Positioning for M&A Success: Putting People Into the Equation

Bringing together groups of previously unacquainted employees operating in their own distinct cultures is challenging, and most organizations going through a merger or acquisition recognize and try to address these challenges. But often people and culture issues are treated too abstractly, too informally or too late in the process.

According to a new Towers Watson pulse survey, organizations going through an M&A have a greater chance of meeting the goals for their deal if they keep workforce issues top of mind, and address those issues thoughtfully and consistently throughout the entire transition process.

The survey, which drew on the perspectives of more than 400 senior HR and business executives from 25 countries, compared the practices of companies that consider their recent M&A transactions to have met the primary objective for the transaction to those that felt their deal was less successful. Among the companies judging their deals successful, the most effective approaches included:

• Focusing on effectively and openly communicating with employees throughout the transition
• Emphasizing strategic people management, including influencing the role and behavior of leaders in the transaction
• Focusing on and measuring how the deal affects people — more frequently than less successful companies
• Involving HR professionals earlier and more frequently in the M&A process to ensure the right attention to workforce issues and help leaders address those issues appropriately

In fact, companies reporting successful deals involved HR more often in all phases of the M&A transaction than did those that met fewer of their primary objectives: 

• Target evaluation — 57% more often
• Due diligence — 58% more often
• Integration planning — 37% more often 
• Integration implementation — 33% more often

The research also demonstrates that companies that felt their deals were successful measured key “people” indicators — like employee engagement and talent acquisition — much more frequently than did those rating their deals as less successful. For instance:

• 42% of successful deal makers measured changes in employee engagement, and 39% measured talent acquisition and retention. 
• Only 28% of companies judging their deals less successful viewed these metrics as important factors in determining the overall status of an M&A deal.

Perhaps the most surprising finding from the data is that in more successful transactions, HR was nearly three times as likely to have supported the deal's priorities by influencing leaders’ behavior related to the M&A transaction.

Companies with deals deemed successful also tend to have an HR function that:

• Understands the company’s primary objectives and strategy
• Identifies the actions necessary for successful cultural change and integration
• Deals adeptly with the “people” side of a transaction, especially in terms of leadership behavior, communication and talent retention
• Develops people management processes and programs that align with and support leaders’ goals for achieving a new culture that drives business performance

The new survey confirms what Towers Watson research and client experience have shown: People issues matter in an M&A, and giving appropriate attention to them can make a huge difference in achieving desired results. Companies that involve HR early and more comprehensively, and focus on and measure the human as well as financial outcomes of deals, often have much greater success.

Methodology

The online pulse survey targeted HR and business executives in medium to large organizations that had completed at least one merger or acquisition within the last three years. Surveys were completed in the fall of 2009. The survey report was originally published in December 2009. The theoretical margin of error for a sample of this size is ±4.87% at the 95% confidence level.