When going through M&As organisations usually focus
primarily on the financial, economic and commercial aspects of the
deal, and often only as an afterthought on people. Contradictory
really, as most senior executives recognise that people are their
greatest asset, but they just seem to overlook this mantra in the
heat of a deal.
Taking full account of the people issues in an M&A and
managing them effectively will generate better short- and long-term
results for employees, customers and shareholders alike. These are
some of the key findings extracted from a new CIPD research report
on mergers by Chris Rees, Kingston University and Tony Edwards,
King's College London. The report assesses the factors that
determine the level of influence HR is able to have in
international M&As, and how when HR is more actively involved,
mergers are more successful.
The range of key issues that HR needs to address if the chances
of success are to be optimised include:
- understanding, prior to embarking on acquisition, the strategic
rationale underpinning the deal, together with the external
constraints and opportunities
- ensuring that cultural due diligence is carried out prior to a
deal, so that effective integration programmes can be implemented
immediately post-deal
- moving quickly but fairly in the appointment of new management
teams at all levels in the business, and dealing humanely with the
casualties
- identifying realistic synergy targets, and exercising caution
in estimating both the timeframe and the potential cost of
redundancies
- ensuring that due diligence provides comprehensive data on all
aspects of reward, and that the costs of harmonisation or
'pragmatism' are factored into the deal
- establishing early a flexible project management process, and
ensuring that it has the necessary time, resources and processes to
manage the transition
- communicating consistently, truthfully and when necessary
- HR being integral to the M&A process from the outset as a
credible business-partner offering practical, financially astute
and timely solutions.
Areas of HR policy identified as central to the successful
handling of international M&As, were:
- pay and benefits
- management selection and development
- harmonisation and integration
- employee communication
- the pace of change.
Mergers and acquisitions (M&As) are fraught with
difficulties, many of which relate to HR issues. And international
M&As are even more problematical. When engaging in cross-border
deals or acquiring an organisation with operations in many
countries, legislative frameworks, ways of doing business and
cultural differences will all provide hurdles not found to the same
extent in single-country deals.
In more cases than not, mergers result in a destruction of
shareholder value, irreparable damage to organisations that were
previously working satisfactorily and/or serious harm to the
livelihood or careers of thousands of people. Despite this, chief
executives and boards, not to say venture capitalists, still
generally view M&As as a legitimate business strategy.
The research considers why M&As fail, and what HR
professionals can contribute for them to succeed.
Lessons from the case studies
Included in the report are in-depth case studies of firms engaged
in international M&As, that consider both the home-country and
host-country effects on international M&As. The results show
that the nature of the industry affects integration. What is
required in financial services or retail is quite different from
what is required in oil or utilities.
These case studies demonstrate that the nationality (home) of
the acquirer makes a significant difference to the style and
culture of the new organisation, as well as to the ways in which
the merger process itself unfolds.
Likewise national (host) differences in patterns of HRM and
industrial relations also inform the way that post-merger
integration takes place across countries, with marked differences
evident in many respects. Moreover, the case studies highlight how
that process is an intensely political one, involving a series of
negotiations and compromises as key players seek ways of achieving
balance in the new organisation.