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Lelia Lim

The Pitfalls of HR in M&A

During M&A, many companies spend too much time focusing on the legal and financial issues, forgetting the impact that HR has on its employees during the process. It’s counter-productive to create a dynamic new company, only to lose your best talent due to low morale and decreased productivity.

One of the biggest reasons for failure in M&A is poor integration. The Asia-Pacific region has a meagre retention rate of employees after M&A. According to Willis Towers Watson, most acquirers globally retain about 80% of their workforce, but in Singapore, that number is lower at 70%.

So, what part can HR professionals play in overcoming this pitfall?

Highlight the importance of the soft issues – firstly, remind stakeholders that M&A is not all about numbers and that people issues can be more threatening to M&A success.

Assess the risk of a culture clash – understand whether the entrepreneurial nature of the company it’s planning to acquire or merge with causes conflicts or healthy competition?

Consider culture, communication and change – the successful joining of two cultures is vital. The degree of misalignment in the values and beliefs of the target company and the acquiring entity contribute considerably to M&A challenges. The areas of difference must be identified, cultural challenges anticipated, and steps taken to integrate the two cultures. HR also plays a crucial role in communicating effectively to both ease stress and anxiety around the changes and outline the benefits for employees. Poor communication creates distrust and uncertainty, leading to lower employee retention.

Create a focused HR M&A team – this must be solely focused on the M&A rather than the running of the business. The team is responsible for leading the change process, assessing cultural sensitivities, and retaining and motivating key employees.

Decide who stays and who goes – M&A can lead to layoffs and a re-structure. HR must determine the new organisational configuration, and ensure the right talent is streamlined, retained and motivated.

This is all fine and well, but for HR to deliver on the M&A deal, they must have the right capabilities to be able to do this. They must be proficient in:

  • Developing HR’s strategic planning, leadership, and technical capabilities
  • Cultivating an understanding of the business, from the macro organisational design to the micro day-to-day operations.
  • Having clear KPI’s that include retaining key talent, integrating cultures and managing change.

The success or failure of an M&A deal is dependent on various contributing factors, with human resource integration a substantial factor. Strengthening and investing in HR, involving it in the decision making process and having a positive strategy in place, is fundamental for seamless integration and employee retention.

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