HR key to M&A success

LEADERSHIP ASSESSMENT, cultural fit and employee communication are the key HR challenges in mergers and acquisitions (M&A)

LEADERSHIP ASSESSMENT, cultural fit and employee communication are the key HR challenges in mergers and acquisitions (M&A).

A recent Asia Pacific study which explored the relationship between HR issues and the long-term success of M&A transactions in the region found that many companies are looking to expand their market share in Asia’s rapidly developing economies.

“Many companies are starting to understand the need to address HR issues during both the due diligence and integration phases of any merger, acquisition or joint venture, since the integration of HR plans and policies as well as communication of these changes are the key areas causing problems in completing M&A deals successfully,” said Eric Fiedler, regional director of Hewitt Asia, which conducted the study.

Looking to the future, 60 per cent of companies would pay more attention to leadership retention and assessment during both the due diligence and integration phases of their next deal.

Cultural fit emerged as the top HR integration issue in terms of importance and complexity during an M&A deal. Despite this, 52 per cent of companies indicated that they did not believe that cultural integration would take more than six months nor had they planned for such an eventuality. However, 70 per cent had learned that cultural integration took much longer than six months in reality.

Only 13 per cent have formal cultural integration assessment processes in place, but most said that cultural fit will receive significantly more attention in both due diligence and integration efforts in the future.

“A failure to address cultural fit can lead to chaos among employees. When cultural integration is not carefully managed, a company risks losing its best employees and leaving others disengaged,” said Fiedler.

“Also, the means by which culture change is communicated is equally as important as the message of change itself.”

The study, which drew on insights from HR and finance executives at 73 large companies, found that employee communication emerged as a critical HR factor during the integration phase of any deal, with 60 per cent of companies recognising its importance.

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