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Terrific question @najranmt! I am guessing that you are asking what are the most common challenges, so please correct me if I am incorrect.
The root of the most common challenges is Human Capital Due Diligence. This includes talent assessment, identification of key personnel to retain, evaluation of human capital programs (total rewards [benefits & compensation], performance management, retention, engagement, and L&D), and development of communication and retention strategies through the M&A engagement. While direct costs are always a key focus of the financiers throughout the engagement, not enough attention is paid to the long-term impact of the human capital components, some of which may cost a bit more upfront but pay significant dividends in the 1-3 year period post transaction close.
@QAHTFA00 is correct, that one of the most common challenges is “losing key employees from the target company”. The loss of key talent is often accompanied by the loss of intellectual property and institutional knowledge that was not appropriately transferred. With the appropriate talent assessment, identification of key employees, evaluation of human capital programs with a critical eye on those that best advance the transaction thesis and merged entities strategic plan, and carefully crafted communication and retention plans all performed and developed during the Human Capital Due Diligence phase, you will significantly increase the success of the transaction in the critical 1-3 year window post close.Great question – I think one of the key challenges for HR during M&A is getting a seat at that table when strategy is discussed. For HR gathering the right information to proceed at an appropriate speed is key to success. The organization needs to be clear about the motivations behind the M&A and then HR has a key role to play in seeing them fulfilled. By including HR in the business strategy, HR can then move with the speed and precision necessary to support the goals. If there is consolidation or redundancies, HR will need to focus on evaluating job roles and responsibilities and performance of individuals. If there is a need to retain key people, HR will need to gather information about company culture and employee engagement and continue to preserve the elements that attracted those individuals in the first place.
One of the key challenges is definitely keeping valuable employees, and keeping the morale of working level staff high.
One challenge for HR during the M&A process is getting all employees on the same page with regard to company policies and procedures. Another challenge is getting target employees up to speed with the acquirer’s business strategy and processes if the target is being absorbed into the acquirer. A good amount of employee training generally needs to take place.
I believe one of the most challenges related to HR is to integrate HR policy between the buyer and the acquired company in a way that does not adversely impact the employees of the acquired company.
I believe managing culture is a big consideration. I’ve seen deals drag out because of fear of culture loss by the target. They use that as leverage in the deal. That forces an acquirer to consent to things they would rather not and can drag out integration timeframes to allow for “appropriate” time for the target to acclimate and not lose their identity.
I would say maintaining employees engaged during the transition and retaining key performers. But the culture management is also an essential element to consider and deal with. It is critical inside but also outside of the company.
good question, which this is always the most questioned and answered topic. After the M&A, employees start to worry if their position is redundant or will their progress of career advancement be impacted. Human capital is always the most challenging part to be quantified during an M&A process. Human capital can sometimes be hidden until the right structure fully release the potential of the employee. Also, how the acquiring company can fully release the potential from the carry-over effect for some employees transitioning from one position to another? I think this is a million dollars answer. I only see this exercise (understanding the challenges of HR during M&A) as a continuous process and always start the questions from asking how can an employer truly see the values of an employee.
Totally agree with you @qahtfa00, as Mr. Micheal said “that one of the most common challenges is “losing key employees from the target company”
Thank you for sharing your valuable opinions
‘@mmaggiotto thank you for your terrific feedback which adds value to the question itself.
You are right, many HR aspects might be affected and should be considered during the integration. (talent assessment, identification of key personnel to retain, evaluation of human capital programs (total rewards [benefits & compensation], performance management, retention, engagement, and L&D), and development of communication and retention strategies.
In regard to not focus enough to the long-term impact of the human capital components, I believe if the HR long-term goals and strategies are liked to the Company’s strategies and objectives during the integration, this issue might be resolved and helpful for company.
Thank you @perlake for your participation as it adds a lot of value.
You are correct as getting a seat at that table when strategy is discussed will help in developing the short-term and long-term HR strategies. For HR gathering the right information to proceed at an appropriate speed is key to success.
“By including HR in the business strategy, HR can then move with the speed and precision necessary to support the goals.”
‘@[email protected] you are right. In addition to the policies and procedures, I believe having one culture will help to accomplish the targeted goals.
Thank you for your feedback
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