What is the organisational costs of ignoring the people components in an M&A.

Mergers and acquisitions (M&A) often focus on finance and legal expertise ... and understandably so. The acquiring company is willing to invest heavily in these areas.

However, the investment in HR, people, and talent is often minimal. In this article, I address two key questions:

• What are the consequences of not involving your HR team and leveraging their expertise in an M&A?

• When should HR be involved, and how can you prepare them?

Let’s begin by exploring the impacts of ignoring people-related components in an M&A. Neglecting these aspects can be costly:

• Loss of key talents: departing employees can take critical knowledge and expertise with them, reducing your ability to meet customer needs.

• Drop in employee engagement: a significant decline in morale can occur within the first two years due to poor communication and lack of change management to support employees.

• Cultural clashes: these can drain resources and energy for years, potentially even leading to M&A failure.

• Legal and compliance risks: unresolved labor disputes and unclear employment contracts can result in severe legal consequences.

• HR team disengagement: when HR is not involved early and are not prepared, they feel sidelined and unable to contribute effectively during the M&A process.

Help your HR team help you

By not leveraging HR expertise before the M&A announcement, you put your HR team in a reactive mode, rather than empowering them to support employees proactively. This is a missed opportunity to position HR as a strategic facilitator during the integration process.

When and how to involve HR in the M&A process?

• Before the due diligence phase: as soon as you consider M&A as a growth strategy, involve your HR leader to initiate the first key actions:

  • Assessing your current HR practices, policies, and organizational culture.

  • Developing mobility and retention strategies.

  • Reviewing HR structure to identify potential competencies gaps and areas for improvement.

  • Analyzing roles for potential redundancies or bottlenecks.

  • Investing in leadership team cohesion and cultural alignment.

  • Define the leadership of change management: who will lead the change management efforts, whether within the HR team or externally. It's crucial to prepare for this aspect early on.

• During due diligence: if HR hasn’t been involved yet, now is the time. HR should support the due diligence process by focusing on people-related risks in parallel with standard evaluations. Additionally, having a knowledgeable HR representative in key discussions is crucial. If the head of HR lacks the necessary expertise (e.g., transformation experience), consider involving other HR experts.

• For the announcement: HR plays a key role in preparing for the announcement, including:

  • Crafting and/or validating key messages and a communication plan.

  • Anticipating employee reactions and concerns.

  • Briefing leaders before the public announcement.

  • Preparing a robust action plan for post-announcement activities.

• During integration: HR will have a critical operational, tactical, and strategic role in aligning practices between the two organizations, deploying talent management initiatives, maintaining employee engagement, gathering employees feedback and facilitating the overall change process.

Conclusion: don’t miss the opportunity! The earlier you involve HR - at least your HR leader - in the M&A conversation, the more valuable insights and contributions they can provide throughout the process. By bringing HR in early, you position them as key enablers of the integration’s success. Don’t miss this opportunity to leverage HR’s full potential.

You need external guidance on how to onboard your HR team or to support them in preparing for this important journey?

Contact me!