Why is the human asset not considered a key priority as part of M&A?
While human assets are undoubtedly crucial to the success of M&A transactions, various factors can lead companies to deprioritise them in favour of more tangible and immediate concerns.
Significant due diligence is undertaken relative to capital and material assets, debt and IP. Yet the real value is in the people and typically less than 5% of the human asset will be assessed as part of the process.
It’s well documented that around 70-90% of mergers and acquisitions fail to achieve their intended goals, with post-merger integration issues cited as one of the main reasons.
Neglecting human assets can have significant long-term consequences, including decreased employee morale, increased turnover, and integration challenges, ultimately impacting the overall success of the merger or acquisition.
How can prioritising the human asset help increase the likelihood of a more successful integration?
For anyone who has gone through the M&A process, you’ll no doubt have experienced a painful, inhuman and often unfair process. We often refer to it as the integration of stepworkers – they didn’t ask for it but are right in the middle of it…often without a map or a guide or indeed any information they can trust. This is equally difficult for the leaders and their people.
Prioritising the human asset as part of the overall decision making process, especially through the lens of employee engagement and capability, can yield significant benefits through the realm of mitigating risk, maximising synergies and creating a cohesive and productive workforce. Specifically through:
- Integration planning
- Employee morale and productivity
- Leadership development
- Communication and change management
- Driving effective retention strategies
Yes, it’s important to consider the other elements of a merger or acquisition, however at the end of the day it’s your human asset that will be responsible for the success of the new entity.
What if integration timelines could be significantly reduced?
How often do we collectively look back on M&A deals and wonder what happened to the human landscape? All that time and money invested in the deal itself, sometimes one that works for both sides, but certainly without any guarantees.
Often there is a correlation between the length of the integration and the success of the outcome. More often than not, it takes too long to integrate the companies. The process isn’t done well and it’s certainly not executed with enough care and appreciation. Why? Because there is no simple way to understand and optimise the human asset. The impact on people, culture and productivity is significant.
The key to a successful integration has to fundamentally be about people which form the fabric of the organisation through a mix of culture and values that underpin the company strategy. To do this effectively, you need a data-driven approach to understand your complete people landscape and the capability and potential that lies within. If you can gain a deep understanding of ALL your people, one that is digital and dynamic, one that is human centred by design, then the typical 18 month cycle can be reduced to 6 months.
The cost of getting it wrong
Statistically speaking, less than 20% of M&A is successful.
Often the originating business case for an acquisition or merger is not about people, so the real art is to ensure you can meet the business objectives while also understanding if you can combine that intentionally with an appreciation of the people involved then you have a much greater chance of success.
A study by Mercer found that 47% of deals that fail do so primarily due to a failure to strategically identify and address people risks. Considering a proactive strategy in this regard will far outweigh trying to navigate this reactively.
In summary
In a world that is in a state of constant change, unpinned by innovation and the art of the possible, the prevalence of M&A activity continues to expand and grow. Taking into account the human impact but also the potential that exists is an imperative that benefits everyone.
For more information about how Humanico can help you understand and maxmise your human asset post integration, get in touch with us below.
