Example: A survey of 1,000 organisations by HR consultants Watson Wyatt found that many boards and senior management teams only pay lip service to the idea of giving priority to the human side of the merger.

This is precisely the problem that grounded America's largest merger - the AOL-Time Warner deal in January 2000 - that created the biggest company in the world. In his book, Stealing Time, Alec Klein, a Washington Post reporter, chronicles a fascinating tale of how the deal of the century became an epic disaster. The deal was celebrated as the
marriage of new media and old media, a potent combination of the nation's No 1 Internet company and the country's leading entertainment giant.

But only three years later, nearly all the top executives behind the merger had resigned and the company had lost tens of billions of dollars in market value. Klein shows how a clash of cultures set the stage for a spectacular corporate collapse. AOL executives lorded it over their Time Warner counterparts, who felt they were being acquired by brash, young interlopers with inflated dollars. The AOL way was fast, loose, and aggressive, and Time Warner executives - schooled in more genteel business practices - rebelled. In the midst of clashing cultures and conflicting management styles, AOL's business slowed and then stalled.

HR consultants cite this example to say that people in charge of acquiring another company often forget that mergers are not just about balance sheets, cash flows or marketing synergies; they are about people making the synergies real.

A top HR executive recounts how the due diligence that his team was asked to do in an M&A deal was restricted to straightforward data - headcount, pay, outstanding legal cases and so on. No effort was made to understand the skills and effectiveness of the people of the acquired company, how they work and relate to each other and how to deal with the problems of cultural integration.

Result: post-merger, the management was perpetually in a fire-fighting mode having to deal with HR issues instead of devoting time to business operations. The actual integration cost far exceeded the plan, making the entire process meaningless, the executive says.

For instance, in every department there were two people working in the same position. Since no one thought about this problem, there was intense politicking among the legacy players jostling for the same space. HR experts say this shows that people, process and the associated change initiatives following a merger are well understood on paper, but become abstract when it comes to implementation.

The opinion in corporate India also seems to be that the rank-and-file in an organisation would rather leave things as they are and the main reason for this status quo bias is people's strong desire to hang on to what they own; the very fact of owning something makes it more valuable to the owner. McKinsey tested the effect with coffee mugs imprinted with the Cornell University logo.

Students given one of them would not part with it for less than $5.25 on average, but students without a mug wouldn't pay more than $2.75 to acquire it. The gap implies an incremental value of $2.50 from owning the mug.

But while it is fashionable for companies to blame the rank and file for the collapse of mergers, the fact is most CEOs are still trapped in an incrementalist mindset that change can come only in degrees and lack the energy of their own convictions to change. Such resistance to mergers will remain, and the best way for corporations is to have internal
change champions who must be chosen carefully.

Most companies try to skirt the issue by appointing external consultants, but consultants can only be temporary facilitators. For mergers to happen successfully, the selection of change champions must be a continuous process. For, no company can remain opaque all along and then expect things to change overnight.

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