What you Can’t Afford to Ignore when preparing for a merger or acquisition.
You’ve come a long way from the early start-up days, your business has grown, your company culture is strong, your leadership is high performing. Now your company is starting to look attractive enough for other companies to want to buy. Now what do you do ?
There are a number of reasons a merger or acquisition can fail but the main you can not afford to ignore are human capital issues and a poor culture fit.
Your human resources department plays a fundamental role in preparing and getting your employees through a merger or acquisition. From proper effective communication and cultural integration. Its easy to forget the most unpredictable part of the merger or acquisition “the human side”
Here are a few things that can help prevent your company from becoming a M&A statistic.
Analyze and Determine if there is a good cultural fit
Often a company becomes attractive as an acquisition due to its company culture. Most successful mergers come to be because of similar company cultures.
Although every company’s culture is different, it makes a big difference when a close match to your company culture can be found. Should a match not be found is either company willing to make a change for the better?
When a merger or acquisition is approaching, often your employees will be asked a series of questions one of them being “ what is it like to work at your company” There may be leadership interviews, focus groups and surveys. This is all standard practice as part of the preparation process for the acquiring company’s way to determine if your cultures are indeed a good fit.
Many Mergers or acquisitions collapse because what looks good on paper doesn’t always add up if the company cultures aren’t compatible. You don’t want to be in the position of investing time, human resources and money only to find out down the road that it simply isn’t a good fit.
Construct a solid communication plan
The need to communicate throughout the merger or acquisition is crucial and just as important as determining if there is a good culture fit. A clear communication plan plays its part by easing concerns, distrust and potential resistance from employees, after all they’re going from the known to the unknown. This can be done by Starting early with your HR team and determining what will happen and when it will happen and what will be communicated when it happens. Not everyone should find out at the same time and certain communication will only go to certain groups.
Some items you’ll need to consider:
- Who is required to know about the merger or acquisition and who will you be communicating with? E.g employees, customers, channel partners, media, vendors, etc.
- Who will buy into the changes resulting from the acquisition? You should have a core team of early adopters, perhaps the founding members, who will be your leaders of change. This leadership team should be unified in how it presents information as well as itself.
- Determine who and what will be impacted,as well as how and when? This can involve anything from deadlines and processes to whether there will be job reassignments.
- How will each piece of information be communicated ?Company meetings, in print, an email, general announcements, a press release, on the website or via social media? This will all depend on the audience and the formality of the announcement. Some communication will need to be vetted by your legal counsel to ensure that the information is both accurate as well as aligned with your merger agreement.
- Establish milestones. What kinds of milestones will be put in place? For example: By 60 days, job assignments made. By 30 days all employees will have met with their managing supervisor.
Your communication plan and timeline will provide vision and clarity to your leadership and assure your employees that you are paying close attention to how this affects them.
Focus on change management
Another one of the main reasons mergers and acquisitions collapse is due to inadequate change management . The way you manage and interact with employees can determine the success or failior of a merger or acquisition. Therefore your communication plan and leadership need to be in alignment for you to get your much deserved pay out.
As the transitioning process gets closer workforce issues will need to be addressed. The timing of this should have already been established in your communication plan. Keep in mind there isn’t any set formula for this as each case has its own unique needs.
Things to consider
- Organization Chart. What will the new organization chart of the combined organizations look like? You will need to determine job titles and hierarchy.
- Management structure. Will the right people be in the right positions? Who will be the managers and what will be their rolls.
- Reorganization. Will you need to reorganize? Check for position overlaps. In some cases you will need to have your employees interview for certain positions or event their current positions to be sure that they are in alignment before moving forward.
- Compensation Philosophy and payroll systems. What is the compensation philosophy for each company. Should you be using the benefits and payroll systems of the acquiring company, this will have to be communicated to all your employees.
- Performance evaluation and reward systems. Will a skill audit of your current staff be necessary?
- Learning about the New company. Your employees will need to learn about the new company, its culture, history and its and procedures. Solutions for this can range from cultural immersion programs to a welcome breakfast sponsored by the acquiring company.
- Mistakes and stumbles are bound to be made along the way. Here are some items that are often overlooked
- Involving a Human Resources professional early
- Understanding the employees needs and concerns
- Engaging and guiding the leadership team
- Planning for enough time and resources for a successful integration
When all said and done, the success or failure of this undertaking may rest heavily on your leadership style and company culture.
It’s human nature to be focused on the financial and legal details that surrounding a merger or acquisition, try to remember that a strong human capital guidance system is always needed. When preparing your communication plan, timeline and transition plan keep your workforce in mind.
As this takes a great deal of work and there are pitfalls that you want to avoid, you may want to consider outsourcing.
Having your i’s dotted and t’s crossed before you get to a merger or acquisition can go a long way in determining whether the deal is successful.