Michael Maggiotto Jr
People issues: Inability to retain top talent, incompatibility of culture, loss of intellectual property when top talent is lost.
Many of the responses above are very similar, containing culture and due diligence as critical reasons. The three I mentioned can be addressed during the due diligence phase. According to several M&A professionals, while there is strong financial, legal, and operational due diligence, Human Capital Due Diligence is significantly lacking in most transactions. Depending on the study, the 1-3 year post-close failure rate appears to average over 60%.
With strong human capital due diligence, cultural integration elements can be resolved, strategic workforce planning can be aligned with the new vision of the combined entity, and appropriate initiatives developed to retain top talent. Human Capital Due Diligence often focuses on total rewards plan alignment (determining the most cost effective solutions) and where certain human capital compliance risks exist. These are important but focus on immediate costs. For the merged entity to be successful long-term, there needs to be a better understanding of the future state roles that do not exist, the succession planning to take current talent and grow them into those roles, and an identification of the top talent who needs to be retained either as successors to the future state roles or as critical to the current organizational performance success.