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HR Strategies are Vital in Acqusitions

HR Strategies

Assessing the "people factors" is not as easy as financial analysis, or at least it is not as clear -cut. How do you gauge the impact of changes on the culture and staff?

These people challenges exist with public and private businesses, large, medium, and small. Small firms are more vulnerable to people issues than larger firms where people are more interchangeable. In smaller businesses the impact of staff turnover is magnified. These firms also don’t have the resources to address the people issues thoroughly. Because of the more personal nature of closely held businesses, especially family businesses and partnerships, issues of control, culture and the process of change can be much more devastating when not effectively addressed.

For buyers who have an effective HR department or access to HR consulting advice it is important to have their involvement early on. A plan for staff communication and transition needs to be developed alongside all the other transitional plans to integrate the businesses.

Dealing with the People Issues

At what point should you address the people issues when buying a business? There are two primary times to focus on the people side of M&A.

• Early in the Process - developed as part of a transition plan
• After the acquisition - as soon as there are signs of an actual or potential “derailment”

Quite clearly, losing the best billers and key team leaders from a small recruitment business right after buying it is not what you want to have happen. Are there actions you can take to prevent this or is it an almost inevitable outcome of a takeover? It is a common occurrence but there are steps that can be taken to minimise the risk.

Related: How HR Tech is Transforming the Recruitment and Staffing Industry

Sensitivity issues during negotiation phases of an acquisition understandably make it difficult for a buying company to adequately gauge and assess key staff. Sellers do not usually want staff to be aware of the sale process until things are much more certain to proceed. Therefore the most timely stage to do this is during the latter part of Due Diligence investigations. Building in time to meet managers and key staff members can be an agreed part of the deal. By the time a buyer is ready to complete this phase a Non Binding Offer or Heads of Agreement outlining the commercial terms should be signed so that both parties understand and have agreed an in-principle deal structure.

If, as a buying company, there are genuine concerns that it will be difficult to keep the key people after the acquisition or if the cultures seem radically different then a re-think of whether the acquisition is the right one needs to happen. However, looking at it more optimistically, the concerns expressed may be able to be dealt by taking positive steps to communicate appropriately. The prospect of change can create fears based on job security, potential income (commission) loss, a stifling of career progression, or even prior personality clashes with a staff member from the buying company. In many cases the underlying issues arise from insecurity about the post-acquisition future and can be relatively easily overcome once people know that an important part of the reason for the acquisition are the capabilities, skills and experience that they as staff members posses.

Communicating the facts

An effective communication plan with staff is essential. Ideally this can be implemented prior to the contract transaction date when transfer of ownership occurs, however, if that is not possible then the staff need to hear from both the new and former owners before anyone else does.

What needs to be communicated in both individual and group situations are the facts. The reasons for the sale; why the buyer wanted the business; the future position and opportunities for staff and how the transition phase will roll out. The key people in the business can't be taken for granted and some reassurance is needed.

As always, people are very different in how they deal with change. Some cope well and focus very quickly on the opportunities and others take a while to get to this point; or never get there at all. It is not necessary, or even likely, that there won't be some staff changes. New owners reserve the right to make changes. What they don't want is to lose people that are critical to the success of the business they have invested in.

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Originally Published in Recruitment Extra May 2013 

Categories: M&A

Tags: Strategy, HHMC, Advisors, Staffing, Leadership, Mergers & Acquisitions, Buy and Sell Business, Acquiring Recruitment Business, HR Strategies

Picture of Richard Hayward

Richard Hayward

Richard has 35 years of experience with outsourcing, recruitment and advisory firms. His record of achievement includes national recruitment management roles, and executive search and selection across the ICT, banking & finance and sales & market sectors. Since 2003 Richard has been a principal of HHMC, guiding recruitment agencies through acquisition and exit assignments. Located in Sydney, Richard works with private and public recruitment agencies globally. HHMC’s innovative business strategies and well-grounded guidance result in clients realising their personal and corporate goals.

P: +61 2 9221 8285 M: +61 411 488 544

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