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Mergers and Acquisitions

HR's Role in Mergers and Acquisitions

What Is HR’s Role in Managing Mergers and Acquisitions?

Managing mergers and acquisitions (M&As) is like trying to balance a high-stakes game of Jenga — you have to delicately adjust each piece while making sure that the entire structure remains stable. M&As hold major potential for driving business value, but there’s a lot of chaos and change that goes along with that. HR plays an important role in guiding the workforce through the process.

The changes that occur during a merger or acquisition can be difficult for employees to adjust to. They may feel like they’re being asked to do more work than before or that their job is no longer as secure as it was. Employees across both organizations may struggle to build relationships with new colleagues who come from different backgrounds or have different values. As a result, it’s important for employees to be prepared for these changes and learn how to cope with them.

Explore how mergers and acquisitions affect employees plus ways to maintain communication and support people through this significant change.

3 Ways M&As Affect Employees

When two companies merge or one company acquires another, there are bound to be changes for the employees. From changes in roles and responsibilities to company culture, here are three major ways mergers and acquisitions can affect employees.

Changes in Management Structure

Management structures and norms are subject to change during mergers and acquisitions. This can be difficult for employees to adjust to, especially if they’re used to having a certain chain of command. It’s important to communicate with employees about any changes in management structure so they’re aware of shifts in reporting practices that may affect their daily responsibilities.

In an acquisition situation, employees from the target company are especially vulnerable to changes in management structure. They may be used to a tiered management structure with a lot of hierarchy and little autonomy, for example, but have to acclimate to an organization with a much flatter structure and less oversight.

Having a clear plan and effective communication regarding how structural changes will play out can help employees ‌adjust.

Changes in Roles, Responsibilities, and Expectations

Changes in roles, responsibilities, and expectations are some of the most common ways in which mergers and acquisitions affect employees. This is where you likely will see the most anxiety and field the most questions from employees who fear for their jobs. When two companies merge, or one acquires another, there’s often a lot of overlap in roles and responsibilities, which can lead to confusion and conflict among employees.

Additionally, the new company may have different expectations for employee performance and behavior. As a result, it’s important for employees to be aware of these changes and how they may affect their priorities.

The new company may decide to reorganize its workforce, for example, which can mean reassigning employees to new departments or locations or changing the way work is divided among employees. Or, the new company may have different policies and procedures than the previous companies. Employees may need to learn new rules and regulations, or they may be expected to meet different standards of performance.

To counter feelings of anxiety and head off questions, make it a point to over communicate to employees rather than undercommunicate.

Changes in Company Culture

Culture is one of the workplace elements most susceptible to change during an M&A. There are a few ways mergers and acquisitions can affect company culture.

The merger or acquisition may bring different values to the new company. For instance, if one company is known for its customer service while the other is known for its innovative products, the new company may have to find a way to balance these two values. This can be a challenge for employees used to one set of values who now have to adapt to another.

Finally, there may be changes in the workplace itself. For example, if two companies merge, they may have to consolidate their office spaces or move to a new location altogether. This can be disruptive for employees and can increase their stress and anxiety. For those who are hybrid or remote, being unable to see some of these changes taking place (as they would in an office setting) may contribute to feelings of overwhelm and lack of control.

Robust internal communication can help employees cope with drastic changes to their daily lives as employees.

Why Most M&A Deals Fail to Realize Their Potential — and What to Do About It

M&A transactions are risky: They require a strong strategic plan and concerted efforts from a lot of key players. It can go wrong in a lot of ways. But even if everything works smoothly, you may not realize the deal’s full potential.

Explore some of the reasons mergers and acquisitions fail to realize their potential, and HR’s role in reversing the trend.

Failure to Build a Compelling M&A Strategy

An M&A strategy is a plan of action companies use to identify and analyze potential acquisition targets, evaluate the feasibility of the deal, and oversee ‌post-merger integration. Unlike a joint venture, where companies briefly join forces to meet a shared objective, mergers and acquisitions are marked by fundamental changes in how an organization operates, what it values, and its long-term goals — and that requires a strategic plan.

Strategic M&A program planning typically involves researching and analyzing the target company’s financials and operations and building a compelling business case for the deal. It also accounts for the motivations of both parties and the potential impact of the transaction on the larger market. M&A strategies also involve structuring and negotiating the deal as well as planning for potential regulatory and tax implications.

HR leaders have to address several people-related questions at the strategy stage. Proactively address these questions to fill out the people part of your M&A strategy:

  • How will the current HR policies, procedures, and practices be incorporated into the new merged organization?
  • What will the organization’s staffing and recruitment needs be?
  • How will you handle employee compensation, benefits, and incentive plans?
  • How will ‌organizational structure and reporting lines be affected? Organizational culture?
  • How will employee morale, motivation, and engagement be maintained?
  • How will labor laws, regulations, and collective bargaining agreements be handled?
  • How will the organization use HR analytics to measure the success of the M&A?

Addressing HR questions during M&A strategy planning can help ensure a smooth integration process and reduce the risk of unwanted surprises.

Deficiency in the Valuation and Due Diligence Processes

Publicly traded target companies have ready-made valuations based on their stock prices and other publicly available data. However, that valuation doesn’t always capture the value of the people involved. (And that’s even more complex for private companies, which have no public data to serve as a starting point.)

A new workforce and all of its accompanying skills and abilities bring tremendous value to the acquiring organization. At the same time, though, merging workforces, people processes, and company cultures can introduce a lot of risk.

Your role in a valuation ahead of an M&A deal is to provide data and analysis of the target company’s workforce. This may include information on the number of employees, salary information, employee morale, and trends in attrition — any data that could demonstrate how merging this new workforce with your existing one provides a competitive advantage to the business.

HR also will be involved in the due diligence process to identify people-related risks that might negate the value of the deal. The due diligence process involves providing information on the company’s compliance with labor laws and regulations as well as any potential bargaining obligations. Also, consider any potential risks to the acquiring company in terms of integrating the two companies’ people, culture, and policies.

Challenges During Post-Merger Strategic and Cultural Integrations

Some organizations develop a cross-functional team to serve as a temporary integration management office (IMO) during deal implementation and the following months. The IMO typically consists of members from both the acquiring and target companies and is responsible for developing and implementing integration plans, managing the integration process, and tracking the progress of the integration.

HR leaders should be heavily involved in assessing the potential impact of the acquisition on the workforce and in developing strategies for integrating the two organizations.

You’ll be responsible for developing and implementing policies and procedures that are consistent with the new organization’s core values and culture. HR also may be tasked with leading the development of an effective onboarding strategy as well as providing assistance in onboarding new employees. HR should be involved in developing and facilitating the communication and employee engagement plan for the new organization.

3 Tips for M&A Communication with Employees

Mergers and acquisitions can be tough on employees, but there are ways to manage the transition smoothly. Here are a few tips for implementing a merger and acquisition communication plan.

Communicate with Employees Early and Often

When undergoing a merger or acquisition, it’s crucial to communicate with employees early and often. This will help ensure a smooth transition for all parties involved. Since employees need to understand what’s happening and why so they can prepare for any changes, be sure to answer any questions they have honestly and openly.

There are a few key things to keep in mind when communicating with employees during an M&A: be clear, be concise, and be transparent. It’s also important to be understanding and patient and to remember that employees may feel anxious or uncertain during this time.

Schedule regular meetings with employees to update them on the status of the M&A and answer any questions they may have. Use an employee communication platform, such as Enboarder, to distribute tailored content across the workforce. Avoid using technical jargon that employees may not understand.

Remind managers to address concerns directly with team members in group meetings, one-on-one check-ins, and during points in-between scheduled meetings. Develop talking points managers can use to maintain engagement while leading their teams through change. Deliver content to managers at regular intervals to help them develop a communication cadence.

Your employees will appreciate knowing what’s going on as much as possible. Keep them updated on the progress of the merger or acquisition, and let them know what changes they can expect. If you’re not sure about something, it’s better to tell them that than to try to hide it — employees will appreciate your honesty.

Be Sensitive to Employee Concerns

When two companies merge or one company acquires another, there are bound to be some employee concerns. After all, change can be scary, and people often fear for their jobs when a new company comes in. As an employer, it’s important to be sensitive to these concerns and do what you can to ease your employees’ fears. Try to address these as best you can, and let them know that you’re there to support them through this transition period.

Encourage your employees to ask questions about the changes happening in the company. This will help them feel more comfortable with the changes, and it’ll also give you a chance to address any misconceptions they may have. Deliver customized content related to each employee’s role or team, helping them understand what changes to expect and how they affect them specifically. There’s no substitute for personalized, meaningful communication during such a turbulent moment in the employee experience.

If at all possible, try to assure your employees that their jobs are safe. Many people fear for their jobs when a merger or acquisition happens, so this is an important step in easing those fears. If you can’t make any promises, be honest about that too — but let them know that you’re doing everything you can to protect their jobs.

Many times, employees worry about change simply because they don’t understand it. Help them understand why the changes are happening and what benefits they may bring. If you can show your employees that the changes are positive, they’ll be more likely to embrace them.

Have a Plan for Managing Change

It’s important to have a clear plan for how the merger or acquisition will play out so employees know what to expect and can prepare accordingly. Having a timeline for various changes can also be helpful in managing employee expectations.

One way to manage change is to create a task force made up of employees from both companies. This task force can be responsible for communication and making sure that everyone is on the same page. They also can help with training employees on new systems and processes.

Another way to manage change is to have regular meetings with employees. During these meetings, you can provide updates on the merger or acquisition and answer any questions employees have. These meetings will help keep everyone informed and reduce anxiety about the changes.

Don’t sleep on the importance of connection during mergers and acquisitions. Connecting people with each other is the first step to creating a unified culture. Facilitating connections between people guarantees a better support network and greater confidence during the transition period.

Finally, it’s important to be understanding and flexible during this time of change. Employees may need time to adjust to the new company culture and way of doing things. By being understanding and flexible, you can help make the transition smoother for everyone involved.

Mastering Change Management in Mergers and Acquisitions

The impact of mergers and acquisitions on employees can be profound, but with the right strategies in place, these changes can be used to create a more connected and successful workforce. Connecting with employees through effective communication and change management strategies can help to ensure a smooth transition and create a more engaged and productive workforce. By taking the time to consider how the changes affect employees, organizations can ensure that the impact of mergers and acquisitions is ultimately positive.