Ake Ayawongs, M&A business leader, growth markets at Mercer
, told HRD
there were three areas that HR should consider when working within the buying firm.
First, it is important to understand the strategic rationale and objectives behind the transaction, he said; for instance whether it is for geographical expansion or the acquisition of capital or even human capital.
Whether the transaction is an assets or share purchase will also affect the human resources implications, Ayawongs said.
“If it is an asset purchase, there is a need to either integrate the employees into the buyer’s existing policies and plans, or develop new programs for the acquired employees by day one.”
“However, if it is a share purchase, the buyer assumes everything by the legal entity, including employment agreements, severance arrangements, pension plans, health and welfare benefits, collective bargaining agreements and employee litigation.”
It is important to consult with the leadership team and map out the levels of integration and retention on the buyer and seller sides. Having a clear culture, communications and change management plan will also help, he added.
HR should also be aware there may be potential hidden liabilities and costs to the merger, Ayawongs said. This includes defined benefit pension liabilities, retiree medical program liabilities, and costs to harmonise pay and benefits.
As there may also be additional labour or compensation & benefits compliance issues involved, it is important to conduct thorough HR due diligence to cover these hidden costs, he added.
“Once the deal has been signed, HR should play an active role in mitigating unwanted attrition and a loss of productivity and engagement which can reduce the deal value and corrode business impact.”
HR should set up a project management office to manage the integration effort, he said. This can also help mobilise integration workstreams with assistance from HR sub-functional leaders in areas such as compensation & benefits, employee relations, talent acquisition, etc.
After this, HR can implement the integration strategy, covering aspects such as developing a new organisational structure, aligning the workforce through level mapping and harmonising fixed pay ranges, incentive schemes, HR policies, cultural integration, etc.
“Where there may be potential overlap in roles in the combined entity, conduct a transparent and equitable talent assessment and selection process to determine best fit to the new organisation for employees impacted,” Ayawongs said.
“Where there are redundancies, consider the statutory severance practices in the respective countries, market practice and the design of an appropriate severance package.”
Finally, it is essential to prepare employees for the first day of the merger, making sure employment contracts, on-boarding programs, communication sessions and changed office locations are all prepared and offered to staff beforehand.
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