M&A (Role of HR) - 2. People issues

Significance of people-related issues during any M&A Scenario:-

Many M&As fail to achieve the desired results because the people issues are not given the importance they deserve. If I go back to what are available statistics (older numbers), within 2003 the value of M&A business in the USA was only worth 510,866.4 $. This is much less when compared to the value of merged and acquired businesses in 1998, amounting to $1.2 trillion.

Though there are still a large number of companies worldwide that believe in the philosophy of “growing through acquiring”, the percentage of failures in M&As has been pulling back quite a few. The decade of 1990s saw a spate of mergers and acquisitions in all the important sectors of business.

However, the success rate of these M&As is estimated to be a mere 30–40%. Companies do announce that their mergers have been successful, but they also accept that they have not been able to derive the kind of benefits that they expected to, from a merger or an acquisition.

What can be the major reason for this failure (partial or complete) of mergers and acquisitions? Companies do go through a detailed analysis and due diligence review on all fronts – business, markets, financial, legal etc. Then what is it that is stopping these companies from achieving complete success?

People issue is one of the most sensitive but often ignored issue in a mergers & acquisitions scenario. When a decision is taken to merge or acquire, a company analyses the feasibility on the business, financial and legal fronts, but fails to recognize the importance attached to the human resources of the firms involved.

Organizations fail to realize that people have the capability to make or break the alliance. Therefore, it is important for organizations on the verge of integration to analyze the feasibility of the integration on the human resources front.

People related issues can be really tough to decipher during the deal but this is exactly what eventually determines the future success or failure of the new relationship. In historical perspective there are organizations which paid the least importance to these issues & had to pay hugely in terms of future failures & failed relationship which either led to a split in terms of a merger or else in terms of an acquisitions re-selling of stake at much lesser than earlier price at which the stake was bought.

People issues stem not only from the CULTURE, VALUES & VISION of the organizations in the new relationship. BUSINESS VISION of the MERGED/ ACQUIRED Co. – This can be the most commonly available piece of document on the web-sites or the Corporate Office walls.

However, it is seldom seen that two Companies can have all of similarity in this aspect of business. Funny as it may sound but alignment of the VISION can be like ARRANGED MARRIAGES. It might work from day one or might not work ever.