You’ve heard the phrase “Pay me now or pay me later”. This became one of the strongest marketing slogans of the 20th century because the message of “invest a little early, to avoid big problems later” applies to so many things in life – including mergers and acquisitions.

When it comes to mergers and acquisitions, there is absolutely a business case for involving human resource partners early, in order to prevent problems later on.

M&As are part of many corporate growth strategies, yet the vast majority of these types of transactions fail to meet their strategic objectives. According to Harvard Business Review, “Companies spend more than $2 trillion on acquisitions every year. Yet study after study puts the failure rate of mergers and acquisitions somewhere between 70% and 90%.” One of the main reasons they fail is because the parties involved underestimate the impact that people-related decisions will have on the outcome of the integration.

M&As that meet and exceed expectations have one thing in common: a clearly defined people and culture plan from the outset.

Here are some of the ways that HR can influence the outcome of an M&A:

  • Culture & Leadership: A cultural and leadership review during the market scan is vital when two organizations are to align their business goals and objectives. Senior leadership, including HR, need to agree on the organization’s vision and leadership style.
  • Financial Implications: The due diligence phase of every M&A needs to be a thoughtful and thorough process. When HR is not involved from the onset it often negatively impacts the acquisition budget, and ultimately the final purchase and sale agreement. This happens because details concerning third-party contracts; pension plans; total rewards and compensation; non-competition and non-solicitation agreements; sub-agent contracts; and high value/high flight risk employees weren’t given the attention they deserve. Involving HR early will help to ensure these matters get the attention they deserve before it’s too late.
  • Communications Strategy: During an acquisition, there are always mixed feelings (anxiety, fear, excitement, etc.), and these emotions will impact the long-term success of the transaction. Honest and timely communication can help manage employee emotions and minimize the impact they may have on business continuity, productivity, and retention. HR partners can provide perspective to the leadership team regarding what messages need to be communicated, when they should be communicated, how they should be communicated, and to whom they should be communicated. They can also help identify key players inside both organizations to help make the integration of people and shared services go smoothly.
  • Retain High Performers: Many acquiring companies lose high performing talent simply by overlooking HR risks from the earliest stages. Let’s face it, the best performers are the most mobile and they know who they are. But do you know who they are at time of purchase? When HR is involved in the planning phase of an M&A they can help identify flight risks and develop a plan to retain high-value talent.

Stay tuned for more on this M&A People and Culture series.

Corrie Anderson is Director of Organization Development with Optimum Talent and a specialist in People Strategies for mergers and acquisitions.