PCS Technology Ltd.
Merger and Acquisitions – What is right choice ?
When a company decides to merge with another or acquire another company, the idea is to form an entity that is bigger in terms of value, resources, expertise than the sum of the two individual companies.
The idea behind merging or acquiring with companies is to use synergies to create efficient processes. HR plays a pivotal role in tackling the most critical issues faced by both the organizations during the transition — managing the human resources, ensuring their buy-in in the process and preparing them to adapt to the change.
In order to ensure a successful integration, HR should be involved from the initial stages of discussion wherein it can focus on aligning the most crucial areas.
To begin with, there are few specifics that need to be looked into during the pre-merger/acquisition stage:
What business life-stage are both the companies at?
How different are the work-cultures at both the companies?
What is the acquire company’s way of working?
How profound is the company’s performance to those ways of working?
Are the processes & systems at both the companies complimentary or contrasting to each other?
Which talent is indispensable from the second company and how to utilise their potential in the renewed system structure?
How much time, effort and management investment will it take to coherent the newly combined organization?
How many functions/roles are duplicated, how to re-align & rationalize headcount
Post this due diligence, the companies needs to introspect & understand whether the difference in the processes, working methods, culture are reconcilable or not. If yes, then a framework needs to be worked out in the initial stage itself.
Here’s how HR can play an important role, when involved from the initial stages of integration:
1. Retaining the Right Set of Talent:
The uncertainty that the unison brings in can lead to the exit of the critical resources. Hence, HR from the very beginning should develop a strategy to identify & retain the right set of people. This could be done keeping in mind the below requisites:
Select employees on merit
Build your employees’ trust
Keep the formal communication channels open
Offer an employee retention arrangement
2. Integration in Compensation Structures:
HR’s efforts to integrate compensation strategies and practices are a key component of successful mergers and acquisitions. They need to carry out the vital actions by reviewing the compensation policies of both the companies & defining a structure which is practically implementable and workable for employees of both the companies.
3. Alignment of Performance Management Methodology:
It is a challenging task for HR to ensure that employees’ are consistently performing during the transition & to evaluate their performance on a regular basis. For this, a proper performance management strategy should be worked out during the pre-merger/acquisition stage itself ensuring a proper implementation of work during and post the transition.
4. Change Management:
Employees will resist the change that the merger/acquisition process will bring in – as there will be an uncertainty of the work structure post the change. Hence, HR together with the management should focus on change management during the transition. Few things that need to be looked into for the same:
Initiate the change management effort at the earliest possible stage
Createshared principles for the change management initiative for the involvedcompanies
Verify the change through every stage of the process
5. Integration of Cultures of Both the Companies:
Integrating Company Cultures Is the key to the success of an M&A. The ways in which you can successfully implement it is:
Communicate Early and Often
Examine Cultural Differences
Develop a Cultural Integration Plan
6. Transparent Communication:
Assuring that a transparent & proactive communication process is followed. This will help fend off the informal channels of communication and will play an instrumental role in the pre, ongoing& post stages of the transition process.