Merger: HR Concerns During a Merger or Acquisition

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HR Merger

Shifting Ground:  HR Concerns During a Merger or Acquisition

What positives steps can HR take to support the workplace during a merger or acquisition?

As markets continue to fluctuate, expect another robust year for mergers and acquisition (M&A).  Globalization and intense competition make the synergies, savings, and strategic assets of M&A’s attractive business options.

For employees of the target, or the acquiring, company, the announcement of consolidation is usually cause for concern. As management and investors of both companies examine the numbers, the workforce is quickly calculating redundancies, the likelihood of job retention, and the possibility that the new workplace will be a good cultural fit.

Because human capital represents a significant asset in many firms, the cost of a poorly planned company shift can be high.  Though smart on paper, M&A activities often fail to turn the profit expected by shareholders when successful organizational integration does not take place.

There is little question that volatile market conditions are now a norm.  Whether your company is currently considering an offer, waiting for regulatory approval, or assessing market conditions, HR plays an important role in creating an effective strategy to maintain employee engagement as both news and rumours filter into your workplace.

Maintaining employee stability and value in transition

When companies merge, or a target company is acquired, job redundancy is almost certain.  The hoped-for efficiencies of most mergers include better utilization of talent, shedding or spinning off less productive units, and reducing workforce numbers.

The tasks of HR in companies being readied for sale are different than those of buying companies, but the goal is the same—developing an engaged, productive workforce that delivers for employees and investors.  We talked in an earlier blog about the emerging role of HR as a change agent.  Nowhere is that new role more apparent than during company consolidation.

A recent report from Mercer explores the components to retaining workforce value during a merger or acquisition.

The report notes, “The root of people risks in M&A transactions lies with individuals’ inability to manage uncertainty and embrace change—which can lead to declining organizational performance and loss of transaction value.”

Based on survey responses from over 300 M&A participants, Mercer identifies the top challenges facing management, HR, and the transition team including:

  • Employee retention:

    Loss of talent, institutional knowledge, and productivity can quickly erode profit and the company client base.  Employee assessment by the surviving company takes time, but a demoralizing loss of stability in the workplace often leads key workers to accept employment elsewhere.  Skill inventories and perception surveys help collaborating HR units to develop strategies, provide support, and build effective retention programs.

  • Organizational integration:

    When two organizations become one, change must be carefully managed on all levels.  Company culture impacts the productivity and profit of a business.  The loss or disintegration of culture could lead to downturn. A careful, long-term plan transitions both organizations to a consistent, stable culture supported by change champions throughout the process.

  • Engagement:

    During business negotiations and after, employee engagement is essential to keep your business a going concern. While honestly discussing the coming change, continue to support career development plans.  Coordinate training, retraining, and services that support professional development. Prepare employees for cultural change, offering both information and opportunities to address concerns. Plan social, casual, or team retreats to create opportunities for employees to meet and come together as co-workers.

Transparency and high quality, top-down messaging is critical to an effective change management plan.  The essential function of HR is to establish and maintain communication tools and face-to-face forums to provide transition services for work groups and individuals.

Organizational change of any kind is rarely welcomed by the workforce.  Managing the message, operationalizing plans, and acknowledging the anxiety that realistically attends the possibility of job loss are important HR capabilities.

Because a company sale can drive growth faster than internal development, there is a good chance your HR department could be called on to evaluate your processes, job classifications, and prepare your workforce for an eventual merger or acquisition.  Is your firm ready?

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