If your organisation is about to be merged or acquired by another, how can you manage this process to ensure the best for your staff and firm?
When a firm is being integrated into another through a planned merger or acquisition, what role should HR take during the transition? According to Ake Ayawongs, M&A business leader, growth markets at Mercer, there are a number of key steps that HR should take.
First, understanding whether the transaction is an asset or share purchase deal will affect the HR implications, he said.
For an asset purchase, all employees will be integrated into the buyer’s existing policies or plans or the buyer will have to develop new employee programs prior to the merger. For a share purchase however, the buyer will assume everything from the seller including employee agreements, pension plans and employee litigation.
After this, it is important to define and implement a comprehensive divestiture strategy that plans a clear road map from strategy to execution, Ayawongs said.
“An effective divestiture strategy would outline a clear path to executing the sale by defining key objectives and milestones for each stage of the process. It would also address people issues and ensure resources are in place to complete the separation work.”
Conducting pre-sale diligence will also help HR prepare for going to market and negotiating the deal as this helps both buyer and seller understand where the value lies, he added.
In an asset sale, the seller should carefully examine the part of the organisation that will be transferred to the buyer and address the following key questions:
“In an asset sale, employees are terminated from the seller so that they may be rehired by the buyer which triggers severance and termination liabilities,” Ayawongs said. “Also, HR programs to be transitioned over to the buyer and treatment of employees exiting these programs will have to be considered.”
HR should play an active role with the buyer during the transition strategy, planning and integration. This will protect value throughout the sales process by maintaining continuity and keeping employees engaged.
“Assist in identifying a list of critical employees for deal and integration success and consider a retention program to minimise any pre-close exit disruption and maximise purchase price,” he advised.
“Invest in communications to show employees and other stakeholders that the appropriate steps are being taken to ensure an orderly transition, maintain business continuity and set up the buyer for success.”
A clear talent management/staffing plan should also be set up to determine which employees stay with the seller and which go to the buyer, he said.
“Where applicable, HR can also consider an appropriately priced transition services agreement (TSA) to mitigate reputational risk, cover costs, and have a well-managed exit,” he added.
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Three HR considerations when acquiring a business
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First, understanding whether the transaction is an asset or share purchase deal will affect the HR implications, he said.
For an asset purchase, all employees will be integrated into the buyer’s existing policies or plans or the buyer will have to develop new employee programs prior to the merger. For a share purchase however, the buyer will assume everything from the seller including employee agreements, pension plans and employee litigation.
After this, it is important to define and implement a comprehensive divestiture strategy that plans a clear road map from strategy to execution, Ayawongs said.
“An effective divestiture strategy would outline a clear path to executing the sale by defining key objectives and milestones for each stage of the process. It would also address people issues and ensure resources are in place to complete the separation work.”
Conducting pre-sale diligence will also help HR prepare for going to market and negotiating the deal as this helps both buyer and seller understand where the value lies, he added.
In an asset sale, the seller should carefully examine the part of the organisation that will be transferred to the buyer and address the following key questions:
- What is the impact of the sale on the asset itself?
- Which employees will go over with the sale and which will stay?
- How is the asset represented to buyers?
- How will the sale of the asset affect the larger business and ongoing operations?
“In an asset sale, employees are terminated from the seller so that they may be rehired by the buyer which triggers severance and termination liabilities,” Ayawongs said. “Also, HR programs to be transitioned over to the buyer and treatment of employees exiting these programs will have to be considered.”
HR should play an active role with the buyer during the transition strategy, planning and integration. This will protect value throughout the sales process by maintaining continuity and keeping employees engaged.
“Assist in identifying a list of critical employees for deal and integration success and consider a retention program to minimise any pre-close exit disruption and maximise purchase price,” he advised.
“Invest in communications to show employees and other stakeholders that the appropriate steps are being taken to ensure an orderly transition, maintain business continuity and set up the buyer for success.”
A clear talent management/staffing plan should also be set up to determine which employees stay with the seller and which go to the buyer, he said.
“Where applicable, HR can also consider an appropriately priced transition services agreement (TSA) to mitigate reputational risk, cover costs, and have a well-managed exit,” he added.
Related stories:
Three HR considerations when acquiring a business
'I wouldn't wish this on anybody’ – Vodafone HRD explains
Using psychometric assessment for smooth M&As
