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People issues are business issues in M&A

To ignore or underestimate people issues in mergers and acquisitions is to ignore a core business issue, so it is important to include HR early in the transaction process

Source | | Kelly Karger | Gabe Langerak | Alberto Mondelli

We recently discussed the role of HR in M&A with a client, and made a regular comment about the role of culture in M&A: “No company has ever stopped a deal from happening because of culture, but looking at the reasons deals fail — culture is often blamed by the leadership as a key reason.” This time, there was a CFO in the room who challenged this. We grew excited, could we have found another of those relatively rare organizations that consider culture in their due diligence phase?

While the CFO believes they look at culture — and feels it is important — his comments were all about gut feelings and alignment of values. The chief human resources officer (CHRO) in the room immediately took the opportunity to state that neither culture assessments nor other people related topics were considered in previous deals, unless they were directly translatable into the financial modeling. Sound familiar?

This situation remains true in many companies, and the fundamental flaw in this situation is not recognizing that people issues are business issues, and corporate transactions are all about achieving stated business goals. To ignore or underestimate people issues in a transaction is to ignore a core business issue.

Globally, we do see a trend of HR, as leaders and champions of the people issues, receiving a seat at the table earlier in the deal life cycle — much like the aforementioned client — and expanding their remit to include aspects beyond the obviously financial. HR leaders have learned how to quantify their companies’ deal-breakers, red-flags and synergy opportunities. As a result, deal teams have included HR to help get the people strategy of transactions right in order to deliver on deals’ goals.

Identifying the people risks

During a transaction’s early stages, all functions are starting from the same vantage point:

  • Why this deal?
  • What is the strategic business rationale of this transaction?

With this common basis, HR can work collaboratively with the deal team and functional leaders to identify the true people risks (and opportunities) that may emerge

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