important differences until after they have committed themselves to the new organisation.To acquire true cultural insight, requires both parties to take part in each others cultures. This can be done by sending employees into the other organisation for some time or by creating dialogues between members of the two cultures that allow differing assumptions to surface. Dialogue is a form of conversation that allows the participants to relax sufficiently to begin examining the assumptions that lie behind their thought processes. Participants should feel secure enough to suspend their need to win arguments, clarify everything they say, and challenge each other every time they disagree. Reflective rather than confrontational conversation should be encouraged. The process of creating dialogue can help focus on engaging people and making issues discussable and in this way reducing uncertainty and anxiety and the likelihood for employee resistance to the change.Critical to the success of a cultural change process is a well-designed plan for the management of such change. It has been found that companies with strong integration plans created above-average value in their industries and effective post-merger management policies were seen to improve the odds of success by as much as 50 percent .Just as critical as planning for the management of cultural change is the need for effective communication, in every phase of the merger process. Employee resistance to change can be a huge barrier to the successful implementation of a merger or acquisition. Resistance is, however, a natural part of the change process as change involves going from the known to unknown. Individuals typically go through four phases during a major organisational change: initial denial, resistance, gradual exploration and eventual commitment.Keeping communication channels open will prevent anxiety from getting out of hand and providing clarity about expectations will reduce distrust or conflict. Frequent reviews should be conducted during the transition process, during which people can talk about the reasons for the merger and open the dialogue around future changes, and during which management can attend to the psychological dimensions of the change process.Related to the issue of communication is the identification of all stakeholders who may be affected by the change. The business case for change, the process of change and timeline must be communicated to all stakeholders so that they may gain an adequate understanding thereof. Those stakeholders who will be impacted significantly by the change must have a clear understanding of how and when they will be impacted.Clear and regular communication, including the process of creating dialogues, should address stakeholder resistance and lead to stakeholder buy-in. Communication channels must allow for effective feedback from stakeholders to ensure that barriers to and opportunities relating to the change objectives can be identified on an ongoing basis and be addressed.Merger and acquisitions and the resultant changes to the organisational culture often require a collective change of mind. But, minds cannot be managed, they can only be inspired. For this to occur, the right style of leadership is essential. Leaders must communicate the vision of the change and its impact as widely and effectively as possible. Thereafter they have an important role to play in guiding the ongoing change effort and in encouraging employees to stick to the change process until it is an integral part of everybodys lives.

Case StudyAbstractThe case is about the US-based social networking giant Facebooks acquisition of WhatsApp, the worlds most popular mobile instant-messaging platform. It discusses the landmark deal to buy WhatsApp for US$ 19 billion including US$4 billion in cash, US$12 billion worth of shares, and an additional US$3 billion in restricted stock units of Facebook over four years after the deal closed. On April 10, 2014, the Federal Trade Commission (FTC) cleared the deal.The case also includes the journey of WhatsApp into the most popular instant-messaging app. The WhatsApp Messenger is a cross-platform mobile messaging app which allows users to exchange messages without having to pay for SMS. Apart from simple text messaging, users can send images, video or audio messages. After their first trial year of using the service, users need to pay subscription charges of US$ 0.99.Issues in the caseThe case is structured to achieve the following objectives: Understand the growth strategy adopted by Facebook to maintain its dominant position in the social marketing space Understand the issues and challenges faced by Facebook in recent years in terms of competition from other social media companies; Study and analyse the Facebook-WhatsApp deal; Assess the challenges the deal could face in future and how these can be overcome.

Acquisition of WhatsAppOn February 19, 2014, Facebook announced that it was acquiring WhatsApp in a US$ 19 billion deal. The social networking giant would pay US$4 billion in cash and US$12 billion worth of shares for WhatsApp. WhatsApps founders and 55 employees would receive an additional US$3 billion in restricted stock units of Facebook over four years after the deal closed. Informal discussions between the two companies had reportedly been going on since 2012, when Zuckerberg first approached Koum. However, the deal started shaping up only in early February 2014.cChallengesWhile analysts were mostly positive about Facebooks acquisition of WhatsApp, some of them were worried about the valuation of the deal, which was Facebooks largest acquisition ever. The deal was not only one of the biggest since Time Warners US$ 124 billion merger with AOL in 2001, it was also one of the biggest deals in the tech industry and larger than any deal done by Microsoft , Google, or Apple. While Apple had never done a deal of over US$ 1 billion, Microsofts biggest deal was acquiring Skype at US$ 8.5 billion, and Googles biggest deal was acquiring Motorola Mobility at US$ 12.5 billion.The Road AheadWhile Facebooks acquisition of WhatsApp received many positive reviews from industry experts, some were still unsure whether the deal would prove to be smart move or not. Investors, especially, were anxious about the price and the fact that the purchase was being made mainly in shares, thereby diluting the power of other shareholders. Analysts were of the view that in order to validate the valuation of the deal, WhatsApp would need to generate around US$1billion in annual cash flow by 2018.