Maximising acquisition value: getting the most out of your people
Private Matters, May 2012
The purchase of a business shouldn’t be regarded as a financial issue only according to Deloitte’s Laurent Toussaint, Director, Deloitte Private and Eileen Fernandes, Principal, Deloitte Consulting LLP, Deloitte (U.S.).
If the value of a business acquisition deal is to be fully maximised, one of the key considerations must be the management of the talent.
In particular, this includes ensuring that key talent is not lost, and that the environment that is created after the sale remains attractive to new employees.
Creating a transition roadmap
The information surrounding a change of ownership can shift quickly from the initial shrouds of secrecy when an acquisition is being negotiated, to hitting the headlines of the morning newspaper. After the deal is signed everything changes, and the hallways are flooded with a variety of stakeholders, all giving different opinions and asking questions.
A common mistake is to glibly say, “I’ll deal with people issues as they arise”, and end up with the business losing key people and with them, significant knowledge and value. Replacing this talent may well take years.
It is essential that before the deal is announced, investors and management should create an integrated roadmap, showing major milestones and their sequence, as well as a structured communication plan for stakeholders.
The roadmap should be divided into phases, for instance: deal signing, pre-closing, Day One launch, and post-closing. However, most of the strategy occurs prior to Day One.
A process for consistent internal and external communication is vital to manage stakeholder emotions and ensure that channels are open for sensitive questions. Special attention should be paid to the messages that are being disseminated and the questions that are asked.
Prior to the signing, employee meetings should be prepared for by establishing a tightly monitored, consistent communication policy for conveying and monitoring information, promises and statements of intentions to all groups.
Before completion of the acquisition, meetings should be conducted with supervisors and employees. Communications at press conferences and customer meetings should also ensure the announcements to both the inside and outside world are consistent. Due attention must be paid to closely tracking the messages and promises (general and specific) made to each group and to not making commitments that can’t be kept.
On Day One, launch meetings should be held with internal and external stakeholders. The process of successful ownership transition should be outlined and even a celebration of the opening of the new organisation announced.
Any negative news, such as redundancies or closures, should be balanced with a vision for the future. After completion, the focus should be on meeting strategic goals, achieving cost synergies and integrating the organisations’ cultures.
At this stage of the process, it’s time to go beyond the transition plan and move into the new organisation’s HR strategy.
A prudent and balanced level of disruption to employees should be decided upon. In a merger, for instance, strategy will be driven by the commitments and goals of the deal (including cost-cutting promises to shareholders); but a highly unionised environment may not allow for much disruption.
Compensation, benefits and payroll
While HR’s deadlines are mostly set according to their own priorities, the immovable due dates of compensation, benefits and payroll should not slip.
Before signing, retention strategies for key people should be identified and developed into the executive communications plans. Closer to Day One, it is time to notify all stakeholder parties and have the changes in place. Recruiting issues should be quickly resolved. On Day One, it’s time to implement the retention, executive compensation and recruiting plans.
After completion, a key focus is changing and creating incentives for the new organisation, depending on the situation. HR benefits and work/life programs of the merging organisations are often not comparable, and service provider contracts should be reviewed.
As important is securing administrative contracts such as new insurance, superannuation, and deferred-compensation plans; as well as preparing new employment documentation and identifying employee programs to be offered along with their providers.
In certain circumstances, the payroll function will be built from scratch. In others, by contrast, how much payroll processes change depends on how much disruption the new business can cope with. For payroll, there is no room for error: employees can deal with many uncertainties except in their pay cheques.
Specifying, selecting, and loading the new payroll system after signing, and then testing it is crucial. From Day One, the improved payroll system and procedures should be implemented.
After successful implementation of these procedures, it’s important to then frequently review the roadmap, staffing and communications process. The success of your investment may well depend on it.
For more information please contact:
Director, Deloitte Private
Tel: +61 2 9322 3239