‘2 ways HR can boost M&A success’

Title: ‘2 ways HR can boost M&A success’
Date: October 2020
Author: H. Scheepens MBA, Co-founder & Transition Director HR Transition B.V.

In the last few years we have been fortunate to work on some large scale assignments with a ‘merger & acquisition’ character for our customers. Our experience has given us some ‘food for thought’ on the role HR should play to ‘boost’ the transition. 

2 important notes to start with:
First:The success rate of M&A deals is still very low* and organizations are desperately searching to increase their M&A success rate. 

Second: Looking at the role of HR&O on the M&A stage we see it is still not developed to its full potential. HR needs to bring more to the table than ‘culture change’ and recruitment for the new organization. 

In our view and experience HR can make a difference between success and failure by joining their finance and legal colleagues in the frontline of the M&A theatre. Stepping up means that more value can be added to phases where HR traditionally has been almost absent. Let’s look at 2 examples where we see HR can boost the success rate: 

Valuation and Due Diligence phases

The phase where parties can view the mutually agreed list of valued documentation prior to closing ‘the deal’. Although this may be hard to picture, in these phases the HR input can ‘make or break’ the deal. 

When reviewing in depth HR related Due Diligence documentation, several matters could lead to critical findings of great importance. For example, analysis on the C&B structure of the other party regarding the total people cost vs the projected cost; company HR policies that don’t match with international or corporate employment rules & regulations of the other party, diving into Service Level Agreement structures for vital activities that could potentially break a deal, etc. 

Implementation phase

Capturing Synergies after closing the deal. It is in the implementation phase where leadership should shed old beliefs and really alter the ‘frame’ to the actual business reality. New thinking on strategy, rewards, people, processes, etc are needed to achieve proper integration and to capture the projected synergies. 

However, in this phase after closing, the trusted advisors that have helped to set-up and close the deal such as the investment bankers and the consultancy and legal firms are already pulling out. We have seen this multiple times and have filled up this vacuum by creating and driving the integration program side-by-side with the leadership. 

These are only 2 examples of phases during M&A where we feel HR can make a great difference in ‘boosting’ the M&A success rate. To summarize, we close with a quote of a Harvard Business Review study (2016): ‘Companies that focus on what they are going to get from an acquisition are less likely to succeed than companies that focus on what they have to give it’!

More of our insights on this topic will follow. To be continued!

*According to different studies including McKinsey, 2020 and Harvard Business Review 2019.

About HR Transition

Working as interim HR specialists we discovered a real ‘gap’ in what our clients need. Once organizations undergo a transformation process, expert knowledge and additional capacity is needed. We fit in as we tailor interim resources from our network for the specific needs and we distinguish ourselves from the bigger firms in the combination of expert knowledge and ‘feet in the mud’ approach.