Avoid Being the Next M&A Horror Story


(First in a series of posts about doing HR M&A right)

The higher the stakes, the bigger the headline!

We are seeing an ever-growing complexity of shorter timelines for due diligence, more competition, more global focus, and increased competition for internal M&A talent to support deals. It is critical to focus on the people aspect of deals. Rarely is a deal done that doesn’t involve the transition of key leaders and professionals whose experience, energy and knowledge are required to produce the desired results.

While most experts agree that approximately 70% of deals fail to achieve their full anticipated business results, a good question to ask is, “How can we improve our deal performance?” With most transaction teams focusing initially on financials, Human Resource issues need more specialized attention.

Inept handling of people risks can lead to problems such as low morale, reduced productivity, loss of key talent, diminished customer service and lost revenues, as two telecom giants experienced when they attempted a $35 Billion “merger of equals.” The ensuing clash led to a loss of key employees, low sales, and plummeting stock prices. Their failure to account for cultural issues doomed the integration.

With culture most frequently cited as a key reason that deals fail, it’s important to realize that rather than just being soft and fluffy issues, troubled people integrations can truly impact the bottom line and business results. Companies must consider people issues at the outset of any transition/transaction to safeguard their valued investments in time, talent and money. Challenges around people issues can jeopardize the realization of desired goals. HR must ensure that integration planning and activities take culture as well as communications and change management into account, though culture itself should be owned by the business leaders.

Culture can be defined as the how’s, why’s and who’s of the organization. It is evident through work environments, leadership alignment, common work practices and norms, spans of control, roles, nature of power in the organization, behavior and reinforcement, performance management, level of collaboration and a number of other factors. During due diligence, the acquiring company must pay special attention to the culture of the target organization in addition to clearly understanding their own. Identifying the differences and gaps in the expected norm is necessary in designing the communications and change management activities that will help incoming leaders and professionals to acclimate to the change and their new business environment during integration and transition. 

Culture will impact business performance. Managing culture requires awareness, attention and active design by HR leadership, plus the input and support from the business. Actively designing culture mandates not only understanding the current culture, which may operate differently in different parts of the organization, but also actively designing the desired new culture as the two companies join together. To succeed in an acquisition, the operation must begin with a clear strategy and vision for the future; define outcomes to meet objectives; and identify and deliver on aligned tasks. HR plays the role of strategic partner in supporting this understanding and aligning with the business to implement the programs to drive behaviors that end in the desired result.

For purposes of this article series, we will focus on Human Resource’s impact within transactions and how to avoid some of the most common mistakes HR makes in M&A transactions. Mergers and acquisitions can create major headaches for organizations, but HR can lead the organization in preparing for an effective and seamless transition.

Check out the next installment in this series: When Workstreams Fail To Align.


Learn more about navigating the people aspects of M&A by attending M&A Leadership Council’s The Art of M&A for HR Leaders in Scottsdale, AZ, the first training event of 2020. This 3-day program is designed for senior leaders and the HR professionals who advise them to learn how to capture deal value by mastering the people issues of M&A.