Empowering Human Resources in the Merger and Acquisition Process: Guidance for HR Professionals in the Key Areas of M&A Planning and Integration

96 Pages·1999·1.01 MB·English

by  Clemente M.N.

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Empowering Human Resources in the Merger and Acquisition
Process
Guidance for HR Professionals in the Key Areas of M&A Planning and
Integration
Mark N. Clemente
David S. Greenspan
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Clemente, Greenspan & Co., Inc.
Management Advisors
Glen Rock, New Jersey
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Copyright © 1999 by Clemente, Greenspan & Co., Inc.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any
form or by any means – electronic, mechanical, photocopying, recording, scanning or otherwise –
except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without
either the prior written permission of Clemente, Greenspan & Co., Inc. or authorization through
payment of the appropriate per-copy fee.
All inquiries should be addressed to:
Clemente, Greenspan & Co., Inc.
233 Rock Road, Suite 260,
Glen Rock, New Jersey 07452;
[phone];
www.CGadvisor.com
ISBN 0-9671204-0-3
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Clemente, Greenspan & Co., Inc.
Clemente, Greenspan & Co., Inc. is an M&A consulting and training firm that specializes in helping
companies ensure the success of strategic mergers and acquisitions in order to increase shareholder
value.
CG&Co. is comprised of veteran consultants with expertise in M&A planning and integration – as
well as in strategic marketing, training and development, and organizational communications.
CG&Co. focuses on the synergy between the merger partners' people, products and processes to
develop strategies and tactics that drive long-term corporate growth.
Mark N. Clemente and David S. Greenspan, SPHR, the firm's principals, are frequent speakers
before major companies and business groups on the topics of pre-merger planning and post-merger
integration, and are the authors of Winning at Mergers and Acquisitions (John Wiley & Sons, 1998).
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CONTENTS

Section One:
Empowering Human Resources in the Merger and Acquisition Process
Successful Mergers and Acquisitions Require Broad Involvement of Human 1
Resources
HR's Role in Acquisition Planning and Implementation: 10 Critical Success Factors 11

Section Two:
Role of Human Resources in the M&A Process Today: Results of a National
Survey
How the Findings are Reported 21
Timing, Volume and Nature of Respondent Companies' Acquisitions 27
Evaluating Managerial Performance of Acquisition Planning and Integration 35
Critical Post-Merger Issues 47
HR's Current Role in Acquisition Planning and Integration 64
Post-Merger Integration: Tactical Execution 77
Importance of HR in the M&A Process: A Self-Assessment 89
Future Role of HR in Acquisition Planning and Integration 101
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Section Three:
M&A Skills Development for Human Resource Professionals
Introduction 115
Acquisition Process 117
Due Diligence 121
HR Due Diligence Checklist 127
Employee Communications 129
Communication Critical Success Factors 134
Organizational Behavior 135
Employee Sensing and Research 140
Assessment and Selection 146
Training and Development 150
Marketing and Sales 154
Conclusion 157
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Successful Mergers and Acquisitions Require Broader Involvement of Human
Resources
Mergers and acquisitions (M&A) continue as a primary means of effecting speedy and substantive
corporate growth, yet several studies indicate that more than half of all M&A deals fail to meet
management's strategic, operational and financial objectives. Going forward, acquirers must ensure
that their transaction does not become another corporate combination casualty.
There are literally hundreds of reasons why the M&A failure rate is so high. But many can be traced
to the exclusion of human resource professionals in the pre-deal planning phase and the function's
last-minute inclusion after the transaction has closed. It's a classic case of "too little, too late."
To help improve the odds of orchestrating a successful transaction, HR must be broadly involved in
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all phases of M&A pre-deal planning, target company evaluations, due diligence, and post-merger
integration.
What are the specific activities HR professionals should undertake to help ensure the success of their
companies' M&A program? It depends on the various, and inter-related, stages of the M&A process.
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M&A Planning and Due Diligence Where's HR?
The traditional focus of M&A has been on "making the numbers work." Typically, an investment
banker or corporate development officer presents an acquisition candidate to management. If doing
the deal makes financial sense, the wheels are set in motion and the due diligence phase begins.
Due diligence keys primarily on financial, legal and regulatory, and accounting and tax issues. Thus,
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when everything in the examination checks out, the merger partners plunge forward assuming that
the strategic benefits of the merger will necessarily fall into line. Statistics on the failure rate of
M&A transactions suggest this is erroneous thinking.
The financial and legal aspects of M&A planning are critically important to the success of any
transaction. But the traditional "ledgers and liability" orientation toward M&A planning highlights
its principal shortcoming. If people issues are so important to the success of the deal, how can such
little focus be paid to those issues in the strategy development, target company screening and due
diligence phases?
Clearly, in most cases, the merger partners have not sufficiently assessed the strategic variables that
lie at the heart of the deal; these include the all-important "people component." When a strategic
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vision drives an acquisition as opposed to cost-cutting synergies or stock prices it requires the
critical up-front participation of HR professionals to assess the valued human assets that never show
up on a balance sheet or income statement. What's more, identifying key human assets in a target
company and quickly taking steps to keep them from walking out the door on announcement of the
deal is an HR-related imperative every company must take. Yet, historically, HR comes into the
M&A process too late to make this vital contribution.
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In most companies, HR gets involved in the M&A process well after the initial pre-deal planning.
Once the up-front groundwork has been laid and the deal announced, the legal, financial and
accounting participants have all moved on to the next deal or gone back to work. HR is left with the
hard part: developing communications strategies; aligning payroll, benefits and compensation
paradigms; and trying to meld disparate processes and corporate cultures.
Unfortunately, by this point, key employees have headed for the exits. Those remaining are mired in
confusion and inertia, and HR is forced to play catch up. Is there any wonder why after the first six
months, most merged firms are left with less value than on the day the deal was announced?
HR: The Power to Make the Deal Succeed
HR professionals must participate at a higher level and play a much broader role in the following
areas:
Acquisition Strategy
HR professionals should be among the senior managers who help guide the strategic vision of an
M&A transaction. Unless it's a pure asset acquisition (e.g., obtaining manufacturing facilities or
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sources of raw materials), every deal involves securing people people who possess distinct skills
and capabilities. Those attributes will be needed to advance the merged company's strategic
objectives.
But HR professionals must familiarize themselves with their company's business, strategic and
marketing plans. This will put them in touch with the business issues that drive M&A decision-
making. It is from this vantage point that people issues can best be linked to the very business
strategies that spawned the acquisition in the first place.
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Target Company Screening
Once merger or acquisition candidates have been determined, HR can play a valuable role in
screening and evaluating those companies. Contributing a people perspective to a process that is
traditionally focused on numbers will reduce the likelihood of the acquiring company making a
disastrous decision on a would-be merger mate.
Many corporate marriages, much like those between people, have an underlying element of
incompatibility that dooms them from the start. HR professionals can contribute to the evaluation
process by assessing such crucial variables as a work force's possible response to an acquisition,
marketplace perceptions of the employee base, and organizational differences that may exist in the
merging companies' collective belief systems and attitudes. Culture is one important part of the
investigation. But there are many others factors that determine the level of "integrate-ability" of two
companies. HR professionals are clearly the best judges of these distinctly people-oriented issues.
HR Due Diligence
As mentioned, in traditional due diligence, HR issues are not typically addressed with the same level
of scrutiny as financial, legal and tax considerations. Including HR as early as possible in the process
makes the entire due diligence effort a more comprehensive and informed undertaking.
Issues brought to light via HR due diligence will help shape the longer term integration effort and
help guide the scope and pace of the non-HR aspects of the acquisition effort. Following are the key
areas of investigation:
Culture
The broadest issue confronting the HR professional is