Merger and acquisition is a business strategy. Such an initiative is not always successful. The toughest obstacle is clashing work culture and differing management styles. The situation is tougher for a merger than for an acquisition. In either case, it is possible to lose key personnel when their working style does not fit in with the management style of the Chief Executive Officer.
This is understandable when we know that 4 key success differentiators are key talent retention, change management, workforce deployment and leadership alignment.
In an acquisition, the acquiring company must ensure that the acquisition is a value for money. It has guard against the management of the company being acquired from inflating the sales figure and hiding costs to make the bottom line look attractive.
The Five Stages
Merger and acquisition are carried out in 5 stages:
- Pre Deal – The search for a suitable target company
- Due Diligence – Review the risks and soundness of the deal
- Integration Planning – Mapping out the detailed plan.
- Implement Merger – Establish the new entity
- Evaluate the Success of Merger
Understand the Business Strategy
Merger and acquisition is a valuable method to accelerate growth by entering into new regions, expanding into new products and service areas or acquiring new technologies.
Risks Mitigation Strategy
The M&A checklist should form part of the overall risks mitigation strategy.
Check your have the legal, finance and IT resources in place. This would be the support team for the merger and acquisition (M&A).
Aim: To check if the company is adequately staffed and manpower costs are accounted for and to ensure that company’s workers are documented workers.
Action: Obtain a copy of organization chart, payroll register, financial statement (pertaining to payments to outsourced vendors, free-lancers, and independent contractor).
- Is the organization structure adequately designed for the business model?
- Are staffing levels adequate?
- Are critical or hard to fill positions filled?
- Are there positions that can be outsourced or made redundant?
- Are there work currently done by an outsourced party, independent contractor, free-lancer, part-time staff, unlicensed worker?
- Is there anyone on internship, management trainee program, secondment, international assignment?
Initial Target Organization Structure
Aim: To define the gap between the pre-M&A structure and post-M&A structure, with a view of first maintaining business continuity.
Action: Identify positions that are critical to the post M&A structure as well as those that are hard to recruit. Identify staff who has been long with the target company and know the processes and equipment.
Cultural and Management Styles Assessment
Often when M&A fails, the key factor is often the differing organization culture and management style. Despite of that, more often than not, it is not something that is considered at depth at the pre-deal phase. Most of the time, top management is excited to jump into the M&A. The other point is culture as well as management style are intangibles that need on the ground information and experience to assess.
Aim: To take map out a recovery plan. The purpose of the plan is alleviating fears of job loss and preventing exodus of staff. You want to avoid losing your sales and marketing team; staff who know internal processes and equipment;
Action: Develop a change communication strategy and detailed plan. This is the first thing you need to do (calm leadership). It revolves talking to staff at a personal level. Develop a name list. The dialogue revolves around questions that would normally arises from an acquisition, for example, do I still have a job? If yes, Will I continue with what I am doing or will there be a change in expectations?
Aim: To ensure that personnel records are complete. To understand the HR department and manpower budget
Action: Get a list of staff with and without a personnel file. Then make a random check of the files for completion of records. Get a copy of the manpower and HR Department budget. Verify whether there is a manpower requisition process.
Aim: To get an understanding of the staff profile and core capabilities.
Action: Obtain a list current personnel with job titles, function, geographical station, hire dates, years of service with the company, current monthly salaries for the recent year, highest educational degree and prior experience, if available.
- Potential for overtime costs: Exempt vs non-exempt staff
- Potential for maternity benefits: Male vs female
- Potential for loss of experienced staff: Age-range
- Need to meet regulatory quota: Staff on work passes
- Potential for shift costs and additional manpower: Any staff on shift
- Number of staff in each countries
To be continued in Part 2