Effective HR in M&A's

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a study on how companies create value in mergers and acquisitions by aligning people, organization and structure

Published in: Leadership & Management

Effective HR in M&A's

  1. 1. EFFECTIVE HUMAN RESOURCE PRACTICES IN MERGERS AND ACQUISITIONS Kristian Andersson PAUSE Network Göteborg November 24, 2009
  2. 2. Agenda • Introduction - Kristian and why the topic is relevant • Theory - M&A and value creation • Cases - Overview • Recommendations & learnings from cases • Key takeaways • Discussion 2 Center for Human Resources - Kristian Andersson
  3. 3. Kristian Andersson - Bio Visiting Scholar Director HR Strategy (acting) | Management Consultant Department Management Cardiothoracic Surgery SAHLGRENSKA UNIVERSITY HOSPITAL Management Consultant M.Sc. Financial Economics | Psychology 3 Center for Human Resources - Kristian Andersson
  4. 4. Effective Human Resource Practices In Mergers And Acquisitions So what? 4 Center for Human Resources - Kristian Andersson
  5. 5. M&As Are Popular Means of Growth THE BAD NEWS IS: IN A RECENT ACQUISITION FRENZY, WE PURCHASED ONE OF OUR OWN COMPANIES. THE GOOD NEWS IS: THE STOCK WENT UP. 5 Center for Human Resources - Kristian Andersson
  6. 6. M&A Activity - Low / High • Announced global M&A volume stands at $1.46 trillion for the year to date • Dealmaking is down a substantial 38% vs. third quarter 2008 and is the lowest third quarter figure since 2004 Thomson Financial, Q3, 2009 Dealogic, Q3, 2009 6 Center for Human Resources - Kristian Andersson
  7. 7. Discouraging M&A Outcomes • Many M&As fail to realize expected results 30-50% KPMG, Mergerstat, PricewaterhouseCoopers… 57% Mercer 65% BCG 67% Booz Allen 7 Center for Human Resources - Kristian Andersson
  8. 8. M&As Fail - HR Issues Common Explanation But HR Issues Are Neglected, Why? 8 Center for Human Resources - Kristian Andersson
  9. 9. Purpose of Study • Explore what and how HR practices could have a positive impact on M&A performance HR practices = activities broadly related to the management of people, performed by both the HR function and by other parties within a company The effectiveness of HR practices = impact on company performance (however measured) post-acquisition 9 Center for Human Resources - Kristian Andersson
  10. 10. Why Buy? • Consolidate market within geographical area • Extend or add products, services or technologies • Enter a new geographic market • Vertically integrate • Enter a new line of business 10 Center for Human Resources - Kristian Andersson
  11. 11. Measures of M&A Performance Our books are balanced. 50% of our numbers are real and 50% are made up. Accounting-based Stock market based 11 Center for Human Resources - Kristian Andersson
  12. 12. M&A Performance Dimensions Task level Transaction level Firm level 12 Center for Human Resources - Kristian Andersson
  13. 13. Determinants of M&A Success Experience Codifying knowledge 13 Center for Human Resources - Kristian Andersson
  14. 14. Determinants of M&A Success (Cont’d) Value from Strategic rationale and type / synergies level of integration realization does not happen automatically! 14 Center for Human Resources - Kristian Andersson
  15. 15. Structure (Level of Integration) Is About Balancing Positive and Negative Synergies 15 Center for Human Resources - Kristian Andersson
  16. 16. Approaching Integration of Corporate Cultures Portfolio Blending New Creation Assimilation 16 Center for Human Resources - Kristian Andersson
  17. 17. Adapt M&A Approach to Fit Underlying Strategy Strategic M&A Structure HR practices rationale performance 17 Center for Human Resources - Kristian Andersson
  18. 18. The Cases • Companies show different degree of sensitivity to the underlying strategy when deciding on structure & process • HR tend to be involved too late in the process More reactive than proactive • Communication is perceived a major challenge Lack of clarity amplifies • None had any systematic approach to learning 18 Center for Human Resources - Kristian Andersson
  19. 19. Recommendations for HR 1 (4) • Understand the underlying strategy and its implications Decide on structure and processes Set and manage expectations I assumed when we merged that we’d each have our own desk 19 Center for Human Resources - Kristian Andersson
  20. 20. Recommendations for HR 2 (4) • Take lead and plan for realization of acquisition objectives Create space for risk analysis in the acquisition process Staff with the best HR takes the lead! 20 Center for Human Resources - Kristian Andersson
  21. 21. Recommendations for HR 3 (4) • Minimize value leakage and secure the base business Keep dialogue with employees Monitor and manage issues early 21 Center for Human Resources - Kristian Andersson
  22. 22. Recommendations for HR 4 (4) • Build long-term M&A capability Create systematic and fact-based approach Establish and lead process for learning from M&A experience 22 Center for Human Resources - Kristian Andersson
  23. 23. Key Takeways for HR • Get involved early • There is no one-size-fits-all approach to the management of HR in M&As • Be clear on the underlying strategy driving the deal • Decide on the appropriate structure to support the strategy • Align HR practices to strategy and structure • Build long-term M&A capability 23 Center for Human Resources - Kristian Andersson
  24. 24. +46 702 - 83 5991 Questions? kristian.andersson@telia.com 24 Center for Human Resources - Kristian Andersson

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