HR PROFESSIONALS must act as business advisors first, and HR specialists second, in the event of their organisations becoming involved in merger and acquisition (M&A) activity
HR PROFESSIONALS must act as business advisors first, and HR specialists second, in the event of their organisations becoming involved in merger and acquisition (M&A) activity.
A study by Mercer Human Resource Consulting found one in five HR functions (21 per cent) would not be effective in the event of a merger or acquisition indicating that some HR professionals would be unable to provide the right support to their businesses.
“In organisations with a history of growing through acquisitions, the HR function is more likely to be prepared to meet the challenges of juggling day-to-day HR service delivery with specific requests for deal support from all parts of the organisation,” said Karen Isely, head of M&A at Mercer.
She suggested HR professionals “need to have an awareness of what is happening across the entire business and anticipate what will be required in the way of support, in the event of an M&A”.
“If a company has a growth strategy that relies on acquisitions (alliances, joint ventures or other significant business transactions) it will be important for the HR team to be ready at the outset of a deal.”
The biggest challenges for HR during a merger or acquisition were those related to staffing, communication, rewards and talent management, and culture, she said. Of these, communication and managing uncertainty were essential.
“If insufficient information is provided, employees will draw their own conclusions,” with the risk they will jump ship. “Losing or distracting employees can lead to decreased productivity and damaged customer relationships can destroy expected deal value,” Isely said.
Corporate activity in Australia is reported to be lower than in previous years, especially last year when an M&A boom drove the value of deals to US$121.1 billion. Activity in the second quarter of this year dropped to US$18.3 billion from US$27.6 billion in the first quarter of 2005, according to Thomson Financial data.
However, this represents a pause rather than a downturn as businesses take stock of previous deals, according to analysts. Activity levels are expected to pick up, particularly in light of expected legislative changes such as those to cross-media ownership laws.
Meanwhile, HR professionals cannot afford to stay silent. “Many businesses make the mistake of not getting HR involved [in the M&A process] early enough,” cautioned Isely.
“If people integration issues are not considered in the early stages of a deal, companies can get caught on the back foot. The earlier these issues are managed, the better informed and prepared the HR team is to deal with the challenges that a merger or acquisition presents.”
Isely also warned of another common pitfall – when the best resources were not freed up to work effectively. “HR leaders need to ensure their team is well equipped to contribute during a deal, which may include delivering the ‘business as usual’ HR services in a more challenging environment, or providing direct specialist and project support to the transaction,” she said.
“Because handling employee issues is one of the most critical as well as challenging aspects in a deal, HR is playing in a high-stakes game,” Isely said. “For best results the function should be ready ahead of time and involved as early as possible.”
She suggested organisations build a strong integration strategy and implement it well. “Understanding the basic requirements underlying successful mergers – including those elements driven by HR – is critical.”
These can include: an emphasis on timeliness and speed; honest, straightforward leadership that sets and fulfils realistic expectations; ability to prioritise among competing issues in a complex and high pressure environment; ability to make effective decisions quickly; and flawless project management.
Yet M&A activity offers HR professionals a great opportunity if they are ready, especially to step up to the strategic plate.
“Establishing the HR team’s credibility within the organisation as a trusted business advisor is essential – well before a deal is underway. HR professionals must demonstrate to their executive how they can add real value throughout the entire transaction,” Isely said.
She suggested HR professionals need to have an awareness of what is happening across the entire business and anticipate what will be required in the way of support, in the event of an M&A.
“If a company has a growth strategy that relies on acquisitions (alliances, joint ventures or other significant business transactions) it will be important for the HR team to be ready at the outset of a deal.
“HR has already had significant involvement in M&A activity in the Australian marketplace,” Isely said.
“The volume of deals in the market and continued industry consolidation indicate that there is plenty of work to be done from an HR perspective. Other transactions such as IPOs, divestitures, joint ventures and alliances all provide an opportunity for HR to increase its role.”
