Aligning people in M&A Transaction

Aligning people in M&A Transaction

Mergers and acquisitions are an integral part of the business atmosphere. It involves growth and situational based objectives. Any M&A deal requires strategic planning and execution to save it from the risk of collapsing or inefficiency.

Nowadays, mergers and acquisitions are coupled with not only the financial aspect of the deal but also the human resource element involved in the same. Post-merger problems may include employees feeling that they are a part of two different companies instead of one and these unwanted situations result in dismissing of the deal’s potential. Such issues has made to the introduction of the term called ‘potential M&A deals’ because these deals are being critically examined by the buyers and the sellers before stepping down into the final decisions.

M&A failures when are analyzed, shows that they are being caused not only because of weak strategic or financial planning leaders of the organization, but mainly because of inadequate focus on deeply analyzing, assessing and planning the alignment pattern between both the companies. The leaders of the organization right from the initial phase of the deal should have a very clear idea of the process or the pattern in which both the organizations will integrate operationally and organizationally. This will help in full utilization of synergistic opportunities that both the companies bring with them in order to achieve the pre-decided objective of the deal.

The beginning points for every transaction that is in the hands of the leaders of the organizations is the strategy that has to be laid down to make the entire process smooth and beneficial. For this several factors come into play like the type of target industry, the competition, future planning, assessing the requirements, deal amount and many more. But the basic idea that undergoes behind all these factors can be summarized in the below mentioned points:

  • Analyzing the benefits and capabilities of both the companies that will generate value in the market.
  • Integration process to formulate the strategic plan.

A deal that looks fine on paper is merely a beginning, but simply acquiring a company and mentioning to the employees that now they are a part of the newly merged or acquired organization will not change people’ behaviour ad thoughts. To reap the benefits from a merger or acquisition, it must be ensured that the two organizations integrate and align not only in theory but also in actual practice in the way that has been already designed to enhance their combined capabilities. An essential requirement from the leader is to put forth all the necessary plans and strategies well in advance to capitalize on the market opportunities and minimizing the risk levels.

Integrating human resource is very important in the entire process of merger and acquisitions. This integration involves making them feel that they are an essential part of the organization, making them friendly with new work culture, understanding their requirements and potentials, etc. All this requires a strong HR department of the organization that will help in achieving the deal’s objective by efficiently integrating the human element as it is the workforce that will help in carrying out future operations. It becomes important to lay emphasis on the fact that the human aspect of integration cannot be formulated or practiced with in a silo that this is disconnected and separate from the other efforts being put in the entire merger or acquisition process.

There are several issues in respect to the human resource that has to be looked upon by every company and its leaders to ensure their perfect balance and capitalization. The below mentioned points must be taken care of will integrating them in the whole work process:

  • Are the employees and leaders of both sides rationally agreed to the deal?
  • Are their skills in alignment with the company’s requirement to reap long term benefits?
  • Are people being designated as per their skills?
  • Is there any learning and development for skills or new technology required for the people to help them carry out their tasks in an efficient manner?

As mentioned above. HR strategies and plans plays a very crucial role in the entire integration process, the below mentioned points are the practices and skills that every HR domain must equip in it to facilitate a smoother and wholesome execution of the plan and aid the organization in attaining the pre-decided objectives.

• Confirmatory examination:  HR must ensure that it has critically examined all the needs and wants of the integration process. It must have with it the people related policies, company’s objective plan, HR plans, people data of both the organizations as it will help in easier understanding of the skills and requirements of the people coming to the company and they can further plan out the integration based on the same.

• Assessing leadership: HR has to place the people on various designations based on the skills and qualification of the individual. So, to make this assigning process efficient, it must obtain all the information about the leaders of both the companies and then assess who will take the leadership charge of the combined organization.

• Retention of employees: HR department has a major role in employee retention and reducing employee turnover ratio of the organization to exhibit a good image of the company. To do the same, they need to determine their skills and abilities, knowledge or future success and further identifying the already existing people in both the organizations who them. This analysis will help them in figuring out a retention plan to persuade the employees to stay in the organization.

• Culture: It is important to analyze the similarities and difference in culture of both the companies. This will facilitate the HR to strategize the steps to be undertaken to bring out some initiatives that will help people in adjusting to the new work environment.

• Communication: Communicating each and every position to all the stakeholders and all the norms and regulations to both the new and existing employees is essential as it will bridge the gaps between uncertainty and the organizational objectives.

• Staffing and selection: Staffing and selection is one of the major role of the HR department. The mergers and acquisitions will bring with it new demands of skills and knowledge from the people. HR has to examine these needs and place people in such a way that their skills are in alignment with their designation.

• HR practices: Comparing the HR policies and procedures of both the companies will install in the assessment mentioning the requirements that planning which policies will be eligible and suitable for the merged or the new company.

• Performance and rewards: Establishing a competitive and comparable platform of rewards for the employees that is based on the performance matrix and which will also boost up the morale of the entire workforce.

• HRIS: Integrating both the companies’ human resource information systems is very important for future course of action.

• On-boarding: Recognizing a suitable on-boarding process for the employees of the target company is crucial as it will facilitate them in acquiring the new work culture and help them in bonding with the acquirer company’s employees. 

• Training: Providing adequate learning platforms to the all the new joiners so that they have the know how about the correct procedure of performing their assigned tasks or projects.

Therefore. from all the above-mentioned points it can summarized that it is essential for every company going for a merger or an acquisition process to not only look into the financial aspect of the deal but also strive for integrating the companies along with the integration of the human capital of both the organizations.

About the author: 

Mervyn Aranha is a Business Analyst - Transactions at Kapso Business Services, India’s Leading Business Brokerage firm.