It goes without saying that mergers and acquisitions (M&A) involve a complex process that affects every facet of an organization, most importantly its people. In nearly every organization, people are the key to making the products and services provided by an organization and are critical to ensure the organization’s success. A thoughtful approach to people through the M&A process requires the partnership of human resources leadership and the broader HR team. This Forbes article touts the important role that HR plays in mergers and acquisitions, and reminds us of some failed M&A attempts when HR was not engaged from the beginning of the process. Through early, intentional, and ongoing inclusion in the M&A evaluation, planning, and integration processes, human resources can be a valuable conduit of information, strategic planning, and change management.
Participation in Due Diligence
It is vital that HR is on the front end of the due diligence process of mergers & acquisitions. There are several items to assess. For example, are there huge disparities in benefit plans, compensation, and geographical cost of living? Is there a collective bargaining agreement at any of the entities that needs to be considered? Is there any pending employment litigation or charges that would need to be considered? All of these important costs need to be analyzed for impact and considered in the financial equation of the M&A activity.
Assessing the Current Cultures
It is critical to keep the culture of each organization front-of-mind. Just assuming the two or more cultures will merge seamlessly can be a crucial error; and one that could derail the process. Focus groups should be conducted to determine what is important and unique to each company and how these cultures can successfully integrate. Remember this is a huge change management opportunity and one that will require human resources leadership and skill.
Key Areas of Focus During Mergers and Acquisitions
Communication – It goes without saying, communicate, communicate, and then communicate some more! In all seriousness, utilize all existing communication channels to share information and broadcast integration phases to the broader teams. It is also advisable to establish communication channels that are unique to the M&A integration.
Organizational Design – An area to not only focus on, but step into the lead, is the discussion around structure of the new organization – from the bottom up to the top down. This discussion must be structured to identify the individuals who will be key to the newly formed company’s success.
Compensation – Establish integration pay needs in the form of bonuses to key individuals for the long term and those who are critical to the integration period. Additionally, HR should lead the establishment of severance practices and the merger of the acquiring and acquired company policies.
Note: the costs of these practices should be included in the due diligence phase and the financial evaluation of the deal. Another key consideration, due to cost of living differences, is the location of the merging companies and where the company will be in the future. What is viewed as a competitive salary package in one part of the country is not necessarily so in another part of the country.
Benefits – Identify what benefit plans will be retained post-merger/acquisition and for what period of time. Will all team members move to the acquiring company plans or vice versa? Pay close and careful attention to these plans in terms of what could be viewed as a takeaway from the benefits employees currently have. Try to work with brokers and plan designers to ensure you can have any benefit plan enhancements. Perhaps a takeaway in one area can be compensated by a benefit enhancement in another area. It is also important to keep tasks related to closing down and filing all final compliance reporting for ending plans on the project agenda.
Talent Management – Consider adding additional performance cycles post acquisition to establish communication and connection between new manager/team member relationships and to reinforce long established connections. If you are beyond regular review cycles and have moved to continuous performance discussion, consider infusing M&A specific topics to meetings to encourage dialogue.
Preparing Current Team Members
Remember this is a time of fear and high stress for employees. First and foremost, they will be concerned if they are going to be part of the company moving forward or not. This is an area where you cannot over communicate. As soon as you know which employees are going to be invited to stay with the company, this should be communicated. This will aid in the retention of key employees needed to ensure the success of the new organization. Just as quickly, those who are not going to be moving forward with the company should receive communication. This conversation should include the details of any severance package, continuation of benefits and outplacement services that will be provided. If the employees will be needed for a certain time before departure, clearly defined stay bonuses with a “work until” date should also be communicated at this time.
The Process of Integration
Again, communication and culture awareness are key drivers in the success of the M&A process and integration period. Each company has its unique culture and way of doing things. Change management training and roundtables are key ways HR can assist in the integration process. As stated before, you cannot assume the cultures will merge seamlessly, rather you need to have a purposeful and planned approach to ensure the smoothest transition.
Mergers and acquisitions are a complex process and a time of stress and uncertainly for employees. The many human capital factors involved require the strength and skills that human resources professionals can provide. Through careful planning and thoughtful guidance, human resource professionals can greatly assist their organizations through the process and aid in the success of the mergers and acquisition activity.
Thank you to Jeff Rouse, Sr. HR Consultant and Karen Brandenburg, Sr. HR Consultant, with strategic HR inc. for sharing their insights and findings on mergers & acquisitions. If you have any questions or would like to share your comments, contact us at info@strategicHRinc.com.