Due to the ongoing market uncertainty caused by COVID-19, mergers and acquisitions (M&A) and divestitures are increasing. The second half of 2020 was the highest on record for M&A, and almost half (49%) of global companies are planning to actively acquire in the next 12 months.
Interestingly, the driver for almost two-thirds (63%) of companies is to increase investment in technology and digital capabilities.
EY’s latest M&A report finds that COVID-19 led to an even greater focus on transformation, with companies now planning not only to restore performance “but also reframe their futures for an improved post-pandemic world. And many are opting to transform through M&A.”
And yet, we all know the stat: an estimated 70 to 90 percent of M&As fail.
Organizations spend vast amounts of time and money on a deal yet fail to grasp the complexities of integrating cultures, technology, processes, and people.
To be successful, HR has a vital role to play.
M&A expert George Brooks, writing in Forbes, argues that, “Involving Human Resources upfront during the early planning phase of an acquisition strategy is critical. Skip that, and you could count yourselves among the failures.”
The evidence is overwhelming, says Deloitte in a recent report. Acquiring companies cannot focus “too much nor too early” on an M&A transaction’s people implications: “Chief Human Resources Officers (CHROs) as leaders and the Human Resources (HR) function as a whole play critical roles in determining whether a potential deal realizes its strategic, financial, and operational goals.
As soon as an organization begins the M&A process, HR can share vital business information and expertise.”
Companies choosing to enter Mergers and Acquisitions are often doing so to invest in technology to accelerate their digital transformation process.
Typically, executives take the most effective processes and solutions from each organization or implement new, best-in-class solutions for the combined entity.
Companies may also be required to divest some of their assets as part of a merger. Payroll services as part of a divestiture, for example, come with additional complexity.
When this complexity is ignored, recognized too late, or handled by professionals with insufficient knowledge of the characteristics of a divestiture, it will lead to financial consequences for all parties, even possible discontinuation of contracts.
So, how can the systems and processes (including HRIS and Payroll) best integrate? Deloitte advises using a side-by-side, global, and country-by-country comparison of the acquirer’s and target’s similarities and differences (e.g. HR policies, systems, and processes).
The HR integration team can then develop an effective synergy and integration strategy.
Crucial amongst these is avoiding the perpetuation of outdated or inefficient policies, processes, or technology. Any plan should address reporting structure changes, process redesign, technology changes, and corporate branding.
SHRM advises working with “clean, accurate data… It’s imperative that the data shared between companies is accurate, up to date, and includes any special information.”
And yet, PwC’s M&A Integration Survey still finds that while 70% of companies had synergy plans in place at deal signing, survey results consistently show that capturing value in M&A can remain elusive.
Companies that involve integration teams early in the deal process are 40% more likely to see favorable results.
Meshing culture and processes together isn’t just the job of HR. The M&A team must also work closely with IT to understand the technology systems and processes that will be merged.
Due diligence is the difference between M&A success and failure.
Even with all the right planning before a deal’s close, say, McKinsey, a merger’s success is not assured without a well-executed integration.
The first 12 to 18 months serve as a test of the acquirer’s ability to execute on the deal’s promise.
To address the complex issue of how HR processes and technology can lead to a smooth Mergers and Acquisitions, SD Worx and CorporateLeaders are hosting an interactive peer-to-peer virtual roundtable discussion for an intimate group of up to 25 HR, payroll, talent, HRIS, and M&A Leaders, on 9th September.
During this virtual meeting, keynote speaker Michael Oggenfuss, Global Head HRIS & Employee Services Human Resources, Worldline who has successfully supported 14 M&As in the past two years alone, will be sharing his learnings.
Alongside him, M&A experts from SD Worx who guide companies and teams successfully through integrations will discuss:
By involving HR early in the M&A or divestiture lifecycle, the analysis and insight it provides can help achieve success. But what are the priorities for HR and strategic HR Leadership to address?
Register here to join us for 'DRIVING M&A SUCCESS WITH HR', 9th September, 15:30 -17:00 CET.