THE INTEGRATION ADVENTURE A CASE STUDY AT ABN AMRO & Fortis

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THE INTEGRATION ADVENTURE

A CASE STUDY AT ABN AMRO & Fortis

Master thesis, MscBA, specialization Change Management University of Groningen, Faculty Economics and Business

February 28, 2009 STANLEY WYLENZEK Student Number: 1436260 Poederooienstraat 54 1106 CK Amsterdam Tel: +31 65 106 4213 E-mail: swylenzek@hotmail.com

Supervisor University of Groningen (RUG) Dr. B.J.W. Pennink

Supervisor ABN AMRO L.C. Wielstra

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The Integration Adventure: A Case Study at ABN AMRO & Fortis

University of Groningen, The Netherlands, Faculty of Management & Organization, by Stanley Wylenzek 1 ABSTRACT

This master thesis is written to finalize my master degree in Change Management. The integration adventure discusses which factors influence an integration process. The main research question is: Which internal integration factors and external constraint(s) influenced the intended integration at ABN AMRO Transaction Banking & Fortis Cash Management and to what extent did the integration managers cover the potential integration success factors? Literature provided eight internal factors and one external factor which influence an integration process in the financial sector; these are summarized in a conceptual integration framework. Internal factors are divided into two groups: (1) Soft-side of change (related to the Human Relations approach, the four factors are: Culture, People/HR, Communications, and Client Focused) and (2) Hard-side of change (related to the Classical approach, the four factors are: Structure, IT/Systems, Focus on Value/Finance, and Project Management). The external factor was limited to Stakeholders’ Trust (divided in four groups: Financial Industry, Regulators, Shareholders, and Clients). The integration framework has been analysed during a case study at ABN AMRO Transaction Banking and Fortis Cash Management. Outcomes of analyses of data from the questionnaire and interviews indicated that all integration framework factors influence an integration process. Based on the interviews with the management team of ABN AMRO Transaction Banking Complexity Deal should be added to the integration framework as external constraint. To accomplish post-merger integration success soft-side factors were indicated as relatively more important than hard-side factors (preconditions). The integration managers were on the right track to cover the success factors (do’s), but the decrease in stakeholders’ trust caused a premature ending of the integration adventure. Recommended for future integrations is to keep the same energy and willingness to change, and also try to manage the environmental constraints.

Key Words

1. Integration 5. Soft-Side of Change

2. Success Factors (Do’s) 6. Hard-Side of Change

3. Internal Factors 7. Stakeholders’ Trust

4. External Constraints

Title of the Master Thesis

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University of Groningen, The Netherlands, Faculty of Management & Organization, by Stanley Wylenzek 2 TABLE OF CONTENT

1. COMPLEXITY INTEGRATION ADVENTURE ... 4

1.1 CHALLENGES MERGERS &ACQUISITIONS... 5

1.2 DESIGN INTEGRATION ADVENTURE... 7

2. INTEGRATION SUCCESS IN THE POST-MERGER STAGE ... 8

2.1 TIME FRAME MERGERS &ACQUISITIONS (M&A) ... 9

2.2 WHY ORGANIZATIONS MERGE... 10

2.3 INTEGRATION SUCCESS FACTORS... 10

2.3.1 Internal Factors Influencing an Integration Process... 11

Factor One: Culture ... 11

Factor Two: Structure... 13

Factor Three: People / Human Resources ... 14

Factor Four: Communications... 15

Factor Five: Focus on Value (Finance) ... 16

Factor Six: IT/Systems ... 17

Factor Seven: Project Management... 18

Factor Eight: Client Focused... 19

Soft versus Hard Integration Factors... 19

2.3.2 External Factors Influencing an Integration Process... 11

Trust... 21

External Condition One: Financial Industry’s Trust ... 22

External Condition Two: Clients’ Trust... 22

External Condition Three: Shareholders’ Trust ... 23

External Condition Four: Regulators’ Trust... 23

2.4 CONCEPTUAL INTEGRATION FRAMEWORK... 25

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University of Groningen, The Netherlands, Faculty of Management & Organization, by Stanley Wylenzek 3

4 INTEGRATION FRAMEWORK USEFUL AT ABN AMRO & FORTIS ... 29

4.1 INFLUENCE INTERNAL FACTORS ON AN INTEGRATION PROCESS... 29

4.2 INFLUENCE EXTERNAL CONSTRAINT(S) ON AN INTEGRATION PROCESS... 34

4.2.1 Decrease in Stakeholders’ Trust... 34

4.2.2 Extra External Constraint Complexity Deal... 36

4.3 BUSINESS AS USUAL GROUP VS.INTEGRATION GROUP... 37

4.4 POTENTIAL SUCCESS FACTORS COVERED... 38

4.5 INTEGRATION MODEL FINANCIAL SECTOR... 42

5. INFLUENCE INTEGRATION FRAMEWORK ... 45

- Conclusion Integration Adventure - 6. A FUTURE INTEGRATION ADVENTURE ... 47

- Recommendations - 7. SAVED FROM THE ABYSS ... 48

- Reflection Creation Integration Adventure - ATTACHMENT I: QUESTIONNAIRE... 50

ATTACHMENT II: INTERVIEW FORMAT... 53

ATTACHMENT III: DO’S PER FACTOR FOR A SUCCESSFUL INTEGRATION ... 54

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1. COMPLEXITY INTEGRATION ADVENTURE

The continued drive for shareholder value growth will keep the urge to merge high on the agenda of company executives. (Pritchett, Robinson & Clarkson, 1997) The question will be how to increase the success percentage of mergers & acquisitions (M&A). This thesis will focus on the balance between internal factors and the external constraints which can influence a successful merger. First a literature review will be given on which factors influence an integration process. Second, the determined factors will be analysed with a case study on the intended integration of ABN AMRO Transaction Banking and Fortis Cash Management.

The integration adventure of Fortis and ABN AMRO started in 2007. Royal Bank of Scotland (RBS), Fortis and Banco Santander had acquired ABN AMRO. Preceding this takeover a ‘fight’ between Barclays and the consortium had been going on. Barclays withdrew because the consortium was outbidding Barclays (60 versus 71 billion Euros) and 10 October 2007 the consortium parties announced an official offer. (Elsevier, 2007) This has been the starting point of a complex and adventurous merger and acquisition process for Fortis and ABN AMRO with some unexpected twists (financial crisis and nationalisation of the banks) during the process.

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1.1 Challenges Mergers & Acquisitions

Challenges complicate a successful merger and acquisition process. ‘Mergers have to deal with a lot of management challenges and complicating environmental factors. For instance meeting aggressive deadlines, achieving tough financial targets, restructuring quickly with limited information, merging a variety of systems applications and architectures, retaining key employees, maintaining adequate communication, and managing relocations and consolidations (1997, Pritchett et al.) are examples of complicating factors which should be covered during a merger and acquisition process.

During the start-up stage of this thesis 15 integration program managers and project leaders provided feedback to the question: What are the challenges for the integration between Fortis and ABN AMRO? The integration managers’ and project leaders’ feedback made a clear distinction between the challenges in the roots of the companies and the external surrounding influencing the merger and acquisition process.

Specific challenges mentioned for the roots of the companies are: time pressure, communication plans, loss of productivity, loss of key personnel, and cultural differences. Challenges mentioned in the external surrounding were legal approval, and environmental constraints like the credit crunch.

This clear distinction used between the challenges will be used in the main research question of this thesis. The challenges in the roots of the companies will be referred to as internal factors and the challenges in the external surrounding will be referred to as external constraints.

The internal factors and external constraints will be discussed during separate sub-research questions, to finally combine the finding into a conceptual framework. The conceptual framework and do’s of an integration process will be analysed with a case study at ABN AMRO Transaction Banking and Fortis Cash Management. But first to provide a solid background on merger & acquisition activity and to determine the scope of this thesis, two sub-research questions will deal with the various stages of merger & acquisitions, and why do organisation merge to determine what is meant with a successful integration.

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Main Research Question of the Integration Adventure

Which internal integration factors and external constraint(s) influenced the intended integration at ABN AMRO Transaction Banking & Fortis Cash Management and to what extent did the integration managers cover the potential integration success factors?

Sub-Research Questions of the Integration Adventure:

1 Which distinctive stages are there during a merger & acquisition process? 2 Why do organizations merge?

3 Which internal factors influence an integration process?

4 Which external constraints influence an integration process in the financial sector?

5 Which internal factors and external constraints influenced the integration of ABN AMRO Transaction Banking & Fortis Cash Management?

6 To what extent did the integration managers of ABN AMRO Transaction Banking & Fortis Cash Management cover the potential integration success factors?

Goals of the Integration Adventure

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1.2 Design Integration Adventure

The thesis will be divided into four parts. In the first part the literature review is given. This part provides background information on the Merger and Acquisition field by answering the first four sub-questions and it provides the success factors (do’s) of an integration process. It concludes with a conceptual integration framework (a balance between internal factors and external constraints).

In the second part the research methodology will be given. This part covers the case study design (conducted at ABN AMRO Transaction Banking and Fortis Cash Management). The chapter is divided into area, data collection method and data analysis.

The third part contains the case study analysis. The analysis provides an answer to sub-question five and six. First, which internal factors and external constraints did influence the intended integration? Second, which potential integration success factors (do’s) were covered during the intended integration and which could be improved during another integration? The chapter will conclude with an empirical integration framework for the financial sector.

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2. INTEGRATION SUCCESS IN THE POST-MERGER STAGE

Within the Change Management literature the managerial approach is an important topic. The ‘best way’ managerial approach for management has shifted over time. It started with the Classical approach of Taylor, Fayol and Weber. In this approach ‘human fallibility and emotions, at all levels in the organisation, should be eliminated. (…) create narrowly focused jobs encased in tight standardised procedures and rules.’ (Burnes, 2004) The Classical approach was an approach that excluded the intrinsic motivation of the workforce and focused on the hard (mechanic) factors of management. According to Sirkin, Keenan and Jackson (2005) the hard factors are a focus on the not-so-fashionable aspect of change management, but important to cover during a transformation.

The struggling of the workforce with this emotionless management approach has caused a counter approach: the Human Relations approach. The Human Relations approach of Mayo, McGregor and Maslow focused more on the soft parts of management. ‘People are emotional rather than economic-rational beings and (…) organisations are cooperative, social systems rather than mechanical ones.’ (Burnes, 2004) The Human Relations approach focused especially on the intrinsic motivation of the workforce and communication. According to Legare and Bechtel (2001) soft, people issues associated with leading large-gauge change efforts are critical for long-term business success.

The downside of the Classical and Human Relations approach is that they focus on the ‘one best way’ approach. This has caused that both theories became less influential than the Contingency Theory approach, which outlines a ‘one best way’ approach for each organisation. The three most important contingencies are: (1) Environmental uncertainty and dependence, (2) Technology and (3) Size. (Burnes, 2004) ‘An organisation does not exist in a vacuum; it interacts with its environment.’ (Rosen, 1995)

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In this chapter existing literature on ‘successful’ mergers will be discussed and out of this literature a ‘successful’ conceptual integration framework is extracted. The literature review discussed four sub-questions:

1. Which distinctive stages are there during a merger & acquisition process?(Paragraph 2.1) 2. Why do organizations merge? (Paragraph 2.2)

3. Which internal factors influence an integration process? (Paragraph 2.3.1)

4. Which external constraints influence an integration process in the financial sector? (Paragraph 2.3.2)

First a time frame of mergers & acquisitions will be provided to determine where the integration stage sets in.

2.1 Time Frame Mergers & Acquisitions (M&A)

The process of a merger & acquisition can be divided into five distinctive stages (Figure 2.1) according to Schweiger (2002):

1. The Strategic and Financial Objectives, underlying a deal must first be understood before an approach to integration is chosen.

2. Transaction Stage; characterizes the period after which an acquirer identifies a target and culminates when there is commitment to the deal. This period consists of negotiations, due diligence and valuations.

3. Transition Stage; begins when the acquirer and the target or merger partner formally announce a deal and sign a merger or acquisition agreement.

4. Integration Stage; begins after deal closing and continues until after partners are integrated. 5. Evaluation; Central to the effectiveness of the integration is the need to continually

improve the process. This can be conducted in two ways: (1) Learning and improvement during the integration effort and (2) evaluating after the project/process.

Figure 2.1 Distinctive Stages in a M&A Process

The focus of this thesis is stage four, the integration stage.

1. Strategic and Financial Objectives

3.Transition Stage 4. Integration Stage 2.Transaction

Stage

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2.2 Why Organizations Merge

Literature gives four strands to the conceptual basis for integrating mergers and acquisitions: (Walter, 2004)

1. The Strategic Fit View (resource relatedness); in related sectors or markets a strategic fit should perform better than in unrelated situations due to possible benefits of economies of scale, scope, and market power can be achieved.

2. The Organizational Fit View; a M&A deal is the transfer of strategic capabilities that provide a sustainable competitive advantage to the firm, thereby leading to long term shareholder value creation.

3. The Resource-based View; which attributes performance variances between firms to the difference in the way firm managers build, maintain, and defend their resources.

4. The Knowledge-based View; which considers that human resources dominate the material resources of the firm. Knowledge can be the basis for integration.

To integrate ‘successfully’ is complicated, especially if you measure it by shareholder value. A study out of 160 acquirers shows that: ‘only twelve percent achieved organic growth rates (from 1992 to 1999) that were significantly ahead of organic growth rates of their peers, and only seven of those companies had total returns to shareholders that were better than industry average.’ (McKinsey, 2001)

One of the four perspectives given above can be the reason for mergers/ ‘takeovers’ (or a combination of perspectives). In this thesis success has been defined according to the Strategic Fit View. To achieve a ‘successful’ integration, the integration should meet the intended benefits of economies of scale, scope, and market power.

To reach that successful integration you need to take into account the factors that influence an integration process. Paragraph 2.3 will delve deeper into this subject; an overview of which factors influence an integration process will be given.

2.3 Integration Success Factors

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2.3.1 Internal Factors Influencing an Integration Process

In the literature various authors claim to have ‘the blueprint’ for integration success in the post-merger phase. In this paragraph a framework of internal factors influencing integration success (figure 2.2) will be provided. The framework combines the different angles of the various authors.

The eight most important internal factors that influence integration success are: (Figure 2.2) • Culture

• Client Focused Approach • People / Human Resources • Communications

• Structure

• Focus on Value (Finance) • IT / Systems

• Project Management

The eight factors will be discussed in

the next part. Per factor a graphical outline will be given with the most important factors that influence a ‘successful’ integration.

The first four factors discussed are related to the soft-side of change (Human Relation approach): Culture, Client Focused Approach, People / Human Recourses and Communications. The second four factors are related to the hard-side of change (Classical approach): Structure, Focus on Value (Finance), IT / Systems and Project Management.

Factor One: Culture

Culture has been addressed as one of the most important factors for a successful merger. Research of Bain & Company (Harding & Rovit, 2004) among 250 executives shows us that 83 % acknowledges that the integration of ‘different’ cultures should be addressed early on. ‘Cultural differences are almost certain to be involved when companies are combined.’ (Weston & Weaver, 2001)

You can divide culture on three levels: (1) Organization level, (2) Team level and (3) Individual level. (Kreitner, Kinicki & Buelens, 2002) For this research, culture will be discussed on organization level, because it is the most interesting part of culture to cover during an integration of two companies. (Burnes, 2004) Team and individual level of culture

Successful Integration Structure People/ HR Culture Client Focused Focus on Value (Finance) Communications Project Management IT / Systems Successful Integration Structure People/ HR Culture Client Focused Focus on Value (Finance) Communications Project Management IT / Systems

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are out of scope. ‘Corporate culture is defined by an organization’s values, traditions, norms, beliefs, and behavior patterns. (…) It is also expressed in informal relationships and networks. (…) Pitfalls begin with simply ignoring the problem.’ (Weston et al., 2001)

The way to deal with culture can be divided into two parts: (1) Bridging the cultural gap, (2) Style to bridge the cultural gap. These two sub-factors will be discussed next.

Bridging the Cultural Gap

Bridging the cultural gap is the first stepping-stone for an organization to integrate not only within the board rooms, but also in the organization roots. The starting point should be managing culture by ‘creating artifacts and apply a super-ordinate goal.’ (Tetenbaum, 1999) The workforce of both organizations should become proud of working for the ‘new’ combined company. ‘Give people a flag to wave (a sense of citizenship in the new organization), but not only for the acquired employees.’ (Pritchett et al., 1997) If this new citizenship is combined with that super-ordinate goal, one of the hardest factors to integrate has been covered and completed.

Bridging the cultural gap can be covered with an action plan, which consists out of three phases: (Carr, Elton, Rovit & Vestring, 2004; Tetenbaum, 1999)

• Phase one: Recognize, label and discuss differences.

• Phase two: Incalculate the culture throughout the organization and develop a way both sides accept decisions

• Phase three: Implement and cascade new approach down both organizations

Style to Bridge the Cultural Gap

There are two sub-factors that determine the style to bridge the cultural gap: (1) proactive and taking charge management (Pritchett et al., 1997) and (2) cooperation and involvement of both companies. (Schweiger, 2002; Marks, 2005)

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University of Groningen, The Netherlands, Faculty of Management & Organization, by Stanley Wylenzek 13 Figure 2.3 Culture Influencing Integration Success

Second, Cooperation and involvement of both companies is an important factor to streamline integration. ‘The combined organizations must be considered carefully and (…) the degree of involvement of both companies should be considered.’ (Schweiger, 2002)

Figure 2.3 outlines the culture aspects influencing a successful integration.

Factor Two: Structure

Clarity on structure is the foundation of a solid integration. ‘(…) changing formal organizational structures and systems are central to the success of the overall change process.’ (Beer & Nohria, 2000). The Structure factor can be divided into two parts: (1) Clear Structure & Processes and (2) Project Organization vs. Business as Usual.

Clear Structure & Processes

Uncertainty among the workforce is the first factor to capture. (Pritchett et al., 1997) ‘Define clear line of authority; formal procedures’ as the 250 executives stated in the research on integration. (Harding et al., 2004) After the acquiring phase there is a gap to close between the as is situation and to be situation. To evolve from the as is to the to be situation requires four actions: (Carr et al., 2004; Harding et al., 2004; Pritchett et al., 1997; Schweiger, 2002; Tetenbaum, 1999) (1) Clarity on naming, (2) Clarity on organizational structure, (3) Clear defined roles and responsibilities, and (4) Early management team announcement.

If these factors are covered you are providing the climate for a ‘successful’ integration. Then the future is clearly defined for the internal and external stakeholders. Without this clarity ‘(…) acquisitioned employees operate in a vacuum or some will do nothing while others do wrong.’ (Pritchett et al., 1997)

Project Organization vs. Business as Usual

The problem during an integration process is to keep your focus on your daily activities. Everybody wants to be involved and assist in determining the ‘new’ situation. One of the pitfalls is, that during the integration ‘firepower is extracted out of the base business,’ (Carr et

Successful Integration

Culture

1. Label & Recognize differences 2. Incalculate & Accept ‘new’ culture

3. Implement & Cascade approach down both organizations

4. Speed above value (taking charge management) 5. Cooperation & involvement of both organization

+

Culture

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al., 2004; Harding et al., 2004) you should ‘keep your eye on the ball, most vulnerable are sales, service and information systems.’ (Pritchett et al., 1997)

There has to be a clear distinction between the business as usual and the project organization during the integration. ‘There should be a project group managing the integration, parallel to the organization.’ (Pritchett et al., 1997) Project organizations are ‘companies’ structured by grouping people into project teams on temporary assignments. (Pinto, 2007)

There are three ground rules for a project organization versus the business as usual during the integration. (Carr et al, 2004) The ground rules are:

1. ‘Walk the talk’; communicate the targets extensively. The naming, structure, roles and responsibilities and governance should be clear to everybody. Communicate from the project organization to the business as usual, to provide a clear situation to all stakeholders.

2. ‘Use the 90 – 10 rules’. 90 percent of the workforce should be in the base business and 10 percent should be working on the integration project.

3. ‘Let the line steer’. Smart acquirers often designate their line executives as members of steering committees for duration of the integration.

Figure 2.4 outlines the structure aspects influencing a successful integration.

Factor Three: People / Human Resources

The third factor is people/ human resources. During the integration process you have to take into account the behavior within the organization. ‘Having a compelling story for bringing the organizations together and (…) having an inspiring vision and a clear understanding of the gain and the pain’ (Marks, 2005) is the focus for this factor. Two sub-factors will increase this alignment of the workforce: (1) gaining acceptance and commitment among the workforce and (2) provide the workforce a feeling of importance.

Successful Integration Structure

1. Clarity on naming

2. Clarity on organizational structure 3. Clear defined roles and responsibilities 4. Early management team announcements 5. Walk the talk

6. Use the 90 – 10 rule 7. Let the line steer

+

Successful Integration Structure

6. Use the 90 – 10 rule

7. Let the line steer Successful

Integration Structure

6. Use the 90 – 10 rule 7. Let the line steer

+

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University of Groningen, The Netherlands, Faculty of Management & Organization, by Stanley Wylenzek 15 Figure 2.5: People/HR Influencing Integration Success

Gaining Acceptance and Commitment among the Workforce

The acquired workforce first needs to accept the takeover (history) and then they need to accept to work in a new situation (future). (Schweiger, 2002; Marks, 1999) ‘Benchmark, gain acceptance and commitment within both companies,’ (Schweiger, 2002) People within the organization are the integrators and the parties to integrate. An inspiring vision, mission and strategy can increase the willingness to accept change and cooperation during change. The success factor is ‘don’t forget the staff.’ (Marks, 1999)

Provide the Workforce a Feeling of Importance

Provide the workforce a feeling of importance is critical for integration success. Core job characteristics influence the critical psychological states, which lead to outcomes of your work. Especially during integration the core job characteristics; skill variety, task identity and task significance lead to the critical psychological states: experienced meaningfulness and experienced responsibility. These feelings of importance lead to high internal motivation, growth satisfaction, general job satisfaction and work effectiveness. (Hackman & Oldham, 1980) ‘Communicate high expectations to the workforce and the measuring of these expectations,’ (Schweiger, 2002) can work as a triggering event for the feeling of importance.

Figure 2.5 outlines people/human

resources aspects influencing a successful integration.

Factor Four: Communications

The fourth factor is communications. Communications is responsible for ‘managing the information flow.’ (Tetenbaum, 1999) Communications ‘explains the plans and the potential success, (…) internal and external.’ (Harding et al., 2004) Without managing the communication process rumors will be spread among the stakeholders.

People/ HR

1. Clear & Inspiring vision, mission and strategy 2. Change is accepted by workforce

3. The workforce did not felt left behind 4. Commitment among both organizations

5. Experienced Meaningfulness & Responsibility 6. High expectations were communicated +

People/ HR

1. Clear & Inspiring vision, mission and strategy 2. Change is accepted by workforce

3. The workforce did not felt left behind 4. Commitment among both organizations

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University of Groningen, The Netherlands, Faculty of Management & Organization, by Stanley Wylenzek 16 Figure 2.6: Communications Influencing Integration Success

During an integration process the communication plan should consist out of four important actions. The four actions are:

• Provide a Sense of Corporate Direction; communicate the companies’ values, strategy, mission, vision and clear goals. (Pritchett et al., 1997; Harding et al., 2004)

• Effective Communications; focus on fairness, dignity and respect for both workforces and externally. The important message here is that you should focus on the good and the bad. (Marks, 2005; Schweiger, 2002)

• Kill the Rumors; internally your workforce will be affected by a ‘chaotic’ and unclear future. ‘Over communication is impossible’. (Marks, 2005; Pritchett et al., 1997) This accounts for your external communication as well.

• Monitor Employee Attitude; one of the most cost-effective ways to monitor your people is by employee attitudes surveys. It is a good way to measure what is still missing in your integration approach and it

provides a possibility to adjust your plans or relay the focus of your plans. (Marks, 2005)

Figure 2.6 outlines the communications

aspects influencing a successful

integration.

Factor Five: Focus on Value (Finance)

Factor five focuses on value (finance) and explains the ‘only’ goal from a shareholder perspective. During a merger & acquisition finance is crucial. Like due diligence is important during the acquiring phase, there are crucial financial aspects during the integration stage. Integrations should ‘focus on financial objectives and mapping the changes on synergies.’ (Schweiger, 2002) Finance is divided into two aspects: (1) Value creation and (2) Prioritization.

Value Creation

Value creation is based on: (1) Cost and Value Synergies and (2) Integration Costs (Mittler, 2008) First, Cost and Value Synergies are the financial foundations for the company to make integration a success. ‘Mergers can create extraordinary value. (…) However, one of the

Communications (Internal & External)

1. Provide a clear sense of corporate direction 2. Effective communication (Good & Bad news) 3. Kill the rumors

4. Monitor employee attitude +

4. Monitor employee attitude Successful

Integration

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biggest challenges acquirers face is setting realistic, yet stretch, targets. How far – and how quickly – can you go?’ (BCG Focus, 2007)

Second, Integration Costs are the costs you have to make to integrate. ‘Make realistic estimates of integration costs,’ (Carr et al., 2004) is considered as one of the key success factors. Next to the integration costs, the acquiring costs are an important liability for the acquiring company.

Prioritization

Make sure that you prioritize the issues/ projects within the integration; it ‘helps to prevent concurrent pressures from vying for people’s time and energy.’ (Pritchett et al., 1997) The acquiring can be a large burden for a company, in most of the times you need to regain liquidity. For instance by ‘identifying quick wins and publicize them widely.’ (Pritchett et al, 2002) This can be gained through a launch of a new proposition, but also by selling a small part of your company to boost your liquidity. For instance the

selling of Antonveneta by

Banco Santander after they had acquired it from ABN AMRO is a good example. (Michaels & Crawford, 2007)

Figure 2.7 outlines the focus on value (financial) aspects influencing a successful integration.

Factor Six: IT/Systems

Factor six IT/Systems is a factor that becomes more and more important. ‘Strategically aligning and implementing appropriate systems and procedures. (…) creates a strategic leverage.’ (Tetenbaum, 1999) This strategic leverage will ‘(…) drive down costs overall; they need to look at the financial systems. If they are competing for customers, maybe they should start looking at the customer level of data. If they are combining manufacturing businesses, they have to look at their manufacturing systems.’ (Hadfield, 2006)

Synergy possibilities are out there, the only question being: are the IT-systems easy to integrate? For instance were the IT-systems already aligned in functionalities? These are just two examples, but there are abundant questions.

Successful

Integration

Focus on Value (Finance)

1. Synergies outweigh integration costs 2. Make realistic estimates of integration costs 3. Identify quick wins

4. Make important changes first

+

Successful

Integration

Focus on Value (Finance)

1. Synergies outweigh integration costs 2. Make realistic estimates of integration costs 3. Identify quick wins

4. Make important changes first

+

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University of Groningen, The Netherlands, Faculty of Management & Organization, by Stanley Wylenzek 18 Successful

Integration

Project Management

1. Team composition; capable, motivated, cooperating and supporting employees

2. Create a realistic planning

3. Create a sufficient monitoring & tracking +

Project Management

1. Team composition; capable, motivated, cooperating and supporting employees

2. Create a realistic planning

3. Create a sufficient monitoring & tracking +

The leverages can be mitigated: ‘(….), once companies recognize the challenges to implementing enterprise-wide IT, they have a much better chance of success and can realize the productivity and cost-savings benefits that such a system can provide.’ (Shore, 2006)

A disadvantage of IT/System integration is, that: ‘IT integration can also been exceedingly frustrating and time-consuming process that can not only endanger anticipated cost advantages but also erode the trust of shareholders, employees and other stakeholders.’ (Walter, 2004)

Figure 2.8 outlines IT/Systems aspects influencing a successful integration.

Factor Seven: Project Management

Factor seven project management is already identified within a sub-factor of factor two structure: project organization vs. business as usual. ‘There should be a project group managing the integration, parallel to the organization.’ (Pritchett et al,. 1997)

This parallel project group should start with ‘building a standardized integration plan.’ (Tetenbaum, 1999) The factor project management will be divided into: (1) Team Composition (2) Project management organization (PMO).

Team Composition

Comprehension of the team is important because you want to have the best selected people to lead the merging entity. The team should be built out of people who are to lead the change who are ‘capable for developing and are motivated to lead the change.’ (Schweiger, 2002) The leaders should be selected, because they are supporters of the change. (Rovit et al.,

2004) Cooperation should become the motto.

(Schweiger, 2002)

IT / Systems

1. IT-systems were easy to integrate 2. Combined systems created a strategic

leverage by cost-savings

3. Combined systems created a strategic leverage by higher productivity

+

IT / Systems

1. IT-systems were easy to integrate 2. Combined systems created a strategic

leverage by cost-savings

3. Combined systems created a strategic leverage by higher productivity

+

Figure 2.8: IT/Systems Influencing Integration Success

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University of Groningen, The Netherlands, Faculty of Management & Organization, by Stanley Wylenzek 19 Project Management Organization (PMO)

Project management organization (PMO) is the part of the organization that is responsible for the ‘planning, tracking and monitoring of the integration.’ (Schweiger, 2002) It is the part of the organization that orchestrates the project management approach. It has to provide the structure of the integration. (Pritchett et al., 1997)

Figure 2.9 outlines project management aspects influencing a successful integration.

Factor Eight: Client Focused

Factor eight Client Focused is another factor during an integration process. The market segment, and the product or service offering will determine the importance of this factor. You have to find the right balance for the client

between a good information flow on what the status is and the actual upcoming changes. You should focus on clients and strategic priorities during integration. (Schweiger, 2002)

Also during the preparation of the new proposition you have to keep in mind what your clients want. Make sure that the

clients from the acquired company still can recognize themselves in the proposition and offer. (Ruth, 2008) Keep both companies’ clients in mind during creation of the proposition.

Figure 2.10 outlines client focused aspects influencing a successful integration.

Soft versus Hard Integration Factors

The eight integration factors mentioned above can be divided into two parts: (1) Soft-Side of Change (related to the Classical approach) and (2) Hard-Side of Change (related to the Human Relations approach).

The soft-side of change is covered with four factors in the framework: (1) Culture, (2) People / HR (3) Communications and (4) Client Focused. Sufficiently covering these four factors positively influences a change process. The first hypothesis is related to this statement.

Hypothesis 1: The soft-side of change does not influence an integration process

Client Focused

1. Both companies’ clients were kept in mind during creation of the ‘new’ proposition 2. Balance in upcoming changes &

non-upcoming changes +

Client Focused

1. Both companies’ clients were kept in mind during creation of the ‘new’ proposition 2. Balance in upcoming changes &

non-upcoming changes +

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The hard-side of change is also covered with four factors in the framework: (1) Structure, (2) IT/Systems, (3) Focus on Value (Finance) and (4) Project Management. Sufficiently covering these four factors positively influences a change process. The second hypothesis is related to this statement.

Hypothesis 2: The hard-side of change does not influence an integration process

Hypotheses one and two deal separately with the soft- and hard-side of change. This can hypothetically mean that both factors are considered as important for a successful integration. To determine which of the two approaches, Classical or Human Relations approach, is more important during a successful integration process there will be a third hypothesis added.

Hypothesis 3: Soft- and hard-side of change are equally important to make an integration process successful

2.3.2 External Conditions Influencing an Integration Process

After providing the internal success factors for integration in paragraph 2.3.1, we have to consider the external factors that can influence the outcome of the integration as well. To come up with a solid approach for integration you have to take a look at the environmental factors that can change over time. You have to take into account the external constraints that can be infinite. In this part one of the important factors of the Contingency Theory approach will be added to the eight factors related to the Classical School and Human Relations approach; the environment. ‘The world in which you do business is ever changing, and that change can make a world of difference in how you do business.’ (Goldberg, 1992) To limit our scope this part looks at the external constraints of the financial sector.

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Trust is the most influential external constraint in the financial sector in 2008, and will be used as the umbrella for this part of the literature review; an overview of stakeholders’ trust will be given. A ‘narrow sense of stakeholders’ will be used for the stakeholder analysis. ‘A narrow sense of stakeholders is any identifiable group or individual on which the organization is dependent for its continued survival. (Employees, customer segments, certain suppliers, key government agencies, shareowners, certain financial institutions, (…))’. (Freeman & Reed, 1983)

Trust

Trust is an often discussed topic in the change management literature and is already partly mentioned in this thesis during the internal factors: People/ Human Resources (commitment) and Communications (kill the rumors). Trust in change management is being looked at from an internal perspective: trust among the workforce and trust in top management. These two topics are interrelated.

Trust among the Workforce during Change

In paragraph 2.3.1 already has been explained, that trust of the workforce is important to make an integration process successful through the commitment aspect. ‘(The) people are willing to be vulnerable to the leader’s actions if they are confident that their rights and interests will not be abused.’ (Lines, Selart, Espedal & Johansen, 2005) Four factors are important for employees to identify with management: (1) Competence/Ability, (2) Fairness/Benevolence (3) Openness and (4) Identification. (Lines et al., 2005)

Trust in Management

Trust in management by the workforce is important but hard to accomplish, because of ‘the combination of historical evidence and a lack of trust made every statement issued by senior management suspect’ (Goldberg, 1992). ‘It has been found that honesty and integrity are among the core traits to be consistently associated with leadership trust.’ (Cunningham & MacGregor, 2000) The workforce simply finds it hard to trust the management.

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Integration success is dependent on the trust among four different stakeholders: • Financial Industry

• Clients • Shareholders • Regulators

External Condition One: Financial Industry’s Trust

The finance industry is finding itself in heavy weather. ‘Global financial markets have been volatile over the last two years despite robust earnings over the past few years. Most financial markets underwent a moderate to severe correction in 2007. (…) the crash of the US sub prime market erased almost all the earnings of the year.’ (Fortis, 2008) The crash of the sub prime market started the global financial crisis; it was the trigger for the credit crunch. (Mizen, 2008)

Problems in credit markets have led to a ‘perception’ of recession, which will have negative effects on the willingness of banks to provide credit to commercial clients. (Fortis, 2008) This is what is called the ‘credit crunch’. The credit crunch has caused an extraordinary decrease in trust within the financial sector. (Between banks and overall money markets)

The causes of the current economic malaise, is the lack of transparency in the financial markets. (…) (and) ‘There is a fundamental lack of trust’. (Koetter, 2008) In October 2008 governments and Central Banks had to take dramatic measures to turn the event. October 12th, governments within the Euro zone and Great-Britain announced that they would guarantee the loans that banks lend to each other and to the institutional investors. With this measure the provision of credit should continue again. (Financieel Dagblad, 2008) This is one of the measures to try to regain the trust again within the financial sector.

External Condition Two: Clients’ Trust

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An example of clients’ trust or lack of trust within the financial sector can be explained by the Fortis case. Between 29 September and 3 October 2008 clients withdrew € 35.9 billion from their bank accounts, which could have led to the bankruptcy of the Fortis organization. Because of state intervention (of the Netherlands, Belgium and Luxembourg) and a loan of Belgium Central Bank of €100 billion Fortis could survive. (Financieel Dagblad, 2009)

External Condition Three: Shareholders’ Trust

The willingness of buying shares has decreased with five percent compared to last year. This is a consequence of the decreased stock markets and the uncertainty in the American economy. (Elsevier, 2008) All stock markets turned into a pessimistic atmosphere, for example the Dutch stock market dropped half of its value in 2008. (Managersonline, 2008)

Besides the pessimistic atmosphere some organizations became the target of speculators. Rumours were spread among the market and shareholders panicked and sold their shares. As for example Fortis became a target of speculators, false rumours were spread on liquidity support. Although the rumours were false it affected the way the stockholder market evolved. (Elsevier, 2008)

External Condition Four: Regulators’ Trust

External condition four is the trust among regulators. With regulators we mean the Central Banks, Governments and other monitoring committees and legislators. Since the credit crunch the financial market is very tense. ‘The International Monetary Fund (IMF) urged the financial sector and regulators to reconsider their risk management strategies due to the magnitude of losses facing financial institutions brought by the housing turmoil and the global credit crunch.’ (Davis, 2008)

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monetary policy that is well tailored to the complexity of the European economy,’ without overemphasizing on too much supervision. (Koetter, 2008) Actions by the Central Banks and Government take away the market liquidity problems for the banks, (Mizen, 2008) and in this way regaining trust again.

In summary the financial crisis has decreased the trust in the financial sector. The four most affected stakeholders were: (1) Financial Industry, (2) Clients, (3) Shareholders and (4) Regulators. The decrease in trust of these stakeholders can have a large influence on an intended integration process. It is not a direct success factor as the internal factors described in paragraph 2.3.1, but it has an indirect consequence on an integration process. The fourth hypothesis of this thesis is based on these four factors of trust.

Hypothesis 4: A decrease in stakeholders’ trust has no influence on an integration process

If you want to create a successful integration you first have to deal with the external constraints before it can become a success. (See figure 2.11)

Successful

Integration

Financial Crisis Trust Among: 1. Financial Industry 2. Clients 3. Shareholders 4. Regulators

Successful

Integration

Successful

Integration

Financial Crisis Trust Among: 1. Financial Industry 2. Clients 3. Shareholders 4. Regulators

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2.4 Conceptual Integration Framework

Figure 2.12 is a summary of the given factors in paragraph 2.3.1 and 2.3.2. It is the conceptual framework of this thesis. It shows the balance between the internal factors and the external constraints influencing an integration process, focused on the financial sector.

Internal Organizational Factors Successful Integration Structure People/ HR Culture Client Focused Focus on Value (Finance) Communications Project Management IT / Systems FinancialCrisis Trust Among: 1. Financial Industry 2. Clients 3. Shareholders 4. Regulators + + + + + + + +

Internal Organizational Factors Successful Integration Structure People/ HR Culture Client Focused Focus on Value (Finance) Communications Project Management IT / Systems Successful Integration Structure People/ HR Culture Client Focused Focus on Value (Finance) Communications Project Management IT / Systems FinancialCrisis Trust Among: 1. Financial Industry 2. Clients 3. Shareholders 4. Regulators FinancialCrisis Trust Among: 1. Financial Industry 2. Clients 3. Shareholders 4. Regulators + + + + + + + +

Table 2.1 provides the hypotheses initiated in this chapter (related to the conceptual integration framework). In paragraph 2.3.1 (factor two: Structure) the distinction between project organization and business as usual in an organization has been explained. In the next part of this thesis the project organization will be referred to as integration organization. The clear distinction between both groups will be used to determine if hypotheses one to four are homogenous for both groups (Integration Group vs. Business as Usual Group). The last hypothesis that will be added is related to this distinction.

Hypothesis 5: There is no difference in how the business as usual and integration groups experience the influence of the success factors

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University of Groningen, The Netherlands, Faculty of Management & Organization, by Stanley Wylenzek 26 Table 2.1 Hypotheses Integration Adventure

Nr Hypothesis

1 The soft-side of change does not influence an integration process 2 The soft-side of change does not influence an integration process

3 Soft- and hard-side of change are equally important to make an integration process successful

4 A decrease in stakeholders’ trust has no influence on an integration process

5 There is no difference in how the business as usual and integration groups experience the influence of the success factors

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3 CASE STUDY DESIGN

The conceptual model has given a pattern on how the internal factors and external constraints will influence an integration process. To verify the relations given in the conceptual integration framework and to determine to what extent the integration managers did cover the do’s (potential integration success factors) of an integration process (see attachment III for an overview of all thirty-four do’s initiated in the literature review) a case study was conducted at the intended integration of ABN AMRO & Fortis. This single case study will explain the presumed causal links in a real-life intervention. The choice of a single case study is legitimate, because of the unique character (…) and a single, well-designed case study can provide a major challenge to a theory (Yin, 2003).

Data Collection Area

During the case study at ABN AMRO and Fortis an embedded case design has been conducted. ‘These embedded units can be selected through sampling or cluster techniques.’ (McClintock, 1985) A sample group has been selected; the teams related to the intended integration between ABN AMRO Transaction Banking and Fortis Cash Management.

This research looks at the intended integration from an ABN AMRO-perspective. The data has been collected in two different groups: (1) ABN AMRO Transaction Banking Integration Group and (2) ABN AMRO Transaction Banking Business as Usual Group. The difference between the Integration and Business as Usual Group was that the Integration Group was highly involved during the integration process and the Business as Usual was running the normal business and they were less involved with the integration process than the Integration Group.

Data Collection Methods

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University of Groningen, The Netherlands, Faculty of Management & Organization, by Stanley Wylenzek 28 Data Collection Analysis

During the case study the pattern-matching technique was used. It compared the empirically used pattern with the conceptual integration framework to strengthen the internal validity. (Yin, 2003) The generalizabilty was harder to test; because it was a single-case study and the workforce of Fortis was not allowed to cooperate during the research through legal restrictions.

The data collection was divided into two inquiries; a questionnaire and interviews. Both inquiries were based on anonymity. This means that the sources will not be revealed in the data collection results chapter when certain phrases/expressions are included.

First, for the questionnaire a nine-point Lickert scale has been used (Cooper & Schindler, 2003) to test the relations in the conceptual integration framework and to determine how the do’s for an integration process were covered/missed. The questionnaire has been used to analyse the relations of the internal factors (paragraph 4.1.1) and the external constraints (in paragraph 4.2.1) provided in the conceptual integration framework and to determine which potential success factors were covered/missed (paragraph 4.4) during the intended integration. For the internal factors and external constraints the outcomes have been recoded to three categories (disagree – neutral – agree) and are provided in cross-tables and the outcomes will be tested with a one-sample Chi-Square test in paragraph 4.1.2 and 4.2.2. In paragraph 4.3 an independent two-sample Chi-Square test will be used to determine if the outcomes provided in paragraph 4.1 and 4.2 are homogeneous for the Integration and Business as Usual Group.

Secondly, the interviews with the 5 managers have been used to delve deeper into the literature statements and results of the questionnaire. The interview outcomes will be used to determine the difference in ‘importance’ between the hard- and soft-side of change (paragraph 4.1.1) and will be used to add a different external constraint (paragraph 4.2.2). In paragraph 4.4 the interviews will be used to add functional expressions on how do’s (potential integration success factors) were covered or missed.

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4 INTEGRATION FRAMEWORK USEFUL AT ABN AMRO & FORTIS

The conceptual integration model given in paragraph 2.4 will be analysed related to the five hypotheses and the next sub-questions will be discussed:

5 Which internal factors (paragraph 4.1) and external constraints (paragraph 4.2) influenced the integration of ABN AMRO Transaction Banking & Fortis Cash Management?

6 To what extent did the integration managers of ABN AMRO Transaction Banking & Fortis Cash Management cover the potential integration success factors?(Paragraph 4.4)

4.1 Influence Internal Factors on an Integration Process

During the literature phase a conceptual integration framework has been created and these factors were analysed on influence during the case study at ABN AMRO Transaction Banking and Fortis Cash Management. In this part the internal factors will be discussed related to hypotheses one to three. For these hypotheses the questionnaires will be analysed and for hypothesis three the interviews with the management team of ABN AMRO Transaction Banking will be used as additional input.

Hypothesis 1: The soft-side of change does not influence an integration process

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University of Groningen, The Netherlands, Faculty of Management & Organization, by Stanley Wylenzek 30 Table 4.1 Four Soft-Side Factors of Change Influence an Integration Process Positively?

Culture 25 18 43 100,0% 100,0% 100,0% 25 18 43 100,0% 100,0% 100,0% Count % within Group Count % within Group Agrees Culture Total Business as Usual Integration Group Total People / HR 2 0 2 8,0% ,0% 4,7% 23 18 41 92,0% 100,0% 95,3% 25 18 43 100,0% 100,0% 100,0% Count % within Group Count % within Group Count % within Group Neutral Agrees People / HR Total Business as Usual Integration Group Total Communications 3 1 4 12,0% 5,6% 9,3% 2 0 2 8,0% ,0% 4,7% 20 17 37 80,0% 94,4% 86,0% 25 18 43 100,0% 100,0% 100,0% Count % within Group Count % within Group Count % within Group Count % within Group Disagrees Neutral Agrees Communications Total Business as Usual Integration Group Total Client Focused 1 0 1 4,0% ,0% 2,3% 24 18 42 96,0% 100,0% 97,7% 25 18 43 100,0% 100,0% 100,0% Count % within Group Count % within Group Count % within Group Neutral Agrees Client Focused Total Business as Usual Integration Group Total Culture 25 18 43 100,0% 100,0% 100,0% 25 18 43 100,0% 100,0% 100,0% Count % within Group Count % within Group Agrees Culture Total Business as Usual Integration Group Total People / HR 2 0 2 8,0% ,0% 4,7% 23 18 41 92,0% 100,0% 95,3% 25 18 43 100,0% 100,0% 100,0% Count % within Group Count % within Group Count % within Group Neutral Agrees People / HR Total Business as Usual Integration Group Total Communications 3 1 4 12,0% 5,6% 9,3% 2 0 2 8,0% ,0% 4,7% 20 17 37 80,0% 94,4% 86,0% 25 18 43 100,0% 100,0% 100,0% Count % within Group Count % within Group Count % within Group Count % within Group Disagrees Neutral Agrees Communications Total Business as Usual Integration Group Total Client Focused 1 0 1 4,0% ,0% 2,3% 24 18 42 96,0% 100,0% 97,7% 25 18 43 100,0% 100,0% 100,0% Count % within Group Count % within Group Count % within Group Neutral Agrees Client Focused Total Business as Usual Integration Group Total

For Culture, People/HR, and Client Focused nobody disagreed that these factors have a positive influence on an integration process. For Culture 100% agreed, for People/HR 95.3% agreed, and for Client Focused 97.7% agreed that these factors have a positive influence on an integration process. Communications is also seen as a positive factor by 86%, but also 9.3% disagreed that Communications has a positive influence on an integration process. These outcomes indicate that hypothesis one can be rejected.

To test if this is the correct conclusion for hypothesis one a one-sample Chi-Square test (table 4.2) has been used. (To test the null hypothesis the neutrals and disagrees are combined and figurate as null hypothesis, the agrees are used for the operational hypothesis) The Total columns in table 4.1 have been used as input. (In paragraph 4.3 will be determined if the outcomes can be homogeneous for both groups) The significance level used during the test is α = 0.05 (One-Tailed) and the expected value has been equally divided between both possibilities.

Table 4.2 Soft-Side of Change H0 Not Rejected or Rejected?

Value (χ²) Culture People / HR Communications Client Focused

Test - 35.372 22.349 39.093

α = 0.05 (One-Tailed) 2.71 2.71 2.71 2.71

Rejected* Rejected Rejected Rejected

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The hypothesis is rejected. This means that all four factors related to the soft-side of change have an influence during an integration process and the soft-side of change should be covered to become successful in the post-merger stage.

Hypothesis 2: The hard-side of change does not influence an integration process

The four factors (Structure & Finance/Focus on Value & IT/Systems & Project Management) related to the hard-side of change are positively influencing an integration process according to the respondents (both groups) of the questionnaire. In table 4.3 an overview is given of the respondents’ answers divided between the Business as Usual and the Integration Group.

Table 4.3 Four Hard-Side Factors of Change Influence an Integration Process Positively?

Structure 1 0 1 4,0% ,0% 2,3% 24 18 42 96,0% 100,0% 97,7% 25 18 43 100,0% 100,0% 100,0% Count % within Group Count % within Group Count % within Group Neutral Agrees Structure Total Business as Usual Integration Group Total Finance 0 1 1 ,0% 5,6% 2,3% 1 1 2 4,0% 5,6% 4,7% 24 16 40 96,0% 88,9% 93,0% 25 18 43 100,0% 100,0% 100,0% Count % within Group Count % within Group Count % within Group Count % within Group Disagrees Neutral Agrees Finance Total Business as Usual Integration Group Total IT/Systems 1 0 1 4,0% ,0% 2,3% 1 0 1 4,0% ,0% 2,3% 23 18 41 92,0% 100,0% 95,3% 25 18 43 100,0% 100,0% 100,0% Count % within Group Count % within Group Count % within Group Count % within Group Disagrees Neutral Agrees IT/ Systems Total Business as Usual Integration Group Total Project Management 2 3 5 33,3% 16,7% 20,8% 4 15 19 66,7% 83,3% 79,2% 6 18 24 100,0% 100,0% 100,0% Count % within Group Count % within Group Count % within Group Neutral Agrees PMO Total Business as Usual Integration Group Total Structure 1 0 1 4,0% ,0% 2,3% 24 18 42 96,0% 100,0% 97,7% 25 18 43 100,0% 100,0% 100,0% Count % within Group Count % within Group Count % within Group Neutral Agrees Structure Total Business as Usual Integration Group Total Finance 0 1 1 ,0% 5,6% 2,3% 1 1 2 4,0% 5,6% 4,7% 24 16 40 96,0% 88,9% 93,0% 25 18 43 100,0% 100,0% 100,0% Count % within Group Count % within Group Count % within Group Count % within Group Disagrees Neutral Agrees Finance Total Business as Usual Integration Group Total IT/Systems 1 0 1 4,0% ,0% 2,3% 1 0 1 4,0% ,0% 2,3% 23 18 41 92,0% 100,0% 95,3% 25 18 43 100,0% 100,0% 100,0% Count % within Group Count % within Group Count % within Group Count % within Group Disagrees Neutral Agrees IT/ Systems Total Business as Usual Integration Group Total Project Management 2 3 5 33,3% 16,7% 20,8% 4 15 19 66,7% 83,3% 79,2% 6 18 24 100,0% 100,0% 100,0% Count % within Group Count % within Group Count % within Group Neutral Agrees PMO Total Business as Usual Integration Group Total

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To test if this is the correct conclusion for hypothesis two a one-sample Chi-Square test (table 4.4) has been used. (To test the null hypothesis the neutrals and disagrees are combined and figurate as the null hypothesis, the agrees are used for the operational hypothesis) The total columns in table 4.3 have been used as input. (In paragraph 4.3 will be determined if the outcomes can be homogeneous for both groups) The significance level used during the test is α = 0.05 (One-Tailed) and the expected value has been equally divided between both possibilities.

Table 4.4 Hard-Side of Change H0 Not Rejected or Rejected?

Value (χ²) Structure Finance IT / Systems Project Management

Test 39.093 31.837 35.372 8.167

α = 0.05 (One-Tailed) 2.71 2.71 2.71 2.71

Rejected Rejected Rejected Rejected

The hypothesis is rejected. This means that all four factors related to the hard-side of change have an influence during an integration process and the hard-side of change should be covered to become successful in the post-merger stage.

Hypothesis 3 Soft- and hard-side of change are equally important to make an integration process successful

Table 4.5 shows the outcomes of the questionnaire per factor on mean, median, and standard deviations. If you combine the means for the four factors of the soft-side of change and the hard-side of change it shows almost the same outcome; mean soft-side of change 2.9244 vs. mean hard-side of change 2.9014. This indicates that all factors are important to make an integration process successful according to the respondents of the questionnaire and also showed during the outcomes of hypotheses one and two.

Table 4.5: Importance Soft- and Hard-Side Factors of Change