Did you know that 47% of M&A deals fall short due to inadequate focus on workforce issues?

Understanding people issues and risks throughout the whole merger and acquisition (M&A) process is often the second most incumbent action when evaluating an asset. According to Mercer research, 47% of M&A deals fall short due to inadequate focus on workforce issues.

A merger is when two companies combine to form one, and an acquisition is when one company buys another.

Handling these processes correctly is important because they can impact a company’s financial health, employee morale, customer relationships, and overall success. A smooth merger or acquisition ensures both companies align in terms of goals, operations, and culture, avoiding costly mistakes and disruptions.

As the Society of Human Resource Management (SHRM) puts it:

“Mergers and acquisitions (M&As) are tools businesses use to achieve organizational objectives—tools that have profound impacts on the employees of the organizations at every level as two organizations attempt to integrate into one.”

M&A can provide rapid benefits, but handling the process correctly is crucial to avoid misalignment and financial risks. “People issues” are largely to blame when it comes to the failure rate of mergers and acquisitions.

During a merger or acquisition, HR plays a critical role in managing the people aspect of the transition. Key responsibilities include:

Employee Consultation and Communication: Ensuring the seller and purchaser involved in any M&A transaction are meeting their employment obligations by consulting in the correct way; keeping staff informed about changes, addressing concerns, and maintaining transparency to reduce uncertainty.
Cultural Integration: Assessing and aligning the company cultures to ensure a smooth transition and avoid clashes between teams.
Talent Retention: Identifying key employees and implementing strategies to retain top talent, preventing a loss of valuable team members.
Organizational Structure: Redesigning the structure if necessary, clarifying roles, and ensuring a seamless transition of leadership.
Compensation and Benefits Alignment: Reviewing and harmonizing compensation, benefits, and policies across both organizations to ensure fairness and consistency.
Legal and Compliance: Ensuring compliance with labor laws and regulations during the transition, including managing contracts, severance, or redundancies.
Change Management: Supporting employees through the change process by providing training, support, and clear guidance to help them adapt.

HR has a crucial role in influencing successful Mergers and Acquisitions, managing integration in an efficient and compliant manner.

People and culture practices should remain active throughout and after the process in order to maintain high performance, manage costs, and keep talent engaged.

If you’re thinking about M&A, or have already started the process, it’s never too late to check that the next stage of your business has its People and Culture aspect in hand. Get in touch!