HR can play a role in mergers and acquisitions

HR can play a role in

mergers and acquisitions

HR can play a role in mergers and acquisitions

• There has been renewed spotlight on mergers and acquisitions (M and

A) following the all-time annual record volume arising from M & A in

2015. In that year alone, companies globally spent a breathtaking

amount of close to $4 trillion on M & A, leading to speculations that this

trend could continue for the current year.

• Although a couple of factors such as the upcoming American election

and the uncertainty that the European Union is currently going through

following Britain’s dramatic decision to opt out of the EU serve as

indicators to show that these levels are unlikely to be accomplished; the

industry continues to be optimistic when it sees M & A acquisitions from

a global perspective.

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A snapshot of the M & A

scenario of 2015

2015 was a blockbuster year for M & Aglobally. At $3.8 trillion, this was thebiggest year for this activity at anyrecorded point of time. This volume wasbetter than the record set in 2007, in thetime just preceding the slowdown.Although the “hot” industries, namelypharmaceuticals, beverages and fooddominated, accounting for a quarter of allthe acquisitions; the M & A scenario wasnot too fragmented. A few other big ticketmergers and acquisitions too, did takeplace.

The role of human resources

HR is the organization’s facilitator, carrying out a wide variety of tasks that

lubricate all the processes the organization carries out. It can play a

supporting cast in a number of areas. M & A is one of the main activities

that HR can support. HR can involve itself with the M & A process at the

time of initiation. It can consult management and be a part of the

discussion at the estimation change. While bargaining on the deal may be

a management issue in which HR may have an ancillary role; HR has a

lot to contribute when it comes to preparing the organization for a lot of

work that needs to accompany M & A. It can handle all the people-

related aspects of HR. The following are some of the areas in which HR

can play a very important role in a merger or acquisition:

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Understanding the cultural aspects

of the employeesA lot of discussion goes on about the financial aspects of an M & A. This of

course, is very important, because finance is the chief consideration in a

merger or acquisition deal. But what gets overlooked often is the cultural fit

of the merging organizations. Business is mainly about money, but every

organization has its own unique culture. When companies merge, they

merge not just their business dynamics, but their cultures. When there is a

huge cultural gap between the merging organizations; smooth conduct of

business is bound to get derailed. This is where HR can contribute like no

other department. It can make a proper and complete assessment of the

merging organizations’ cultures, which is central to the whole process of

bringing together organizations of different approaches, attitudes, styles and

outlooks, and synchronize, if not homogenize them.

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This is perhaps the most important function of HR in an M & A scenario,

because convergence on the cultural aspect, which is immeasurable and

intangible, is of very high importance to the merging entities.

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Addressing employee concerns

The financial aspects apart; mergers and acquisitions bring huge changes

into an organization. Almost everything that was in place could get

dismantled and new systems could be put up in their place. This is sure to

cause unease among employees, because humans are generally

resistant to change. It is in crucial situations such as this that HR has a

very major part to play. It should communicate freely and transparently

and assuage the feelings that employees, especially those of the acquired

company, go through. Putting them at ease with the changed situation is

very important, and goes a long way in motivating them to work

productively in the changed situation. Doing this is very important for the

organization that has been through change and helps it maintain its

decorum and productivity.

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Ensuring that benefits play out to

the employees

When a merger or an acquisition takes place; it is but natural that there

are going to be clear terms on what the management and the employees

are going to get from it. Terms and conditions for assigning benefits need

to first be put in place before the actual task of disbursing the benefits

takes place. This is another core area for HR, because again, being

placed uniquely as the organization’s facilitator in a number of areas; it

can execute the whole exercise and see to it that there is clarity and

transparency in the implementation of the terms of the benefits.

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Overseeing restructuring

An M & A is a rejigging of the organization in varying degrees. The

existing entity is almost certain to get completely restructured to make way

for a new one or could get subsumed into the new entity. This is long

drawn, and usually complex. Ensuring that this goes on smoothly is one of

the primary tasks for the organizations’ HR. Human Resources needs to

understand the nature and magnitude of the merger or acquisition quickly.

It needs to be a proactive player in the transition process, keeping a close

watch on the financial, legal and attitudinal aspects of a merger or

acquisition. HR can play a primary role in helping the organization

understand the implications of the merger or acquisition and accordingly

work towards making it happen smoothly.

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Supervising layoffsThis is a painful, yet inevitable byproduct of a merger or acquisition. The new

management takes a call on who stays and who doesn’t. Although the

management could have solid reasons to back up its decisions, it leaves a

bitter taste in the staff that it being retrenched. HR needs to address genuine

concerns that people in the firing line have. After all, most people are

concerned about their families and what the new structure could mean to

their livelihood.

This is another of the areas in which HR could be a soothing influence on the

employees whose careers could be on the line. Communicating honestly and

politely, while making the employees aware of the new realities, is what is

required of a responsible HR. it needs to take employees into confidence and

let them know that the echanged situation is going to do to them in the future,

and what options they could possibly pursue for their future.

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Preparing business continuity plans

Yet another highly critical task for HR is to prepare the organization’s

business continuity plans. Usually, an M & A results in the takeover of a

company by another. This means that all the activities and businesses will be

either taken over or performed differently. The entire process of acquisition

usually takes time, and in many M & A agreements, the old management is

asked to stay for a fixed period of time. HR has to make plans to phase the

whole operations out while keeping the business steady. An organization has

to have business continuity plans in the event of a merger or an acquisition.

HR has to drill this down to the management and the employees.

The most important quality that serves as the foundation to all these actions

from HR is openness. The more HR communicates on all these aspects to

the affected or the new employee; the better it is for the employees, HR and

the organization.

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HR stands as a pillar in

these situations to

communicate all that is

important and useful

during the M & A

process. Being open and

truthful about the whole

process makes life easier

for the affected

employees, and at the

same time, lifts the

morale of the incoming

employees or

management.

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