The end of a Stormy Relationship -a case study of an international business divorce and its organisational and emotional challenges Maria Karlsson and Hanna Nordell Graduate School Master of Science in International Business and Trade Master Degree Project No. 2012:12 Supervisor: Katarina Hamberg Lagerström and Roger Schweizer THE END OF A STORMY RELATIONSHIP – a case study of an international business divorce and its organisational and emotional challenges Karlsson & Nordell Abstract The term divorce can be used in explaining many challenges of a demerger, showing similarities to the existing M&A process literature which commonly uses the term marriage. By studying a demerger one can gain insights to challenges met at various stages in a disintegration process. The findings of this study can therefore help companies to improve their allocation of their resources during the demerger. Although many M&As later are shown to demerge, the demerger and its disintegration process has not been subject to previous studies. The main finding is that the disintegration process can be divided into three main process phases; the pre-demerger, the disintegration, and the post-demerger. Various organisational and emotional challenges can be seen during these phases. Organisational challenges are shown to be; creating a new group management, the negotiation of contracts, restructuring the departments, and strengthening the brand and the product portfolio. Prominent emotional challenges are shown to be handling uncertainty concerning layoffs, new work procedures and work tasks, and creating “togetherness” among the employees. Keywords: demergers, disintegration processes, organisational challenges 1 THE END OF A STORMY RELATIONSHIP – a case study of an international business divorce and its organisational and emotional challenges Karlsson & Nordell Acknowledgement We are grateful for all the support and information provided during the writing process of this master thesis. We are especially grateful to our tutors Katarina Hamberg-Lagerström and Roger Schweizer for reading endless material, giving useful comments and supporting us through this process. We would also like to thank Cloetta AB for their cooperation at a busy time. Especially, we are very thankful for the employees’ openness and patience during the interviews. Thanks to this, the study was able to provide a deeper understanding of the demerger phenomenon. Maria Karlsson & Hanna Nordell Gothenburg, May 2012 2 THE END OF A STORMY RELATIONSHIP – a case study of an international business divorce and its organisational and emotional challenges Karlsson & Nordell List of content Abstract ...................................................................................................................................... 1 Acknowledgement ...................................................................................................................... 2 1. Introduction ............................................................................................................................ 5 1.1 Background ....................................................................................................................... 5 1.2 Problematisation ............................................................................................................... 6 1.3 The case of the Cloetta Fazer demerger ........................................................................... 7 2. Methodology .......................................................................................................................... 9 2.1 A case study ...................................................................................................................... 9 2.1.1 The chosen case study company .............................................................................. 10 2.2 Data collection methods ................................................................................................. 12 2.2.1 Primary data ............................................................................................................. 12 2.2.2 Secondary data ......................................................................................................... 14 2.3 Data analysis ................................................................................................................... 14 2.4 The quality of the study .................................................................................................. 15 3. The historical background of Cloetta ................................................................................... 18 3.1 The upcoming merger between Cloetta and Fazer Confectionery ................................. 18 3.2 The pooling of interest merger-method .......................................................................... 20 4. The demerger process ........................................................................................................... 21 4.1 Phase 1 - The pre-demerger ............................................................................................ 22 4.1.1 The ownership related conflicts ............................................................................... 22 4.1.2 The conflicts escalated - the hostile bid ................................................................... 23 4.1.3 The disintegration commission ................................................................................ 27 4.1.4 The public announcement ........................................................................................ 29 4.2 Phase 2 - The disintegration phase ................................................................................. 30 4.2.1 Emotional reactions among the employees .............................................................. 31 4.2.1.1 Uncertainty arises .............................................................................................. 31 4.2.1.2 Relief, sadness, and the new beginning ............................................................. 33 4.2.2 The re-organisation and its impacts ......................................................................... 35 4.2.2.1 Creating the new group management ................................................................ 36 4.2.2.2 Negotiating the disintegration contracts ............................................................ 37 4.2.2.3 Handling the disintegration of the departments ................................................ 38 4.2.3 The HR in focus ....................................................................................................... 41 3 THE END OF A STORMY RELATIONSHIP – a case study of an international business divorce and its organisational and emotional challenges Karlsson & Nordell 4.2.3.1 Creating the new sales force .............................................................................. 41 4.2.3.2 Managing the lay off negotiations ..................................................................... 42 4.3 Phase 3 - The post-demerger phase ................................................................................ 45 4.3.1 Market challenges - the new Cloetta ........................................................................ 46 4.3.1.1 Developing the product portfolio ...................................................................... 46 4.3.1.2 Building the new Cloetta brand ......................................................................... 47 4.3.2 Unifying the company .............................................................................................. 48 4.3.2.1 Bringing the departments together .................................................................... 49 4.3.2.2 Creating togetherness ........................................................................................ 51 4.3.3 Evaluating the disintegration experience ................................................................. 53 5. Analysis ................................................................................................................................ 55 5.1 Main findings .................................................................................................................. 55 5.1.1 Phase 1 – the pre-demerger phase ............................................................................ 55 5.1.2 Phase 2 – the disintegration phase ........................................................................... 56 5.1.3 Phase 3 – the post-demerger phase .......................................................................... 57 5.2 Analysis of the empirical findings .................................................................................. 59 5.2.1 The disintegration process from a change management-perspective ...................... 59 5.2.2 The disintegration process from an integration-perspective .................................... 63 5.2.3 The disintegration from a relationship-perspective ................................................. 67 6. Conclusion and managerial implications ............................................................................. 70 7. References ............................................................................................................................ 74 Figures .................................................................................................................................. 76 4 THE END OF A STORMY RELATIONSHIP – a case study of an international business divorce and its organisational