What is HR's role in an M&A transaction?

What key roles does the HR function play in an M&A transaction?

Many M&A deals are about acquiring competence – it is important to retain this competence also after the deal has been closed. HR can support with assessing competence, identifying and retaining key employees and keeping engagement and motivation across employees through learning & development, talent management programs, change management and communication activities.

Employee cost is also one of the most important cost categories that a company holds. It is important that the due diligence is done carefully to detect any hidden cost and risks with the transaction. A side-by-side review of organization structures, HR policies, compensation & benefit plans together with contract review of mainly management positions will support both the purchase agreement decisions and the future integration strategy.

Retaining key competence and keeping employee engagement is key to deliver value after closing

In Sweden, where many companies are bound by collective bargaining agreements, the trade union consultation processes on both sides of the deal are crucial and time sensitive.

What are the most significant risks a company face during an M&A transaction, and how can you mitigate those risks?

One risk I have come across is a misalignment in the business case and strategy of the entire deal and the integration strategy that is designed. That may mean that many of the synergies or thought values of the target company may be lost in the integration.

One effective way to mitigate the misalignment is to set the evaluation metrics early on and involve all functions in defining the overall integration strategy. HR’s input in topics concerning organization or employees, like cost synergies, culture, employee value proposition and leadership are important to consider.

What are your top 3 tips when facing an M&A integration in the near future?

First of all, do your homework early on. Do a proper due diligence to not end up with unforeseen costs or legal claims concerning employees. Understanding the company well will also help in setting up the integration strategy.

If you are a company used to acquiring, you may feel that you know how to do this. But avoid the pitfall of treating all deals the same way and focus on how to leverage this specific deal’s value.

And lastly – know that when the deal is closed, the hard work starts for HR. Integration is a long process which may include both re-organization, new HR function set-up, HRIT and payroll alignment, culture, reward aspects and not the least change management.

How can Deloitte support companies and HR functions in their M&A integration?

Our team in Human Capital can support through the whole process, from Due Diligence, Transaction or Separation to Post-Merger Integration activities.

We have consultants ready to support in the broader field - HR strategy, reward, leadership & culture, collective bargaining, HR systems as well as with in the organisational and change management space. It might be very natural but still worth mentioning – a focus on communication and change management is vital to reach the target and to make change sustainable. Throughout the process we closely collaborate with our labour law experts in our Legal department. They have considerable experience with due diligence work and can help identify and handle all sorts of labour law related risks in connection with a transaction, as well as making sure that any Post-Merger Integration activities are handled in accordance with Swedish labour law.