In today’s economic climate, it’s common for significant deals to seem like they are “happening” to companies rather than being driven by strategic insight. Imagine this scenario. You’re the head of total rewards or a human resources director/officer. You open your laptop this morning and read a group email that your company is buying your largest competitor Acme, Inc.— the same email every other employee received this morning.
This is not a fantasy (or nightmare, to be honest). In fact, it’s more common than you might think. Buyers often prioritize speed, sacrificing strategic insight, advance planning and analysis, which usually means the HR function is left out of the deal planning, leading HR to ask:
Instead of focusing on strategic growth initiatives, today's M&A buyers focus on cost mitigation, environmental challenges or other pressures. This isn’t the case for strategic buyers with acquisitions that have been long-forecasted or in the works for some time. However, recent market reactions have shifted the balance, especially in the financial services industry where buyers must act quickly to capitalize on opportunistic acquisitions.
There’s a human bias toward action over inaction, but activity (ticking boxes in the project plan) doesn’t always mean progress. When faced with an unexpected acquisition, taking a step back and considering the long-term implications of the deal is essential. Clients often jump into tactical project tasks because they want to feel productive and they’re nervous about deadlines. This knee-jerk reaction can lead to a drain on critical and limited resources at a time when morale is low. This effort often results in inefficiencies such as:
As a result, significant unnecessary costs are incurred when managers rush integration work.
It's crucial to pause, avoid the temptation to fight fires and instead think longer term to map out a strategic plan. This plan should:
We sit down with clients and assess what will “break” if we don’t do something immediately and then construct a day one plan, a 100-day plan, a one-year plan, and more, to ensure they’re spending time on the right resources in the right order.
When you take time to carefully identify and prioritize actions, issues that are not obvious may jump to the top of the list just because of the significant lead time required for implementation. Prioritizing interconnectivity and addressing and averting potential system failures is critical. The best-laid plans can be compromised by a conflicting internal priority such as a global human resources information system (HRIS) rollout at the same time as day one for onboarding a newly acquired company.
The idea of no sudden movements refers to ensuring strategic M&A activity happens at the right pace and time so you don't have to repeat work. While quick decisions may seem tempting, consideration of long-term implications will more likely lead to a successful fast start on day one, better outcomes and a more successful M&A deal. These areas are critical to mitigating the immediate risks inherent in a significant change and enable rapid progress post-close:
Leadership assessment: Assess leadership to understand individual strengths and vulnerabilities. This helps identify potential gaps and areas of improvement. There must be strong governance around how you review leadership. It must be fair and transparent, so there’s no hint of favoritism.
Talent assessment and retention: Ensure appropriate leaders are aligned with the acquisition strategy and equipped to perform their roles during the transition and beyond. Identify key talent and roles at different levels to inform the development of appropriate retention strategies.
Communication, engagement and change: Develop a communication strategy that addresses concerns before they arise and enables a focus on business-as-usual activities. Communications and employee engagement plans should comprise strategies for pre-close, day one and post-close. They should also ensure that leaders and employees alike are informed and engaged. People-focused change enablement is key to the rapid adoption of changes on the horizon.
Compensation and benefits alignment: Conduct compensation planning for key roles, including long-term incentives, remuneration committees and shareholder interaction. Conduct a broad side-by-side analysis of all reward programs to identify potential liabilities and critical harmonization issues for the deal.
Culture alignment: Assess the buyer and seller company cultures. Ascertain key cultural opportunities, barriers or risks to inform effective communication and integration planning.
Organization alignment: Conduct organization design and cost modeling to identify functional integration, synergy opportunities and implications for employees.
With careful planning of these six core areas, buyers can pave the way for a smooth transition and minimize risks associated with M&A deals. Taking a breath to assess and analyze these factors thoughtfully, buyers can achieve their strategic growth initiatives with a higher probability of success.