Mergers & Acquisitions

Managing M&A People Risk: Best Practices for Buyers and Sellers

Jeff Cox, Senior Partner and the Co-Leader of the North American, M&A Transaction Services Business for Mercer 

Chuck Moritt, Senior Partner and the Co-Leader of the North American, M&A Transaction Services Business for Mercer

Published on 17 March 2016 on BRINK  

Merger and acquisition deals are fraught with people risk when the companies involved are unable to manage uncertainty and embrace change. This results in declining business performance and the potential loss of transaction value.

Poorly executed integrations, failure to consider culture and organizational fit and lack of clarity in employee communications are prime examples of people risks that can severely undermine deals and destroy value.

These risks have profound implications for organizations: If they’re not effectively addressed, they can lead to low morale, reduced productivity, the flight of key talent, diminished performance, inconsistent customer service and—ultimately—revenue and profit loss.
Today, these risks have never been more pronounced or pervasive. Worldwide M&A totaled $4.7 trillion last year (a 42 percent increase over 2014 levels) according to Thomson Reuters, making 2015 the strongest year for dealmaking on record. M&A activity was up 32 percent globally in 2015; in addition, cross-border M&A activity escalated by 27 percent over 2014 levels, totaling $1.6 trillion and accounting for one-third of overall M&A volume.

More than half (55 percent) of buyers, including both corporate and private equity, report that talent challenges will remain a significant HR issue in future M&A transactions, with employee retention cited as the No. 1 perceived risk, followed by cultural fit and leadership team concerns, according to a recent research report from Mercer, People Risks in M&A Transactions.

 

41% of buyers of companies report less time to complete due diligence prior to making a binding bid.

The research shows that by managing the investment in people with the same discipline and rigor they bring to the management of other capital investments, buyers and sellers can successfully overcome these risks. Overall, they can drive value through attention to such people areas as leadership and key-employee capabilities, effective retention strategies, clear culture communication and change-management planning, a global view of benefits management, the leveraging of experienced sell-side advisors and separation specialists and clear talent management/staffing plans.

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