While the COVID-era boom in mergers and acquisitions has abated, they’re still happening, with $1.477 trillion in deals in the U.S. and Canada in 2022, according to S&P Global.
In any such business move, the stakes are high. Between 70% and 90% of M&A’s fail, according research published in the Harvard Business Review.
One common reason for those failures: people and culture. If the companies can’t be integrated successfully when it comes to workers and what they expect from work, any potential marriage of two companies could end in divorce.
“Company leadership often underestimates the complexity and time and effort need to get to grips with people and culture issues that are potential sources of deal success but equally potential obstacles to deal success,” said Duncan Smithson, senior director and co-leader of North America mergers and acquisitions for Willis Towers Watson, which recently published “The HR Guide to People and Cultural Problems in M&A Integrations.”
But there are ways HR managers can brush up on the process and help make it smoother for the people involved.
What HR can do
Ideally, HR is brought into the merger or acquisition process while a potential deal is in the works, Smithson said. If HR is involved early, those in the department can work as a strategic partner, and learn about the other company in the deal, inside and out, and map out a plan for successfully integrating their people.
If HR is brought in early, they can be part of due diligence, said Kevin Crow, CHRO at Riskonnect, who said he has been through this process about a dozen times. HR can also start early on learning the values of the other company, “their culture, how do they work and do things and map that to ours.”
That plan should be coupled with “really ensuring you have a strong message” around why a company is being acquired, the vision for what both companies are hoping to achieve, and the benefits of the move, Crow added.
That includes showing new employees how the acquisition will benefit them, especially if they’re coming from a smaller organization to a larger one. For Riskonnect, that meant making videos of testimonials from employees that have come through other acquisitions, including how they’ve been promoted or moved to other departments — career trajectories they may have not had otherwise.
While those won’t entirely assuage the fear someone naturally has with a big change, such testimonials “provide a path and show them where these could be benefits,” Crow said. Being open and honest in addressing employee concerns can help too. “We try to say to most people that we realize you didn’t choose this acquisition. Your executives or shareholders did. But give us a chance to show you what these opportunities could look like and put you on a path to success.”
Hammering out details around benefits should also be done before news about the merger or acquisition is shared, added Smithson. “If you don’t have that in place at announcement, you already start to lose hearts and minds.”
Signs an M&A is not going well
HR managers can look out for red flags that the process isn’t going as smoothly as everyone would like from the start.
If the deal team and business leaders can’t define a company’s culture, it means that piece of the M&A puzzle might not have the right amount of attention for the planned blending of the two companies, said Smithson. “People shouldn’t be surprised to get that question. Even when they go away and think about it, it can be difficult to come up with something that resonates with business leadership,” he said.
Then there’s the obvious sign: people leave. “If you start to see a spike in resignations, that’s a real red flag, especially of key talent and critical leadership,” Crow added.
Whatever the situation, there is never going to be a perfect road to take, though it can be smoother for HR if they’re brought into the process early, Smithson said. “Nobody comes to this by divine inspiration. Companies do have to stub their toes and make mistakes and realize it was a mistake, but companies that do this well get HR involved early and respect HR as a strategic partner in the same way that legal or finance has a voice at the table.”