Early involvement HR in M&A essential
HR needs to be involved in M&A deals to increase deal success. Research shows early HR involvement is a critical success factor. Which role HR needs to play in M&A will be described around 4 critical responsibilities.
M&A deal activity reached an all-time high in 2015. Going forward Deloitte expects: “Deal activity continues to be strong” (M&A trend report mid-year 2016). Early research showed the deal failure rate was around 70%-90%; more recent research shows a 40-50% success rate.
In the research of M&A deal success, the reasons for failure vary, but often you will find culture, leadership, talent and communication in the top ten ranking. So, in addition to the more strategic and economical aspects, people related issues prove also to be critical for deal success.
Research published by the M&A research center of the London’s Cass Business School found 60% of executives agreed post M&A deal issues could be better resolved if HR teams were involved earlier. The report also highlights three main areas to focus on to be successful. The number two area mentioned, based on their study, is early involvement of HR, and retention of key operational personnel. The research also shows that only 10% of the researched companies included HR at the targeting stage of a deal, while 81% involved them at the integration stage. So ample room for improvement for many companies and HR professionals to play a critical role. What does this role for HR entail?
4 Critical role for HR in M&A
Based on my involvement in many M&A deals, I would describe the role of HR around the following 4 critical areas of responsibility.
- Set up and staff deal team during the different stages
- Support design of the deal and the integration process
- Help design the new organization and lead the change process
- Investigate material and immaterial people related deal issues
- Create a focus of the HR team on top critical issues per deal stage
- Ensure expertise and capabilities in the HR team
- Advice involved leaders and the deal team on all HR related issues
- Be the HR subject matter expert
- Deal counselor for change, culture and organizational design
- Design the employee and labor relations communication process
- Take full ownership of employee communication during all stages
- Act as the linking pin between the different involved groups to ensure good flow of information
So a huge opportunity for HR to step up, and claim this role which has proven to be so critical for deal success.