Singapore – Companies that fail to acknowledge how employees can drive future growth during a merger and acquisition (M&A) may suffer lower employee engagement levels and business synergies.
M&A deals are on the rise despite the ensuing financial crunch, according to the Towers Perrin M&A study. Deals worth between S$544 million and S$2 billion are also continuing to create good value for shareholders.
Although M&A can be a good profit avenue, employers need to take heed that M&A transitions can be difficult for the affected employee population.
While it is also largely dependent on the nature of the businesses involved, Steve Allan, principal of Towers Perrin and M&A leader in Asia, believes it can “at worst lead to the real risk of destruction of value as workforces fail to integrate”.
Allan says, “Failure to address the human capital issues in a transaction is one of the most common reasons that some mergers fail to live up to expectations.”
The key human capital drivers companies need to put in place for a successful merger include strong leadership, alignment of organisational structures, proper staffing plans and HR service delivery.
Allan says, “These areas of critical value ensure you optimise employee engagement, which is essential to long-term financial success of any deal.”
Despite the current profitability in acquisition deals, not all companies are suited to acquire new businesses - even if they have the resources to. Leaders have to first make sure it is appropriate for their organisation and they have the organisational capabilities and bandwidth to execute a deal well.
Allan says, “Successful transactions are built upon a clear understanding of the business rational behind the deal and the longer term objectives.”
To ensure M&A deals continue to deliver significant value, companies can expand into new markets, new product lines or even capability development.
“M&A can be a tactic to achieve these objectives quicker or more efficiently than relying on organic growth,” says Allan.
“When conducted carefully and executed well, M&A can and does deliver value.”
