Article

The importance of HR in M&A

December 15, 2016

One constant of successful mergers or acquisitions, irrespective of deal levels, is that people lie at the heart of them.

So while overall M&A deal volumes may have slowed this year, a steady stream of mega deals means there are still many employees finding themselves affected by a merger or acquisition situation. For human resources (HR) teams this entails looking at how they can support and help individuals through the process, supporting the overall business objectives of the deal and making sure that the day-to-day activity of delivering a product or a service is maintained.

A lot rides on how they achieve those goals. For example, a recent survey of Forbes 500 chief financial officers showed the top three reasons for M&A failure are incompatible cultures, inability to manage the target and inability to implement change. Such findings reinforce that culture and the engagement of the workforce isn’t just a people issue. Without the appropriate buy-in from employees, the financial objectives of a deal can be derailed and result in the ultimate failure of the whole thing.

Timing is key

At the start of any M&A process leaders should therefore ideally consider questions such as how to align the cultures of the organisations, how to communicate and how to create sustainable staff engagement as these often hold the key to implementing a deal successfully. The problem for many HR teams is that they are frequently asked to the table late in the day when a number of important decisions have already been made.

Research entitled ‘Serial Acquirers in Modern Times: How to Handle the Assembly Line?’, by Mats Stenerson Kallum goes further by suggesting that early involvement of HR is critical to a successful deal. It also covers the lessons learned from serial acquirers, including the importance of people in the outcome of deals.

Right questions

One of the difficulties that many HR directors face is how to accurately determine what people are feeling or how two cultures may fit together. The answer is simply to ask employees the questions for which answers are needed. But to get value from the results, leaders not only have to listen to the answers; importantly they need to have asked the right questions to the right people in the first place.

During the due diligence stage, a cultural fit survey can be used to strengthen any potential deal. Looking at where there is cultural synergy between the two companies can identify potential areas of strength and can identify where companies can focus in the short term. It should also identify areas of difference, which can potentially save a lot of time and effort in the long term by directing efforts accordingly.

Post-merger

Once the organisations have merged, ongoing measurement of the workforce dynamic is vital. Many companies that we work with have been able to identify potential problems and correct them before they’ve ever become an issue. For instance, local leadership effectiveness can vary considerably in relation to integration, specifically the process to ensure that employees feel equipped and empowered to talk about the M&A with clients and customers. This is vital for the success of any deal, although it is worth noting that sometimes this is a geographic cultural challenge. Benchmarking against country norms can help establish if there is a specific problem.

Surveying regularly provides an accurate benchmark and a way of tracking changes over time, allowing time to react and adjust the integration process. By constantly updating the information, elements such as the pace of change, the consistency of message across business units and geographies, as well as overall perceptions of management and how the company is communicating externally can be adapted to match the needs of merger progress.

Change will always cause uncertainty in an organisation but, by managing that change and ensuring good communication with employees, companies can avoid opening themselves up to an unnecessary risk of deal failure.