How closely should HR and Finance be connected throughout a merger?

This topic contains 13 replies, has 14 voices, and was last updated by  Renata Porto 8 months, 1 week ago.

Viewing 14 posts - 1 through 14 (of 14 total)
  • Author
    Posts
  • #85069

    Jenny Ewen
    Participant

    What are the key areas that HR and Finance should be connected on in DD, close and integration?

    #86744

    Gabriele Frigerio
    Participant

    I think they should continously liaise, having clear business model outcome and answering whether current resources would become a cost (exit strategy?) or an opportunity.

    #87336

    mikep.mclean
    Participant

    HR and Finance need to be closely connected but only related to costs and expense considerations of personnel decision making. As part of the transaction, some employees may get promoted, some may lose their jobs and some may be lateral with a different comp structure. In any case, Finance will need to opine on the implications of personnel decision making.

    #89448

    Josh Liang Wee Ooi
    Participant

    I believe there needs to be very close co-ordination between HR, Finance and the project leader for several reasons. Firstly, HR involves all the internal stakeholders from the target and the principal. Apart from the administrative elements of ensuring that compensation plans are aligned, labour laws are met and that there are no hidden skeletons in terms of personnel litigation (all of which costs money!), HR is also critical in headcount planning, potential rationalizations and integration of the two companies workforce culturally and operationally. If there are red flags in any of these area that could cause financial and commercial assumptions to off, they need to be addressed prior to any deal closure.

    #90493

    Shayekh Ahmed
    Participant

    Finance needs HR input on compensation and headcount planning to make future budgets and plans. HR needs to know the financial targets in order to plan the headcount and compensation packages. Therefore both need to work together.

    #90685

    Anne Becker
    Participant

    HR and Finance should be very well connected as the personnel costs/salaries/etc. feed into the financial analysis. If you create work streams with Finance/Tax being one, HR should be part of it.

    #92269

    Melvin Ashley
    Participant

    They should be working closely. One of the biggest causes for failure in M&A is culture/people. In addition the people in finance need input from HR on compensation, executive benefits, exit planning for executives of the acquired company etc.

    #94033

    From my experience, HR and Finance should be in constant communication during all the phases of a project where people and numbers are involved…and this is the case from start to end : when deciding who is going to be involved from the acquiring company to the due dilligence of the target’s organisation, the evaluation of existing contractual terms, the calculation of potential severance packages, the calculation of new terms for people integrated, tax and legal impact etc
    Basically and to make it simple, Finance must always double check HR assumptions and calculations while HR should always provide updated tax and legal framework existing in the target company and most importantly in a cross border M&A.

    #95557

    Erik Cornelius
    Participant

    In addition to the preceding, HR will continue to identify risk factors on employee flight that need to be channeled to Finance… conversely, Finance can help identify available budget to help mitigate key person risk that funnels back to HR. In the last acquisition I did, Finance and HR were in constant communication, both because of the new benefits factors uncovered in the new geography, and the implications this had for the budget.

    #96990

    Dale Deg
    Participant

    Both HR and Finance need to be in constant communication with each other through out all phases of DD, close and integration. Key reasons for this is how each area’s “data and findings” are needed by the other area. For example, if there are retention incentives for key personnel, those would need to negotiated by HR but captured in any budgeting during strategy development and in forecasting, but wouldn’t be part of the historical DD financial data.

    #97112

    Fathurrahman Latama
    Participant

    HR and Finance should work together in DD especially if the target and the acquirer in the same industry. Chances are it might be overstaffed, M&A requires lots of money and aims to create value, and the value would not be there if the operational cost would be bigger because of salary. Finance and HR would then work together to plan the budgeting for PMI.

    #99789

    Bianca Stafford
    Participant

    I do not believe that these two functions need to work too closely together, however they should come together on human resources costs, such as: training and development, salary and benefits and the like.

    #100003

    Cheryl Taylor
    Participant

    Pre/post integration collaboration between HR and Finance is essential for the following reasons –

    ** correct accounting of post buy-outs for highly compensated resources
    ** accruals of delayed compensation decisions
    ** understanding of cost required to merge benefits, payroll systems, payroll processes
    ** discussion of details of financial impact of layoffs if any

    Additionally other departments will have HR related activities that have financial implications and HR should be front/center in those discussions. A close relationship with finance will limit surprises related to resource management e.g. legal settlements related to numerous situations.

    #101139

    Renata Porto
    Participant

    Every integration effort carries a financial impact (gain or loss). From an HR perspective, you would be looking at all costs associated with human resources (reduction, compensation, mapping of roles and grades, creating a new organizational structure, etc.)

Viewing 14 posts - 1 through 14 (of 14 total)

You must be logged in to reply to this topic.

Loading.. Please wait