Why Mergers or Acquisitions Fail … and How HR Can Help Presented by Michael C. Jacobson, J.D. XpertHR Legal Editor
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Why Mergers or Acquisitions Fail…
and How HR Can Help
Presented by Michael C. Jacobson, J.D.XpertHR Legal Editor
A confluence of
events
A monster year for M&A
Tax Inversion
Failure Rates
MegaDeals
• 141 “mega deals” in
2015 worth $5
billion or more
• Almost $5 trillion
worth of total global
M&A activity
• 42 percent YOY
increase
• Failure rate
consistently hovers
between 70 and 90%
• Would you rather?
• Pay American
tax on foreign
profits; or
• Pay foreign tax
on foreign profits
Primary strategic drivers
of M&A
Revenue
• New profit streams
• Tax inversion
Competition
• Gain market share
• Push a competitor out
Regulation
• Legislation
• Oversight
• Litigation
Why would a startup
want to go public,
anyway?
Increased scrutiny
Crushedentrepreneurial spirit
Profit sharing
M&A in the news
10.4
bill
ion
26.2
bill
ion
66
bill
ionBayer
acquired
MonsantoMicrosoftacquired
LinkedIn Danoneacquired
White Wave Foods
Belle of the ball
Experience &
knowledgeProfitability
Compliance and legalexposure
RetentionSomething
special
What makes a company an attractive
target for a “mega deal”?
Quantitative or
qualitative?
Quantitative
Balance sheet
Market share
Qualitative
Talent
Intellectual property
Answer the
big questions first
Why are we interested in
pursuing this deal?
What are we flexible and
inflexible on?
What is the right style for
the deal?
Who are the real leaders
within the target
company?
How do the leaders build
relationships to facilitate
achievement of goals?
Case Study:
A merger that worked
• In order to succeed they had to avoid a culture clash
• Consensus-building or streamlined decision-making?
• Who are the right people to lead into the future?
• Should we impose our new system on our colleagues or should we
(ahem) build consensus?
Speak up, HR
• Is your company a buyer or a seller?
• Pick the right moment or series of moments
• Provide something tangible to back it up
• The squeaky wheel gets the grease
Data analytics:
Two sides to
the coin
- CEOs want more of this
- Customizable to fit goals
- Poorly understood
- Risk
- Self-serving
Pro
Con
M&A Due
Diligence for HR
Part 1: Financials
Balance sheet
ProductionAudit,Taxes
Future
M&A Due Diligence for HR
Part 2: Technology and IP
• Patents, patents
pending and litigation
• Copyrights, trade
secrets, client lists
• Hardware and physical
property
• Software, algorithms
• Talent
M&A Due Diligence for HR
Part 3: Corporate Matters
Corporate Governance
Structure
Mgmt hierarchy
Oversight
Insurance
M&A Due Diligence for HR
Part 4: Strategic Fit
• Full integration necessary?
• Cost savings and synergies?
• How have mergers,
acquisitions or restructures
impacted the target company
in the past?
*Important*
• Is your company a strategic fit for the industry or
jurisdiction that you’re expanding into?
• Assess the competitive landscape
• What are the advantages and disadvantages of
the target company compared to the industry?
Case Study:
A merger that failed
• Both companies agreed on describing the move as a
“merger of the equals” but they couldn’t live up to
that standard
• Daimler – German company described as
“conservative”
• Chrysler – American company described as “daring”
• Culture clash manifested in multiple ways
• Early integration was fraught with resignations and
terminations, a sure sign of the lack of buy-in
M&A Integration for HR:
The Insider’s View
Most Common Integration Issues
• Speed, clarity
• Responsiveness
Most Common Deal Breakers
• Poor cultural fit
• Lack of vision, strategy
Most Common Indicators of Success
• Employee retention
• Customer retention
M&A Integration for HR:
Change Management
• Imagine dealing with all of the
“people issues” that arise out of a
merger or acquisition on a “case by
case” basis. Is that doable?
• Instead, this process can be
standardized, buoyed by data and
analysis and delivered across
wide swaths of employees.
• Start at the top
• Work your way down
• Build consensus
• Be realistic • Delegate with purpose
• Stay in touch
Post-Restructure Issues:
Evaluating At-Will &
Contract Status, Part 1
• The EAWD does not exist in the UK
• UK terminations are restricted by
statute
• Advance notice
• Due process
• “Unfair dismissal” cases
• The EAWD was “invented” by
Horace G. Wood in 1887’s “Master and
Servant”
• Wood cited four cases in support of his
“rule,” but none of them actually did.
• What happened next?
Post-Restructure Issues:
Evaluating At-Will &
Contract Status, Part 2
Why did American
society allow this to
happen?
• Revolution, War of
1812 still fresh
• Civil War was recent
• Prevailing “Laissez-
Faire” attitude
• Social Darwinism
and rugged
individualism
• A formal move away
from the UK system
Why did the legal system
allow it to stick?
• Richard Posner:
Overcoming Law (1996),
Cambridge Harvard
University Press
• Richard Epstein: The
Global Workplace (2007),
Int’l and Comparative
Employment Law
• Alan Hyde: Working in
Silicon Valley (2003), High
Velocity Labor Markets
Post-Restructure Issues:
Performance
Management and Career
Development
• Culture clash or seamless
transition?
• Results-based evaluation or
subjective managerial input?
• Both?
• Top-down,
conservative or free-
thinking and agile?
• Consensus-builder or
authoritarian?
• Tenure-track or strictly at-will?
• Rate of turnover and loyalty
• Social media presence and feedback
• Effectiveness of performance management
Post-Restructure Issues:
Discipline and Termination
Related to Social Media Usage
What You Can Do
• Set and enforce a SM policy
• Set the right expectation of privacy
• Have employees regularly sign and
acknowledge the SM policy and PA
• Access employer-provided electronic
devices w/prior notice or warning
• Access browser history and other info
on employer-owned equipment like
computers and data severs
• Key card and surveillance data
• Interview employees re: SM incidents
• Make decisions in good faith
What You Can’t Do
• Discipline or terminate for “protected
concerted” activity (NLRA)
• Intercept or solicit info that was not
intended for your eyes
• Hack into password protected
devices without permission
• Demand access to an employee’s
personal electronic device without
consent
• Demand log-in and password info for
SM sites where state laws prohibit it
• Search through personal email that
has not been accessed at work
• Set over-broad rules about conduct
and discussion during investigations
Post-Restructure Issues:
Layoffs, RIFs and
Plant/Site Closings
• Federal WARN Act
• 100+ FTEs
• 6+ months or reduction in
hours by 50%+
• State-specific “mini-WARN”
legislation
• Lower employee thresholds
• Different circumstances and
exceptions
Post-Restructure Issues:
Evaluating Global
Compliance Exposure
• Screening people, partners
and clients for compatibility
• Normalizing handbooks,
policies and training
• Overcoming language and
cultural barriers
• Boots on the ground
Post-Restructure Issues:
Evaluating Industrial
Compliance Exposure
• Coal mining*
• Petroleum processing*
• Utilities
• Cars
• Banking*
• Air travel
• Fishing
• Oil and gas extraction*
• Pharmaceuticals*
• Deep sea/coastal
transportation
*Less regulation under a Trump administration?
Post-Restructure Issues:
New World,
New Handbook
• 50 states, 50 handbooks
• Municipalities?
• A handbook or
supplement for each
jurisdiction
• Translated into every
language that your
employees speak
• Up to date and compliant
• Clear and easy to
understand
• Accessible in its most
current form
Invest in the Success of
Your Own Deal
• Training pays for itself
• It’s business AND it’s
personal
• Make it interactive and
test competency
• Customize training
platforms to fit right
Questions, Comments?
Thank You!
Learn More
About XpertHR!
Contact us at 1-855-XPERTHR or
Learn more at:
www.xperthr.com
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• LinkedIn: XpertHR-USA
• Twitter: @XpertHRUSA
• Blog: www.xperthr.com/blog
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