The FINANCIAL — With global M&A activity up 32%, both corporate and private equity buyers and sellers are facing a host of risks in ensuring successful M&A transaction outcomes. According to the inaugural People Risks in M&A Transactions report from Mercer, people risks remain top of mind for both buyers and sellers, including such pain points as employee retention, cultural integration, leadership assessment, compensation and benefit levels and overall talent management.
These people-related challenges exist in a highly competitive deal environment featuring truncated timelines, less access to information and increasingly activist shareholders. In fact, 41% of buyers report less time to complete due diligence compared to three years ago, while 33% claim sellers are providing less information about assets for sale. Meanwhile more than one-third of sellers (34%) are finding more and more of their divestment resources are required to address HR issues.
According to Adam Rosenberg, Mercer’s M&A leader for Europe said, “Many buyers and sellers are professionalising their approach to diligence and focussing more on key HR and people issues including people related financials, talent management and retention. Typically, the more successful deals typically are those where people risks are addressed at the same time and in the same way as broader deal risks. Gone are the days when people risks are addressed after the deal signs.”
Mercer’s view is that people risks are even greater when dealmakers look beyond their own markets, which they are increasingly likely to do; 50% of respondents reported recently conducting cross-border deals, and 24% are more likely to consider multi-country transactions than they were in January of 2014. Legislative and regulatory issues, cultural and operational mismatches, and differing leadership skills and expertise are all risk factors that increase substantially when attempting transactions outside of a home market.
“Both buyers and sellers tell us they need rich data, unique insights and practical guidance to maximize transaction value and reduce people-related risks,” said Jeff Cox, Mercer’s Global M&A Transaction Services Leader. “The goal of our research is to enable business leaders, inside and outside of the HR function, to make more informed people decisions in the current challenging global deal environment.”
Mercer’s research shows that by managing the investment in people with the same discipline and rigor they manage balance sheet risk and other capital investments, organizations can successfully drive value from several key people-related areas.
For Buyers:
Assess leadership team and key employee capabilities
Develop effective retention strategies
Have a clear culture, communications and change management plan
Evaluate HR service, delivery and design needs
Adopt an enterprise or global view to effectively manage benefits
Understand the market competitiveness of rewards and leverage existing total reward programs to attract and retain the right talent
For Sellers:
Identify critical employee groups and consider a retention program
Leverage experienced sell-side advisors and separation specialists
Consider providing a sensible, appropriately priced Transition Services Agreement
Document a clear talent management/staffing plan
The need to adopt this framework is highlighted by the fact that more than 50% of businesses surveyed experienced delayed closing for global deals – an outcome that does not bode well for rapid integration and value creation.
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