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.
A snapshot of the M & A scenario of 2015
2015 was a blockbuster year for M & A globally. At $3.8 trillion, this was the biggest year for this activity at any recorded point of time. This volume was better than the record set in 2007, in the time just preceding the slowdown. Although the “hot” industries, namely pharmaceuticals, beverages and food dominated, accounting for a quarter of all the acquisitions; the M & A scenario was not too fragmented. A few other big ticket mergers and acquisitions too, did take place.
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:
Understanding the cultural aspects of the employees
A 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. 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.
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.
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.
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.
This 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.
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. 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.