Mergers and acquisitions: Time for HR to shine

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There is seldom a better example of the potential for a strategic contribution from HR than in the specialized but high-impact activity of mergers and acquisitions. Traditionally, one would observe corporate accountants and lawyers dominating this space, with HR only getting involved during the implementation phase, but we are increasingly seeing HR executives playing a vital role from the outset.

There are many reasons why mergers fail or, at least, do not achieve the objectives desired by the shareholders who instigate M&As. Seldom are the reasons for failure cited as the incorrect valuation of assets, equity re-structuring or legal compliance. Things go wrong in mergers when:

  • Staff, clients or management don't want it to happen
  • The real objectives of the merger are masked in Investor-Relations speak
  • Former competitors just cannot get along
  • Cultures cannot be reconciled

One wonders whether it is the people with the CA qualifications or the BAs who are best equipped to deal with these so-called "soft" issues which can derail an acquisition. Arguably, these deal-spoilers are intangible issues which do not easily respond to project management by corporate financiers, and are generally not well understood by external shareholders themselves.

At the time of the Due Diligence exercise, it is essential for HR to be assessing culture, talent retention and sentiment issues, in parallel to the critical work being done by our finance and legal counterparts, and then integrated into the mix prior to decisions being taken. The consequence of missing out on the value-added HR element are significant. All the institutional dust kicked up by mergers often provides the perfect cover for another competitor to poach jittery staff (or clients) before the details can be communicated - and all the while, corporate PR is still touting the wishful thinking line of "synergies" and "best-of-breed."

A truly strategic HR practitioner would be looking behind the gung-ho statements to ascertain the real reason for the merger (for the record, I am not sure that there ever is such a thing as a real merger - they are all take-overs to some degree, with one player calling the shots.) HR is an ideal party to strategize about how to achieve the merger objectives and ensure that these get communicated as honestly as possible to all stakeholders (eg is it really to increase the footprint, or to reduce operating expenses, or to "buy" a book of clients?)

Here again, HR's experience in communicating to employees through their credible representatives can add immense value to the process. Remember that shareholders and corporate bankers will be thinking that the SENS press release is the most important communication document, together with the 17th version of the joint CEO statement and the handshake photo for the financial press. People with careers on the line have a very different perspective, and they are the ones who will really optimize (or sabotage) the opportunities for that elusive synergy.

HR needs to lift its head from concentrating on all the other operational HR issues which arise during an M&A process - marrying the Compensation & Benefit plans, what grading system to use, who gets the key jobs, and does this mean we have to move office again?!  Yes, I have been there, and most good HR people have been through (and only want to go through only one) merger in their careers. It is the stuff of grey hairs and (literally) suicides.

During this burst of frenetic activity in corporate life, the adept HR practitioner is able to demonstrate the role of "strategic partner" in a tangible and lasting way - THAT is what really earns credibility.

About the author

Gary Taylor has worked in HR for 25 years, in National Mutual of Australasia and Unilever, then as HR director at South Africa's largest health insurer Medscheme for 14 years, followed by three years at Wits University. Two years ago, he was appointed to start up HR for a new University in Saudi Arabia, where he is now director of the policy office

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