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By: Robin Simmons on July 8th, 2024

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M&A Advice: HR’s Role When Your Company Is Being Acquired

When employees hear the words, "We're being acquired," their minds often race to the worst-case scenario. They ask questions like: Is my job security at risk? Can I continue with my professional development plan? How will this affect our existing workplace culture?   

This uncertainty can seriously impact employee engagement and retention. In turn, this can affect the M&A, as the acquiring company is keen to access the things that make your current team so special.

Your people's knowledge, expertise, creativity, and customer relationships are all extremely valuable assets. You'll need to retain those people in order to get the maximum value for an acquisition. 

That's why it's so important to involve HR in every step of the M&A process. In this article, we'll look at what HR leaders can do before and after the merger or acquisition to ensure a smooth transition. 

Pre-M&A HR responsibilities

HR should kick into action right from the beginning of the M&A process. An early start will allow HR leaders to get active on essential duties, such as these:

1. Update HR metrics

The HR department tracks essential team information, such as headcount, compensation, demographic data, tenure, job titles, and the current skills matrix. You also need to be able to report on who is on any type of leave, such as FMLA, Military leave, or other personal or administrative leave. HR can also provide information on things like the employee experience and employer brand, which are essential for building and retaining an outstanding team.

Being able to provide metrics and provide it quickly can impact the M&A’s final value. A strong team with specialist knowledge is a valuable asset that makes a big difference during negotiations. Accurate HR metrics can help estimate the true value of your people.

2. Create a knowledge management plan

In-house expertise is a valuable asset, so it’s important that it’s not lost during the M&A action. For example, say your company has a critical process that can only be performed by one person. If that person chooses to leave after the acquisition, it leaves the acquiring company in a difficult situation.

HR can help by working with leaders to develop a knowledge management strategy. If there is a critical dependency, HR can help facilitate training for other team members or arrange to have processes documented. They can also flag that individual as a key person, which will be an important part of the M&A.

3. Secure key persons

Some staff members are indispensable due to their knowledge, their customer relationships, or their track record of getting results. However, the acquiring company won’t know who these key people are. They’re relying on the seller to identify those must-have staff members.

The selling company’s HR team can help by categorizing the current team according to their retention priority. The HR team can also offer suggestions on the best way to retain each key person, such as by offering a retention bonus or professional development opportunity.

4. Solidify cultural alignment

Cultural integration is one of the biggest obstacles to a successful M&A. After the acquisition, leadership might find that the two teams have irreconcilable differences in their values, approach to work and collaboration. There can also be differences in leave and benefits packages that are offered. This can have serious consequences, including low engagement and high staff turnover. No stone should be left unturned when evaluating cultural fit.

HR professionals can help by assessing the existing culture and then developing a plan to align the new teams. Ideally, this can happen in collaboration with the acquiring company’s HR leaders, who will be responsible for the post-M&A integration.

5. Complete all outstanding compliance requirements

Any M&A is subject to due diligence. HR compliance is an important factor in this process, and the acquisition may fall through if there are any outstanding HR issues that could pose a liability to the acquiring firm. HR leaders should perform a thorough compliance audit as early as possible, looking at everything, including FLSA classification, Form I-9, employee personnel files, state laws, and the employee handbook.

It is also good practice to review benefit plan enrollments and eligibility to ensure no one is on the plan who should not be and everyone was provided the opportunity to enroll when they were eligible. Finally, confirm you have met all of your reporting obligations such as 1095 filings and Form 5500s.

6. Minimize legal liability

HR-related lawsuits can impact M&A negotiations. If there are any outstanding actions, HR leaders should be ready to support the legal team with a goal of bringing a swift resolution.

Another HR responsibility is to look at potential lawsuits. The acquiring company will examine this as part of its due diligence, but the current HR team can help get ahead of any possible issues. In particular, it’s important to look at all involuntary separations over the past year, especially those that could be construed as discriminatory or in breach of EEOC rules.

6. Document outstanding employee commitments

Your company may have made formal or informal commitments to team members, such as employment agreements, professional training promises, additional leave or benefits. The acquiring company must understand these commitments—if they choose not to honor the agreement, it could impact retention and engagement.

Employees also may have outstanding commitments to the company. For example, some staff might have received sign on or retention bonuses in exchange for a long-term commitment to the company. The acquiring company will need to understand the exact details of any such agreement.

Post-M&A HR responsibilities

HR leaders will have a lot to do during the acquisition process. However, things don't stop there. Afterwards, there will be some important duties to complete, such as: 

1. Create a legacy

Selling a company can be emotional, especially if the current owner is also the founder. The leadership team might want to see that they leave an internal legacy, either through their organizational culture or by assisting the new leadership team.

HR can help to build this legacy in several ways. They can assist with cultural integration plans and help ensure that their company’s existing values are not forgotten. HR can also facilitate communication between the two leadership teams, allowing them to talk about post-M&A cooperation.

2. Support the incoming team

The incumbent HR department can also make life easier for the incoming team, who face their own challenges. One crucial area of support is HRIS integration, as employee records will need to be migrated across to a new platform. HR can provide information about formats and perform some helpful data cleansing before the handover.

It’s also helpful to have an open dialogue between both HR teams during the handover so they can discuss anything that might arise. This can include queries about compliance paperwork, team structures, organizational culture, training strategy, and anything else that will help ensure a smooth transition.

3. Communicate throughout the process

M&As raise a huge amount of questions internally. Staff members want to know if their jobs and benefits are safe. Leaders want to know how this will impact strategy and policy. Everyone has questions about culture, integration, and life as part of a new team.

HR can facilitate communication and help everyone find answers to their questions. The HR team can act as intermediaries, passing employee questions to leadership and then providing updates back to the team. Most importantly, HR can help to present new information in a way that doesn’t hurt morale—or worse, cause people to start looking for a new job.

Get help with the M&A process

Mergers and Acquisitions are complex, and the process can overwhelm your existing HR team.

That's why it's a good idea to look for additional help. A strategic HR partner can help you navigate all of the challenges of an M&A, helping you to retain your best people and increase the deal value. 

Book a call with Helios HR today and speak to one of our experienced consultants. We'll discuss your needs and help you plan a transfer that benefits everyone. 

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