People buy people
HR should play a bigger role in M&A, says Mike Williams
Acquisitions strategy. The very words can leave even the most bullish CEO trembling and reaching for the phone to call an M&A solicitor.
Especially when their strategy has been growing a business with a view to selling it.
Of course, when companies are bought and sold, they’re an asset. But within that commodity is another, even greater asset – people.
Sometimes, when an organisation’s gearing up for a sale the people strategy can fall by the wayside, despite the fact it could be the linchpin that makes or breaks a deal.
After all, the buyers will have toured the business and met with the key players before confirming their bid.
In fact, according to a study by Towers Watson, when asked, virtually all the business leaders surveyed said they were concerned about the risk of top talent leaving their organisation following an M&A transaction.
World of war: Kraft
‘People issues’ in M&A situations also appear to be growing in importance. Nearly two-thirds from the Towers Watson study (64%) said that people issues are more prominent than they were one or more years ago.
A clash of organisational cultures can scupper a deal – and a lack of well-planned people strategy can put buyers off.
HR directors are leaders within the business. They can’t expect a seat on the board unless they have a strategic imperative.
They have to be savvy with regards to preparing a company for a sale, offer something no one else can, or face being left out of the loop.
Take the Cadbury-Kraft deal in 2010. During Kraft’s allegedly hostile takeover, rarely was there a mention of HR in the clash of culture between a US super-corporate and a British paternalistic institution.
This was an unsolicited bid, but certainly at Cadbury – the company that was being bought – HR was completely absent from the negotiation table.
But HR doesn’t just have a role in TUPE regulation and in the fallout of an acquisition. Perfecting the soft skills prior to an acquisition is the hard part and one where HR directors can add genuine, tangible and monetary value.
HR adds £3m
In a previous role, I was able to prove how strategic HR added £3m to my company’s EBITDA and saved £400,000 per annum in recruitment spend.
That enabled not only the successful sale of the business, but also helped significantly exceed the expected sale price of the business.
A robust internal talent pipeline can demonstrate a succession plan for business longevity. Costs can be saved and profit added through nurturing a culture of employee innovation and involvement. Engagement planning and customer service measures can be directly proportioned to increased customer spend and loyalty.
These are all attractive traits to investment firms.
Culture, values, talent, productivity, customer service scores: these all form a crucial part of preparing for sale.
HRDs shouldn’t be afraid of the opportunity to be involved in a sales strategy. Quite the opposite: this is how they can add value in very real terms.
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