M&A Tips: Get HR Involved Quickly

M&A Tips: Get HR Involved Quickly

NU Online News Service, Dec. 20, 2:20 p.m. EST?The most critical issue in a merger or acquisition is ensuring effective leadership by the top team, a survey of companies has found.[@@]

Towers Perrin in Stamford, Conn., which did the research, said that respondents to its poll also said it was important to involve a company's human resource department at the very beginning of any plan for a merger or acquisition.

The survey of more than 200 U.S. and Canadian companies found that nearly 80 percent of mergers and acquisitions completed in the past few years had substantially met key objectives.

Part of the reason for this success, said Towers Perrin, is that "HR functions now have far greater involvement in the process than in the past."

Nearly two-thirds of the companies said their HR executives were involved in due diligence activity for mergers and acquisitions. Thirty-six percent of the companies anticipate human resources will be involved in pre-deal planning.

Don Lowman, Towers Perrin principal and managing director said HR is likely "to get a seat at the deal table earlier than ever because pension issues, which are always a top challenge in an M&A situation, are more of a concern than ever, given that so many plans are under-financed at present."

Among the other critical post merger issues, 85 percent of those polled listed the job of selecting a top management team for the new outfit.

Seventy-five percent put a priority on reaching workers with a well-executed employee communications program.

Sixty-five percent listed having a strategy to retain key employees as a needed post-merger focus.

Only 12 percent said it was critical to work at integrating or consolidating the HR department, while 47 percent said it was critical to align the cultures of the two companies.

Mr. Lowman said the survey confirmed that "there are no magic bullets for solving the thorniest issues, like leadership culture and communication. The successful companies get it right because they are committed and persistent."

Of the 26 percent in the survey who said they were "fully ready" to process a merger or acquisition, 60 percent reported increased employee productivity following the merger and 50 percent cited an increase in employee morale and engagement.

Fully ready companies, 37 percent, were also found to be classified as having high financial performance.

However, readiness by itself does not mean there will be improved financial performance after a merger or purchase, according to Mr. Lowman, who added that "readiness on the part of HR can make a difference over time on a number of fronts."

A well prepared human resources team, Mr. Lowman said, "gets involved early, identifies the challenges and puts the right plans and processes in motion.

"Then it's in a position to act quickly at the right time by communicating the business rational and vision, helping keep the right people, maintaining employee engagement and focusing people on doing their jobs well. When all those things come together, over time financial benefits will accrue as well," he said.