How HR Can Make Mergers and Acquisitions Run Smoothly

Last month, S2Verify acquired New York-based Yale Background Screening. With the acquisition, S2Verify doubled in size overnight. The influx of resources is good news—it means a higher level of client service, support, and partnership for customers and increased revenue and profitability for stakeholders. 

But for legacy and new employees—at first–it meant a bit of uncertainty, getting to know new team members, and adjusting to unfamiliar team structures. 

Thankfully, however, we are well on our way to delivering on employee goals for the acquisition, which include better family-centric work-from-home options, opportunities for more interesting accounts, greater operational stability, and the resources employees need to do meaningful work (all features of a healthy, thriving, growing employment environment). 

Why HR Gets a Seat at the M&A Table

But, mergers and acquisitions aren’t always smooth sailing. And, in a time where employee engagement is at record lows, and turnover remains high, HR now plays a more central role in those transitional periods. 

According to a study by SHRM, 70 to 90 percent of all mergers and acquisitions fail to meet their expected strategic and financial objectives, largely due to HR-related issues such as incompatible cultures, clashing management styles, poor motivation, loss of key talent, poor communication, loss of trust, and uncertainty. 

In other words, lack of care for “people issues” is largely to blame when it comes to the failure rate of mergers and acquisitions–making HR critical to the success of any merger or acquisition.

How HR Contributes During Mergers and Acquisitions

But how can HR professionals and their teams actually lend their skills and expertise to drive a successful merger or acquisition? HR can provide value before the transaction (during the due diligence process), during the transaction, and after. Here’s how. 

Before

HR professionals have meaningful skills and expertise that can help companies navigate the due diligence process. 

During due diligence, information about talent and culture (plus benefit plans, compensation, employee contracts, etc.) can provide insights into the value of a business and its workforce. HR has a trained eye for this kind of thing–it’s what they do. They should be involved in the investigative process so they can quantify integration risks, identify people-related integration costs, and flag any other risks before the company moves forward. 

Due diligence is a time for HR to weigh in (qualitatively and quantitatively) on whether they think the cultures of the two organizations will be compatible or not, to identify where the fault lines are, and to determine how difficult it will be to ultimately merge those cultures. 

During

Human resources departments collect, house, and analyze some of the most important data for successful mergers and acquisitions: employee data. This data includes workers’ personal information, salary details, contract details, future bonuses, and more. 

Mergers and acquisitions bring about inherent legal risks, including labor and employment complications. Most modern HR teams have labor law experts on their staff or at least a collective working knowledge of how to stay compliant–especially if a reduction in force is needed.  

With a deep understanding of employee data and labor law, HR can provide management with more transparency around costs and timelines–and flag any risk associated with restructuring.

After 

When the deal goes through, HR is tasked with delivering on some of the most critical goals surrounding a successful merger or acquisition: 

• Retain key employee populations

• Maintain employee engagement and morale

• Stabilize and optimize the workforce

• Enable productivity improvements

• Help to restructure the business

HR leads the charge when it comes to creating policies that guide and govern the new organization, including new benefits and compensation structures for both workforces, attendance rules, time off policies, drug testing, privacy, and more. They’ll work to harmonize HR operations and technology like payroll and shared HRIS (Human Resources Information Systems). They’ll tackle job leveling and career pathing. If needed, they’ll strategize around relocation or remote work solutions. 

To keep top talent, HR can team up with management to create retention-focused bonus packages for key employees and manage communication with “star performers” –to keep a pulse on employee engagement and satisfaction so they don’t leave. 

Through all of this, HR’s primary role is to communicate with employees consistently—so they’re not blind-sided by any changes and have a sense of control through what may feel like an unstable time. 

Beyond logistics, effective HR M&A communication also involves providing information on the shared vision for the new company, the nature of the integration and anticipated benefits to employees and other stakeholders, and projections and timelines for future decisions. This kind of clear and consistent communication brings more humanity to the process and a greater sense of empathy, which ultimately helps reduce risk. 

For a closer look into how HR can better manage people and risk through extraordinary times–and bring more humanity to the process–check out this week’s episode of America Back to Work: Expert Interview Series with Catherine Morgan, an award-winning career transition expert who has been coaching clients and colleagues through job and life transition for more than 20 years. 

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