Capturing Deal Value through HR M&A Integration

Ginger Shelhimer of M&A Partners
By Ginger Shelhimer
Dec 14, 2018

For a majority of M&A transactions, the ultimate driver of meeting goals and objectives relies on human performance against deal objectives. Whether the financial goal of the deal involves leveraging people synergies or expanding teams to support new growth, HR plays a significant role. For this reason, HR can greatly affect capturing deal value. First we must broaden our view of deals by not looking strictly at financials, but from a wider perspective that factors in what truly drive financials primarily, people and productivity. This would include areas such as employee engagement; change and productivity; integration effectiveness; leadership; and organizational alignment, plus communications. The following are ways HR can ensure a positive impact during Integration:

  1. Recognizing and accommodating change. It’s never business as usual. I often hear deal leaders asking, “When can we get back to business as usual?” but the reality is that this will never occur. For the people and teams involved in the change, leaders should expect that the business is not going back but moving forward potentially with new teams, new leadership, new organizational structures, new compensation plans, new decisions and, often, new priorities. To minimize business disruption and position the combined organization to move forward quickly, it is critical to understand that an M&A transaction definitely creates change throughout the organization. Human Resources, along with Communications, has a powerful opportunity to minimize and channel the impact of the change to produce results that in turn affect employee engagement and customer focus.
  2. Leading integration effectiveness with speed and clear planning. We have seen M&A integrations consistently fail when the initial integration approach is to delay making decisions until after closing a deal. Failing to make strategy and plans regarding an Integration Strategic Framework (or Target Operating Model) only delays the many decisions required for an effective integration. “Later” often becomes never or, at the very least, results in delayed and disjointed efforts at integration. For the most part, significant pre-close decisions (such as those about operating structure, leadership, governance and integration costs, plans and timelines) can establish clear leadership, strategy and HR support models. Having plans approved and agreed upon prior to close will result in a faster integration and a smoother transition to the new normal. This also leads to fewer disagreements or mishaps, and allows for clearer leadership and communication. HR can help drive these efforts in evaluating leaders, recommending sound HR strategies, identifying HR components of integration and onboarding plus aligning to provide the support required to transition employees over to the new employer. Most importantly, HR should be facilitating the change, culture and communication activities to ensure a smooth transition. These factors cannot be an afterthought but must be woven into the solution planning for the deal.
  3. Establishing clear leadership and structure early. In my experience, a common critical mistake  in an M&A transaction is to be unclear about leadership. Deals where co-leaders were named resulted in years of unclear alignments; challenges with decision-making and approvals; and a culture clash of epic proportions that ultimately lead to the resale of the organization at a significantly reduced price. By working with deal leaders, HR can collaborate to quickly clarify the operating model, organization alignment and identify leadership needed to ensure that the organization is positioned to move quickly to future focused activities. Making these decisions as close to the close of deal allows for quick and clear communication, activity and alignment in the early days of the integration. Multiple stories abound of companies who failed to integrate or whose integration activities resulted in disaster because of a failure to name leadership, manage the organization’s integration and attend to the organizational implications of leadership changes.
  4. Delivering effective communications. HR plays a key role in developing a comprehensive communications plan including pre-Day One, Day One and ongoing integration plus post-integration communications. Care should be taken to address more than just the administrative concerns required to onboard but should also involve a longer-term communications effort aimed at keeping transitioning employees connected and informed. HR’s efforts should speak to the business goals, cultural implications and change management; and provide clear points of contact for leadership and support. Goals for the communications plan can include improving customer focus, engaging employees, potentially improving (or at least maintaining) productivity and enabling decision-making and connections within the newly formed organization. Also attached to the communications plan can be change management plans, new manager training, cultural training and other employee support, as well as opportunities to connect directly with new leadership.

As strategic partners to the business, HR’s role is to evaluate, advise and implement sound strategies to design and deliver solutions to properly execute the integration, support a smooth transition and enable the going forward activities that drive desired business results. Speed, decision and clarity are priorities enabling an effective integration. We find that organizations that best manage the people issues upfront and early in an M&A transaction maximize their opportunities for success, realize their strategic objectives and drive the ultimate value from deals.

M&A Partners has a proud history of enabling our client organizations to strategize, solution and design winning integrations to support effective transitions. Please contact us to see how we can support your organization.

 

 

Join us in Orlando January 15-16 to see Ginger present at The M&A Leadership Council's The Art of M&A for HR LeadersSM. 

 

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