Employee Experience

The Role of HR in Corporate Mergers and Acquisitions Transactions

Abstract M&A graphic

Like many things in life, Mergers and Acquisitions (M&A) transactions come in a variety of flavors: large and small, simple and complex, and with various structures. And while there are many variables in terms of size and complexity of each deal, common to all corporate transactions is the extremely critical aspect of properly managing the workforce through the transition.

 

M&A chess pieces

Corporate transactions, commonly referred to as ‘M&A’, generally occur in one of four ways:

  • Mergers are 2 companies joining to form a single entity
  • Acquisitions are inbound transactions usually of a smaller entity being brought into a larger one
  • Carve-outs are businesses being divested from a larger entity where there is a buyer
  • Spin-offs are businesses being divested from a larger entity where there is no buyer, either as a standalone business or an IPO

Among the many aspects of managing human capital through a dramatic change, the role of Human Resources is key to ensure employee satisfaction. Through the transaction, HR’s focus on Change Management, the HCM Technology and accurate payroll can help avoid issues that would jeopardize the transaction close date and employee retention that are often critical to the success of the surviving entity.

 

HR Change Management: HR is a trusted ally during a period of change
During a transaction, HR is needed more than ever to deliver mission critical functions in the hire-to-retire employee lifecycle including talent acquisition, total reward, and employee engagement matters.. HR will be tasked with fielding employee inquiries about personal implications of the transaction while also being tapped by the business to understand its human capital investments in terms of headcount and cost. Individual contributors will look to HR for reassurance of what is to come while the business will often be trying to understand people related synergies associated with a merger or acquisition. It is imperative that HR is considered as a critical stakeholder in the transaction activity to best serve the employees and the business functions they support.

When HR is treated as a critical stakeholder, they are part of the deal team responsible for understanding the nuances of the transaction and the associated timelines.  HR is also responsible for providing knowledge of the business and its people so that change mitigation techniques can be developed to reduce the impact on the organization. Change mitigation techniques often include critical communications ranging from town halls to FAQ’s, all with the express goal of communicating accurate and timely updates to the people that support the business.

HCM Technology: HR often owns some of the most critical technology with people and payroll solutions
If you were to poll a team of M&A practitioners and ask about the most critical element of a transaction, one of the top answers will likely be on-time and accurate payroll. Whether domestic or global, the bedrock of the relationship between an employer and employee is compensation for services rendered. When undergoing the change associated with a transaction, it is important to make sure that paychecks are accurate on day one. Often, there is an HCM solution change associated with a. The name on the check may change, or the technology which they use to access pay advice and make changes to their HR records may be completely new. The best way to gain the trust of the employee population impacted by the transaction is to speak early and often about any payroll or technology related changes to assure them that it is part of the project, of critical importance and to make sure they are anticipating any changes that will come because of the transaction.

Transactions that involve paying people globally are especially complex with language and time zone barriers that often frustrate efforts for a smooth transition.

Of concern to many large organizations is ensuring that compliance with all local laws and regulations are met and the company is not exposed to fines or penalties.

Depending on how transition services are provided from the seller to the buyer, failing to accurately pay employees on time can invoke expensive extension of services for the seller to pay employees until the buyer is able to. In some cases, as in the event of an IPO, there comes a point where the seller is legally prohibited from continuing to pay the employees of a separate public company. Back-up plans in these cases can involve complex manual issuance of pay checks until standalone payroll processing is in place.
For these reasons, the importance of payroll accuracy cannot be overstated.

Sability’s M&A Support Services are 100% focused on guiding the HR function
Human capital is a key element of any transaction and HR has a distinctive perspective to understanding the impacted employee population and its leadership. When considering the change impact of a transaction on the people supporting the business, it is important to understand and contextualize the ‘as-is’ versus ‘to-be’ state of the business to proactively address areas which will be impacted. Sability is uniquely qualified to provide transaction support to our clients through our Strategy & Advisory Services, Implementation Support and Managed Services. From deal infancy to post-close, Sability operates with ease through the fast-paced M&A lifecycle.

The content of this blog is courtesy of Sability, helping companies create a link between technology and tangible business results . To learn more about our UKG and Sability's partnership, visit their marketplace page.