Moving People, from Deal Downside to Force Multiplier

Few business transactions are as perilous as merging or acquiring companies.  Studies reveal that between 70 and 90 percent of mergers and acquisitions fail. The common thread in all of them is people.  Human capital issues are often overlooked, change-weary people leave, or culture fails to adhere employees.  Pre-deal diligence usually focuses on financial, operational, and legal outcomes, but treats lightly how those outputs are achieved – specifically, the people.  Human capital is a dynamic company asset and by its very nature resists definitive analysis leading to uncertainty and risks.  How can human capital be turned from potential deal downside to force multiplier? 

With a proper focus on human capital, people can become a deal strength.  Here are some acquisition activities that increase the likelihood of human capital success. 

  • Utilize a Business Alignment Survey.  Unique to Insperity, our specially designed methodology looks deeply into all human capital criterion including leadership alignment, leadership potential, HR practices, processes and procedures, communications, compensation, objectives, legal and regulatory risks and more. We thoroughly review HR  documentation including contracts, agreements, and settlements to uncover ongoing HR issues.  This process shines a light on HR strengths, weaknesses, and potential pitfalls. 
  • Thoroughly assess culture.  One of the most frequent reasons for failed mergers is cultural misalignment.  No two companies’ cultures are alike and merging requires the intentional  creation of a whole new culture.  Company culture creates a sense of belonging and commitment to the company.  Absent an embracing culture work is drudgery and just something to be endured eight hours a day.  
  • Don’t underestimate change management.  Mergers get personal.  They disrupt jobs, positions and relative status, and restructure compensation and benefits.  These can disillusion and discourage employees who are heavily invested in their careers.   Change management efforts must communicate merger benefits, implementation steps, and progress.  It should help employees develop trust and align themselves with the new organization and provide them what they need to explain any impacts to their families.    

Analyzed carefully and given proper attention HR can be a merger/acquisition process strength.  Insperity’s Business Alignment Survey and our years of experience is second to none in supporting complex human capital aspects of mergers and acquisitions.     

For more on mastering the human capital side of mergers and acquisitions, get the book: Paul Sarvadi, (2019) Take Care of Your People, The Enlightened CEO’s Guide to Business Success, ForbesBook. 

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