One of the most transformational transitions organisations undergo is mergers and acquisitions that impact virtually every aspect of operations. The conventional approach to mergers and acquisitions (M&As) primarily focuses on establishing pre- and post-deal implications on tax, financial, and legal aspects.
While streamlining these components is essential in facilitating a smooth M&A process, it is equally important to consider people management strategies to safeguard the workforce and minimise impact on operational efficiency, before, during and post deal closure.
The people pillar is the backbone of each organisational strategy and focusing on defining how this will look post-merger is key. In defining the post-merger workforce strategy, it is necessary to consider the change impact and process shifts to minimise the risk of downtime for employees.
Pre-deal considerations from a workforce management perspective establish the current state and determine the extent of streamlining that will be required after the merger or acquisition. This includes identifying alignment areas in human resource policies, procedures and practices across the merging organisations.
This enables organisations to identify potential areas that could be synergised for better operations management within the new entity.
Additionally, it brings out critical people management aspects that should be streamlined pre-transaction deal closure. This includes all components of the HR management cycle – from talent acquisition to employee engagement and exit management.
Putting in place a change management strategy from the pre-deal phase contributes to positive outcomes. Considering more than half of the barriers to successful M&As are people-related, it becomes necessary to identify associated risks and opportunities as early as possible to realise deal value. Furthermore, it enables the effective execution of integration while considering divergent practices and cultures. It also facilitates the journey towards adoption of ideal practices for the merged entity.
Communications management is one of the ways in which organisations can assist employees in navigating the change that comes with M&As. Defining consistent key messages and providing regular information to various employee categories goes a long way in minimising anxiety and resistance to change.
Transition management
Identifying cultural traits that are unique to the merging entities is crucial to establishing areas of cultural alignment post-transaction.
Transition management planning is another integral component. It entails leveraging the human resource due diligence findings and identifying the pre-requisite enablers that will deliver the sustained benefits of the merger or acquisition in achieving the strategic intent.
It is, therefore, necessary to identify early the strategic human resource decisions that need to be made to make the transition as seamless as possible. This includes setting up a transition management office and identifying the critical functional areas and capabilities for the new organisation.
Subsequently, people management transition requirements include streamlining HR Management Information System (HRMIS), employee records management, employee relations management, human resource policy alignment and organisational structure considerations.
Risk mitigation
In Kenya, inadequate management of employee matters has prevented M&As from proceeding due to litigation by staff. Therefore, people management matters can have negative legal implications on the deal.
The post-merger phase sets in motion the process of operationalising the strategic intent of the merger. This requires attaining stability and deploying risk mitigation for emerging issues that could potentially hinder post-merger integration.
Defining people management dynamics once the transition closes is integral to the success of the merger to be able to support the retention of key personnel as well as manage staff placement for optimal operations and continuity.
Cultural incompatibility is one of the leading causes of merger failure and results in diminishing returns on deal value investment. It is, thus, necessary for merged entities to determine how they navigate the complexities of divergent cultures to drive integration and support smooth operations.
There is a need to allocate equal importance to people management as is accorded financial, legal and tax implications.
The writer is a culture transformation expert at PwC Kenya.
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