HR issues & activities in Mergers & Acquisition

By: Ajay Sisodia Govind Agrawal Rankaj Prakash Singh

Major components
 Introduction  Human side of mergers & acquisition activity  Three stage models of mergers & acquisition  Role of HR department in M&A activity  conclusion

Introduction
Company today needs to be: be:
       Fast growing Efficient Profitable Flexible Adoptable Future Ready Have a dominant market position

  

Reasons for M&A s Horizontal mergers for the market dominance Vertical mergers for channel control Mergers for risk spreading ,cost cutting Growth for world class leadership and global reach

Contd.

 

Financial gain & personal power Talent , knowledge & technology.

  

Assumptions M&A s are the fastest & easiest way to grow M&A s are difficult to do Creating synergies is a major challenge Molding culture is a major challenge

Contd.

Pre planning can help increase chances for success

Reasons for failure  Expectations are unrealistic  Hastily constructed strategy , poor planning , unskilled execution  Talent is lost or mismanaged  Power and the politics are the driving forces rather than productive objectives.

Contd.

Culture clashes between the two entities go unchecked  Focus of executives is distracted from the core business


When the deals fails  Productivity falls by 50%  Leadership attrition by 47% within 3 years  Employee satisfaction drops by 14%  80% of the employees begin to feel that management cares more about financials than product quality or people

Major factors in the success of M&A s  Leadership  Well-thought out goals and objectives Well Due diligence on hard & soft issues  Well managed M&A team  Successful learning from previous experience

Contd.

Key talent retained  Extensive and timely communications to all stake holders


Human side of M&A Activity

People issues being critical yet neglected  The belief that they are too soft and hard to manage  Lack of consensus that people issues are critical  No spokesperson to articulate these issues

Contd.

No model or framework that can serve as a tool to systematically understand and manage people issues  The focus of attention is on other activities such as finance , accounting , manufacturing etc.


Major people issues at various stages of M&A s



Retention of Key talent  Communications  Integration of corporate cultures

Three state MODEL of Mergers & Acquisitions

Pre combination CombinationCombination-Integrating the companies Solidification and Advancement of the new entity

PrePre-combination phase
Main HR issues Forming M&A team/leader Systematic and extensive pre-selection pre& selection Cultural assessment Planning to learn from the process

Combination Integrating the companies

Main HR issues
Selecting the Integration Manager Designing / implementing teams Creation of new structures/leadership/strategies Retaining key employees Motivating the employees Managing the change process Communication with the stake holders

  

To focus exclusively on acquisition/merger Does not belong to either of the organization Provide continuity between the deal team & management of the new company

Role of Integration manager  Project manager  Communicator  Advisor  Relationship builder  Team leader  Negotiator

Combinations guided by Integration Manager  Retained a higher % of acquired companies leaders  Retained a higher % of employees  Achieved business goals earlier

Contd.

Deciding of HR policies and practices Deciding on who stays and goes

Research Report Retention of Key Talent Communication Retention of Key Managers Integration of corporate cultures 76% 71% 67% 51%

Solidification and Advancement of New Entity

Main HR issues
Solidifying leadership and staffing Assessing the new strategies and structures Assessing the new culture Assessing the concerns of the stakeholders

   

The Leaders are : Sensitive to cultural differences Open minded Flexible Able to recognize the relative strengths and weaknesses of both the companies

  

Committed to retaining key employees Visionary Able to filter out distractions and focus on integrating key business drivers such as R&D , customer interfaces.

Role of HR Department in M&A



Managing the soft due diligence activity

 Gaining

knowledge of the make-up and makemotivating the two workforces  Accessing management team of the other company  Conducting analysis of the organizational structure  Comparing compensation policies & labour contracts of both firms

Contd.
 Assessing

the culture match between the two

firms


Providing input into managing the process of change Creating of transition teams
 Developing

infrastructure for new firms  Address cultural issues

 Provide

training  Managing activities associated with staffing  Selection process  Retention strategies

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