[Jenny EwenParticipant]

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

[Gabriele FrigerioParticipant]

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.

[mikep.mcleanParticipant]

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.

[Josh Liang Wee OoiParticipant]

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.

[Shayekh AhmedParticipant]

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.

[Anne BeckerParticipant]

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.

[Melvin AshleyParticipant]

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.

[Alexandros TasopoulosParticipant]

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.

[Erik CorneliusParticipant]

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.

[Dale DegParticipant]

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.

[Fathurrahman LatamaParticipant]

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.

[Bianca StaffordParticipant]

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.

[Cheryl TaylorParticipant]

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.

[Renata PortoParticipant]

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.)

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