With seven years of experience as an HR lead in Mergers & Acquisitions (M&A) and Integrations, I am eager to shed light on the invaluable role HR plays in enhancing the value of these complex processes. Recently, during a networking event, a conversation with a Commercial Solicitor highlighted a common oversight: many organisations often exclude HR from the initial stages of M&A, leading to potential challenges. Within this blog, I would like to cover a few areas where having HR involvement at every stage of the deal can add real value to the overall validity of the deal and a well-planned seamless integration process.
The Crucial Role of HR in Initial Due Diligence
During the initial Due Diligence stage, HR within the deal team is pivotal. It assesses the alignment of the target organisation in terms of employment conditions, benefits, potential upscaling costs, and financial implications.
Key considerations include:
Identifying missing key information and potential legal exposures.
Devising strategies to mitigate identified risks.
Determining key employees for retention and crafting retention strategies.
Building up a picture of the workforce, analysing roles, salaries, and alignment with market standards.
Developing a strategy for commission and bonus plans.
Assessing costs involved with future upscaling based on the integration strategy.
Proper in-depth integration planning and understanding all other aspects of the deal to ensure a commercially pragmatic approach. Including planning and running any TUPE transfer process.
Ensuring that employee engagement strategies are built into the project plan.
Identifying day 1 risk mitigation strategies
Differentiating HR's Role from Legal Advisors
While the Employment Solicitor's role in M&A is essential, their main focus is on the legal aspects based on what they can see, which is normally limited or just put together by the target company for the purpose of the sale.
While solicitors provide comprehensive summaries and advice on legalities, HR's employment legal review is often caveated and based solely on data room information. Recognising the reality that policies and contracts may differ from actual practices, HR conducts in-depth Q&A sessions with the target company, including holding in depth thought out question and answer sessions that allow HR to start thinking about cultural alignment and the reality of how HR is actually carried out.
Are the terms and conditions above the statutory minimum, are the children and family policies proactively embracing a work life balance, or is it a hire and fire culture?
Ongoing Contribution to Integration Planning
HR's involvement extends through each Due Diligence stage, advising on red flags, contributing to risk mitigation, and collaborating with other work streams. This includes:
Collaborating with property teams on location changes and defining the HR strategy.
Coordinating with tax & finance teams and considering the impact on integration.
Coordinating with the commercial teams determining misaligned or duplicated roles and working through potential strategies.
Addressing payroll and benefit concerns and coming up with day 1 plans.
Post-Deal Considerations
Once a deal is set to proceed, HR adds substantial value by contributing to the Sale and Purchase Agreement (SPA), planning for the day-one communications, and guiding the integration process. Clarity is sought from legal advisors on nuanced points, ensuring a well-thought-out approach to integration. By being part of the deal team, HR gains an understanding of the company culture, offering guidance and support to ensure alignment and consideration of the hearts and minds of employees and can help other members of the deal team to also be mindful of this sensitive topic area.
Beyond the Deal Table in Mergers, Acquisitions and Integration
Beyond the deal's technical aspects, HR's role extends to legal and cultural integration. Understanding the nuances of both organisations, HR can facilitate smooth transitions, ensuring that the merging entities align culturally. This includes fostering open communication, addressing potential resistance, and promoting a unified vision.
Conclusion
Establishing a pivotal role for HR in M&A and Integration processes brings forth a depth of expertise and value that profoundly influences the success of a deal. Beyond merely comprehending the assets being acquired, addressing challenges, identifying risks, and implementing strategic mitigations, HR's involvement extends to providing a clear roadmap for seamless integration and fostering cultural harmony. It goes beyond the legal compliance aspect, concentrating on preserving not only the legal framework but, more importantly, the hearts and minds of the acquired employees. This holistic approach ensures a well-thought-out and planned deal process that considers the human element crucial for sustained success.
If you need HR support on this topic, please reach out to Progressive HR Solutions via email at info@progressivehrs.co.uk
