Mergers and acquisitions (M&As) are common both in the UK and globally. Indeed, figures from the Office for National Statistics show that in the third quarter of 2013, the total number of domestic and cross-border transactions in Britain totalled 116. However, industry research from the likes of KPMG has shown that around 83 per cent of M&As fail to produce real benefit for shareholders.
The main reasons commonly cited for this centre on human weakness. Indeed, talent – or lack there of – presents one of the greatest barriers to M&As.
“Failure to address the people aspects of bringing two organisations together can not only limit the effectiveness of the deal and desired outcomes,but in some cases can contribute to its demise,” Towers Watson explained in its ‘Positioning for M&A Success: Putting People Into the Equation’ report.
To break with tradition, then, and ensure successful M&As, should talent acquisition form a pivotal part of any strategy?
Doomed to failure?
“The success of M&As is often damaged because a company is more than just its tangible assets,” Chris Molloy, chief executive officer at RSA Executive Research, explained in HR Bullets. “A company is its people, in ‘company’ with one another, defining a culture and a framework for doing successful things.”
This sentiment is shared by Edward A Kazamek, who realised as early as 1989 that without a focus on governance, leadership, and cultural issues, problems will occur in any M&A.
Of course the challenge is that planning for people is an intrinsically flawed concept. Certainties and facts should be the basis of any strategy, but humans are notoriously unpredictable and indefinable. Ultimately, it is hard to predict how staff will respond, therefore placing M&As on volatile ground before they begin.
Mr Molloy claims problems usually become apparent in sales and marketing departments. Customer confusion and employee confidence levels can result in an exodus within days of any announcement if not managed properly. Research and development departments are also vulnerable. “During a merger, R&D departments are the last to combine as a company’s pipeline and patents are its most prized assets and are not revealed to competitors in case the deal falls through,” Mr Molloy explained.
With a complete departmental merger taking anything as long as nine months, with no new projects or hires coming in, staff are placed under significant stress, leading to complications.
However, these trends suggest that M&As aren’t doomed. Indeed, with clear patterns of where problems occur for executives, it is possible to target pain points and manage the ‘uncertain’ human element – at least to a point.
Solving the talent problem
Factoring in talent to any M&A can help to mitigate risk and ensure success. Through analytics it is possible to analyse how departments are going to react to change before it happens, thereby allowing processes to be put in place to limit the fallout.
Profiles International explained that before embarking on an M&A, it is important to understand the people in an organisation. This includes their strengths and weaknesses – information that should already be collected for a successful talent pipeline.
An eye should also be kept on top talent and leadership depth. “Some people will leave on their own, not wanting to go through the process and effort it takes to make the new enterprise successful,” Profiles International explained. “Many of those people might be leaders or considered to be rising stars before the deal, but who are now less sure of their position as a result.”
Consequently, plans need to be in place to help businesses fill these voids if and when they occur. A retention strategy should also be created to ensure a company has the ability to keep current employees primed to climb up the ladder.
Cross-company teams also need to be created during M&As to ensure workers from both companies integrate and work towards a common goal. It is important to pick the right people to go on these teams. These individuals will act as ambassadors throughout your M&A.
Of course, stress is one of the greatest challenges, especially when the word redundancy is floated around. “M&As cause organisational stress but this is dwarfed by the combined personal stress across employees at all levels,” Mr Molloy explained. “From the boardroom to the bench no-one is spared. It is emotional for all and therefore handling emotion is critical.”
To stop any undue worrying, be sure to have open and clear communication with workers, giving opportunities for dialogue. Managing the uncertainty and stress of M&As for workers means key players are more likely to stay on board.
Is talent a silver bullet?
Indeed, a business is only as strong as the sum of its parts and if it doesn’t have the skills it needs to function following an M&A, the future understandably looks bleak.
Of course, talent is just part of the puzzle and executives will know the cruciality of other aspects of M&A. However, when the I’s have been dotted and T’s crossed, if there is a talent void, any M&A is vulnerable to becoming another failure statistic.
Mr Molloy noted: “Instead of being a deliverer of the M&A, drawing up plans for how to manage the problem, talent acquisition can and should, be part of the team that targets acquisitions.”