Human capital analysis in M&A transactions – Mergers & Acquisitions
Human capital analysis in M&A transactions
This is a crucial aspect that can determine the success or failure of such deals.
These are not only based on financial and strategic considerations, but also on how effectively the two companies can integrate their talents and cultures.
We have been working on deals of this nature for Private Equity accounts for a number of years, and our feedback from the HR Due Diligence phase leads us to identify several key points to consider when analyzing human capital in the M&A context:`
Key points to consider :
Skills and talent assessment: Identifying and assessing key talents and unique skills within the target company is essential. This includes analyzing the skill levels, experience and commitment of key employees, who are valuable assets that can positively influence the value of the M&A transaction.
Culture organization : The cultural fit between the two companies is crucial. Significant cultural differences can lead to conflict, reduce integration efficiency and affect overall performance. It is therefore important to assess and plan cultural integration to ensure a smooth transition.
Talent retention: The risk of losing key talent is high during M&A operations. Strategies to retain key employees, such as retention plans or incentives, may be necessary to preserve the value of the acquired company.
Synergies and integration: The analysis must assess how the talents of each organization can be combined to create added value, taking into account possible duplication of roles and reorganization requirements.
Communication and change management: Transparent communication and a change management plan are crucial to maintaining employee commitment and facilitating successful integration. Clearly communicating the vision, objectives and benefits of the merger or acquisition to all stakeholders is vital.
Integration planning: Developing an integration strategy that aligns employees’ objectives with those of the new entity can help ensure a successful transition and achieve the M&A objectives.
In short, a comprehensive assessment of human capital not only helps to identify personnel-related risks and opportunities in M&A transactions, but also lays the foundations for successful integration, thus contributing to the achievement of the deal’s strategic and financial objectives.
Investing in the HR due diligence phase is therefore of real importance, and there have been many cases of major failures due to a lack of prior involvement in the subject.
A final point not to be underestimated is the recovery period between the seller and the buyer.
In our experience, this phase needs to be highly organized and planned, as well as being as short as possible. It often happens that after 6 months, cohabitation becomes delicate. However, the transferor can accompany the transferee under a different status, for example, as a consultant on specific subjects.