M&A HR Readiness

The success of any merger or acquisition, large or small, depends as much on

effectively managing people and the organizational environment as it does on
managing the timing and financials. More M&A deals fail because of unresolved
cultural issues than because of transaction fundamentals. The reality is that business
performance is driven largely by an organizations people specifically, their skills,
competencies and contributions so their ability to stay engaged during difficult
transition periods is critical. And thats where HR plays a pivotal role.
HR Readiness Is Key to Executing M&As
Successfully
Towers Watson research, along with firsthand client
experience, reconfirms that deals can be significantly
more successful when organizations address people
and culture issues early, strategically and with
discipline. In a Towers Watson global survey of more
than 400 business and HR executives (Figure 1),
respondents rating their companys deal as successful
in meeting its primary objectives were far more likely to
recognize the importance of people issues and bring
HR into the deal early. These companies emphasized
critical skills, measured leadership behavior and
actions, and emphasized building critical skills,
communicating broadly, retaining key talent and
building a culture that aligns with, and supports,
strategic goals.

Figure 1. Successful transactions share a common element:

An early and intense focus on people issues
0%

10%

20%

30%

40%

50%

60%

Influencing effectiveness of senior leadership

42
15
Effectively and openly communicating with employees throughout the transition
65

40
Creating and implementing strategies to retain key employees
56
32
Deploying the workforce effectively before, during and after transition
41
19
Assigning the best resources to the integration team
47
26
Focusing on cultural alignment
20

39

Creating and implementing staffing strategies aligned with overall talent strategy
38
19
Very successful deals
Source: 2009 Global M&A Pulse Survey

towerswatson.com

70%

Less successful deals

Rather

than simply execute a checklist of processes, we help

organizations fully appreciate the extensive people changes
that accompany most corporate transactions.
Effective HR Impacts All Areas and
Phases of the Deal Life Cycle

seven areas are in play during each stage of an M&A

deal. Focusing on these areas of critical value helps to
ensure that companies sustain and improve employee
engagement, which is essential to the long-term
financial success of any deal.

HR plays a critical role in all phases of an M&A transaction from target evaluation and due diligence,
through integration planning, implementation and
ongoing growth as well as in each of the seven
areas of critical value (Figure 2).

The Towers Watson Approach

Rather than simply execute a checklist of processes,
we help organizations fully appreciate the extensive
people changes that accompany most M&A transactions. We help companies identify, understand and
act upon the unique people issues that arise what
employees do, how they are motivated, how they are
rewarded and how HR services are delivered to them
to create people strategies that will best support
broader business goals.

A companys ultimate goals for an M&A transaction

are to realize the strategic business objectives of
the modified organization and maximize long-term
shareholder return. Often, these goals include a
combination of cost savings, business growth, and
entry into new markets and services. The seven areas
of critical value noted below along with embedded
project and change management help a company
achieve these goals. To a greater or lesser degree, all

Mergers and Acquisitions

Figure 2. Seven areas of critical value

ject Managemen

Corporate
Transactions
Managing
Costs

Talent

Communication

Culture

en

Due
Diligence

Driving
Growth
Leadership

Integration
Planning

Benefits

Change Managem

Business
Plan

HR Service
Delivery

Pro

Organization
Readiness

tO
ffic
e

Compensation

Business
Performance

Integration
Execution

Through

formal training programs, HR can play a critical role in

supporting future M&A transactions.
Using this approach, there are several steps that HR
can undertake specifically to prepare for its role in an
M&A or other corporate transaction.
These include:
1. Carrying out pre-deal preparations. Long before
a deal is announced, significant preparation is
necessary to ensure needed resources are already
in place when an acquisition target presents itself.
2. Identifying the structure and resource commitment
of the HR M&A team. Early on, HR must evaluate
the likely deal size and scope, anticipate overall deal
coordination and where HR will be involved, create
a project management office, and identify a project
lead as well as geographic and functional resources.

3. Establishing an M&A blueprint. An M&A blueprint

acts as a guide for what needs to happen during
each phase of the transaction and who needs
to be involved. HR M&A blueprints highlight the
most critical areas of a transaction as well as the
complexity and interdependencies of each work
stream within HR and across the different functions.
4. Conducting team training. Through formal training
programs, HR can play a critical role in supporting
future transactions. Training should focus on
understanding the business case, and learning the
different types of transactions and best practices
used in each (Figure 3).

Figure 3. Illustrative training agenda: topics and objectives

Module

Objective

Overview

Setting expectations for training and understanding the overall context of an M&A or
other transaction

Human Capital Value Creation

Understanding the business context and how to drive value through people

Preparing for the Deal

Learning how to establish a dedicated M&A infrastructure, including organization and

process

Target Evaluation

Understanding the business case of a deal and identifying potential strengths and
weaknesses of a target

Due Diligence

Understanding core due diligence requirements, activities and processes

Change Management

Introducing the change management framework, processes and tools

Leadership

Establishing the importance of identifying, selecting and retaining key leaders needed
to drive the business strategy of the organization

Culture

Understanding the importance of culture, and how it relates to the strategic and
business objectives of a company

Communication

Developing a communication strategy, messaging framework and tactics for all

organizational stakeholders

Talent

Understanding different assessment and selection approaches for decision making,

and identifying if and how to harmonize talent management programs to ensure that
the new organization has the right talent both currently and in the future

Total Rewards

Understanding how a total rewards strategy and programs drive employee attraction,
retention and engagement

HR Service Delivery

Understanding how to align the HR function with the needs of the merged company
while balancing day-to-day operational needs

Project Management Office

Understanding a project management office (PMO) structure, including roles needed

and staffing

Key topics remain constant, with content tailored for audience and session duration, from executive briefing for
half a day, to two full days using case simulations and tools.

5. Developing a playbook. An M&A playbook enhances

HRs ability to partner with other functions by
clearly documenting connection points along the
way. Through the development of a playbook,
the capability, credibility and consistency of HRs
transaction support is greatly enhanced. The
playbook should be customized based on the unique
circumstances of the deal (Figure 4).

Turning Challenges Into Opportunities

Mergers, acquisitions and other types of transactions
present exciting opportunities and challenges for
organizations. For HR, its an opportunity to truly help
shape the workforce and workforce programs of the
future. By keeping the people issues front and center,
understanding HRs role in each of the critical phases
of the deal life cycle and working from a deliberate
plan, HR can effectively support the business and help
achieve solid results from the transaction.

Figure 4. Partial list of standard playbook chapters

Chapter

Description

1. Playbook Overview

Review types of transactions, synergies and integration

models

2. Business Strategy

Understand the strategic business rationale of the deal

and the linkages that exist in order to prioritize behaviors,
processes and organization units to maximize financial
return

3. HR M&A Responsibilities

Overview of overall activities mapped by area and discipline

involved in a transaction, followed by detailed HR activities
by transaction phase using process maps

4. Key Players and Roles

Identification of key roles and responsibilities involved in

the transaction

5. Target Evaluation

Pre-deal analysis based on public information to develop

preliminary findings regarding organization structure,
leadership, executive compensation and benefits, culture
and communications

6. Due Diligence

Basics of the data room and the due diligence process,

including data room protocols, use of online data rooms
and vendor due diligence

7. Integration Planning

Understanding the assimilation archetype of the

transaction, and establishing the overarching integration
strategy and plan

Additional chapters could also cover the following topics, based on an

organizations needs and past deal experience:
Leadership
Culture
Communication
HR service delivery

About Towers Watson

Towers Watson is a leading global professional services
company that helps organizations improve performance through
effective people, risk and financial management. With 14,000
associates around the world, we offer solutions in the areas
of employee benefits, talent management, rewards, and risk and
capital management.

Copyright 2011 Towers Watson. All rights reserved.

TW-NA-2011-22157

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