Organizations are created to bring in economic value and a fair return to the shareholders. In a dynamic business eco-system, this objective is met through competitiveness, market leadership, market share and growth both through organic and inorganic methods. When organizations go for mergers or acquisitions, the basic aim will be to look for strategic, business portfolio and product or process fits. The board of directors looks for synergy and /or diversification opportunities when considering such inorganic growth strategies. At times, mergers or acquisitions may be solely aimed at new markets or new geographical sectors for global reach coupled with cost arbitrage which some of the developing countries like India and China can provide. In short, most of the considerations revolve around business factors aimed at monetary and or market advantages and such activities are mostly piloted and driven by finance and marketing professionals and consultants.

People create organizations and growth and prosperity of business benefit people and the larger community of stakeholders. However, mergers and acquisitions throw up great challenges in the “People Dimension” before, during and after the event. Many such issues can be foreseen and prevented with a little more understanding while others can be taken care of with imagination and innovative execution of the merger/ acquisition process. A proactive stance and involvement of the HR staff will go a long way in mitigating many of the HR issues and challenges to achieve the desired “People Fit”.

The diverse business entities lined up for merger or acquisition comprise of people with different culture, work ethics, career goals and compensation framework. When such steps are attempted globally across geographies, the additional cross cultural and ethnic dimensions also manifest. There have been many instances where arch rivals in the market decided to merge for business reasons [remember the Lipton-Brook Bond Merger a few years back in India]. Such scenarios bring additional HR challenges and conflicts needing very sensitive handling. A well thought out HR strategy should be integrated to the M&A Plans to address such issues and the Due- Diligence process before decisions are taken should cover the following areas –

A team of HR experts from the organization which initiated the M & A dialogue carries out an extensive due diligence through one on one and one on many discussions, attending presentations by the target company and also verify documents, records and process documents to collect verifiable evidence on claims made. Transparency, mutual respect and effective communication will help this process. At times, companies enlist the services of consultants and experts from outside to cover special areas where such competencies do not reside inside the sponsor organization.

A detailed due diligence followed up with forthright recommendations for or against M&A should be available to the decision makers prior to the event and detailed and transparent discussions should happen before a decision to go ahead is taken. However, once a decision is taken, the HR staff should honor such decisions and own up the alignment process to achieve the larger business goals.

The post decision process in M&A throws up many HR challenges, most of it centered around an alignment process for the merged or acquired entity. The major issues confronted and steps to be taken are -

This process can take months and needs sustained and progressive efforts to achieve strategic and operational results in the people dimensions. A road map, with milestones for results need to be prepared and followed through for desired outcomes. HR teams from different entities with or without the assistance from independent consultants should form task forces for such activities. Their activities should also be subjected to management review periodically to ensure that targets are achieved in time. The fact that this has to be achieved without loss of productivity brings in additional complexity to the whole HR process.

While the financial and legal/statutory framework can be closed within a reasonably stipulated time frame as per the laws of the land of individual entities, the cultural and emotional integration of employees take a long time to happen. This is, therefore, a very sensitive phase to ensure long enduring success for the merged/acquired entity to grow and prosper. A well thought out and balanced task force should be assigned this task for a period of at least two years post merger to take suitable steps to sustain the success achieved during the M&A phase.

Some of the major deliverables for the HR task force could be –

Mergers and acquisitions are the avenues open to business to synergize and jumpstart business growth and these have to be conceived, planned, monitored and facilitated over the duration of the process with well thought out people centric strategies and execution of sound HR processes with experts driving the efforts continuously and progressively. Management review should be built into this process with milestones and deliverables to achieve the strategic goals with minimum adverse impacts, costs and pain points.

Author: Brigadier [retired] K Harikumar,
Executive Director,
Hyderabad Software Exporters Association.