‘Talent Due Diligence’ - a vital part of your M&A
It is well known that Mergers and Acquisitions (M&A) are an attractive way of achieving speedy and substantive corporate growth. But the corporate M&A record is stark and bleak – historically, more than half of all such transactions fail to meet strategic and financial objectives.
If we make the assumption that the bankers, lawyers and accountants accurately performed the necessary due diligence, why is the M&A failure rate so high? I think in a lot of cases this is due to the lack of, or poor, pre-merger talent due diligence. The way to improve the odds of orchestrating a successful M&A transaction is to involve the human resource (HR) function well in advance of the deal being done and not just during the post-merger integration.
In most companies, once the up-front groundwork associated with a merger has been laid, HR is left with the arduous task of developing organisational change strategies and trying to blend disparate processes, systems and corporate cultures. Unfortunately, by this point in the process, many key talents in the acquired company have started heading for the exits. Those remaining are distracted and mired in the inertia of speculation. Is there any wonder why, after the first six months, most merged organisations are left with less value than on the day the deal was announced?
Human assets are a key part of the inherent value of any organisation – for an extreme example, think Blackmores without Christine Holgate – so it is imperative to identify the key talent in the target company as early as possible. Yet, as stated, HR is often invited into the M&A process too late to make vital, decision influencing contributions.
The companies and private equity firms partnering with Evolve Intelligence understand the criticality of performing timely talent due diligence. Conducted during the pre-merger process (complete with flow-through to the integration phases), Evolve’s talent due diligence solution has the potential to add significant value to the merger or acquisition by:
- Providing a ‘road map’ for a smooth integration process that minimises key talent and customer ‘run off’. The ‘road map’ also helps key talent to maintain business focus by reducing possible distractions
- Providing a detailed insight into the business risks associated with the degree of fit with the target company in terms of people, culture and structure
- Improving the quality and speed of key decisions about the target company’s talent inventory
- Identifying key talent to be targeted for specific retention initiatives
- Identifying key talent to be included in strategic succession planning
Stephen Harvey is an Executive Director at Evolve Intelligence.