HR’s role in mergers and acquisitions
by Michelle Hicks
Published: May 11,2010
Time posted: 2:46 pm
Tags: Line of Communication, Michelle Hicks
Michelle Hicks
Early this year, McKinsey & Company predicted merger and acquisition activity would increase in 2010: “We expect large corporate buyers will be particularly well positioned to take advantage of any new wave of M&A, but we also see private-equity firms returning to the market.” And, as predicted, M&A activity is heating up.
Last week, Continental and United Airlines announced plans to join forces – earlier Kraft purchased U.K. chocolatier, Cadbury. Yet, in order for these or any merged companies to make their deals successful, they need to make sure HR is at the table from the beginning.
A Society for Human Resources study shows the greatest obstacles for M&A success are HR-related. They include a loss of productivity, a loss of key talent, and aligning incompatible cultures. Despite this fact, dealmakers continue to leave HR out of critical pre-deal and due diligence M&A process steps.
Often, HR is called in as closing activities commence. The result is missed opportunities to identify risks, establish and execute change management and communication processes, and identify critical talent – including what it will take to keep that talent motivated and loyal to the new organization.
The costs of leaving HR out of the due diligence process are high, especially in regard to identifying hidden burdens that can be buried in pension obligations or OSHA violations. For example, Wilshire Associates reported that at the end of 2009, 92 percent of corporate pension plans were underfunded.
Not only are there hard costs HR can uncover, but HR is critical to addressing the human “challenges” of a merger that can make or break a deal. That is why it is critical to establish a change management and communication plan early in the M&A process.
The objective is to create an awareness of the deal for your workforce and, over time, build understanding of the vision for the merger to gain acceptance and commitment to its success. The process needs to begin in the pre-deal phase and continue through post-integration activities.
Managing expectations through change management and communication is also critical to retaining key talent throughout the process. HR can help identify high-potential employees and where they will fit in the new organization.
HR can also coordinate funding incentive programs to reward high performers who help ensure a successful integration.
When HR is properly positioned as a strategic partner in the M&A process, it can add enormous value toward the success. The M&A process is difficult and time consuming.
However, if synergies are achieved in the end, the merger can create tremendous growth.
On the other hand, when proper attention to the “people” side of the transaction is not made, the value of the new organization can plummet as anticipated efficiencies or market share go unrealized.
So, as more M&A activities both large and small continue, it is imperative that business leaders include their HR experts at each stage of the process, especially at the beginning stages. It will help to ensure a seamless integration of employees, cultures and business processes that must be realized for the deal to achieve its optimum value.
Michelle Hicks is a communications consultant with Buck Consultants. Contact her at michelle.hicks@buckconsultants.com.
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