Website M&A

Despite a tumultuous global market in 2018 and similar concerns for 2019, the Asia Pacific region (APAC) expects to see a stable increase in merger and acquisition transactions through this year and beyond. A report by international law firm Baker McKenzie suggests that despite low M&A performance in Chinese markets, general M&A activity is expected to rise to USD 751 billion across APAC in 2019. Citing the “cyclical” nature of the M&A market, the report suggests that even a slowdown in growth in 2020 will not hinder a continued increase in trends through 2021 and 2022. With this in mind, many companies may be currently preparing for or exchanging deals for mergers or acquisitions, and managing your employees effectively through the process should be a key focus.

Common mistakes

A problem, according to John Tucker, Southeast Asia Regional Head, RGF International Recruitment, is that what most companies experience when going through a big change such as a merger or acquisition is a lack of planning and consistency throughout all departments and levels of the business. “M&A deals are intended to maximise value creation by integrating two different companies. However, they often end up doing just the opposite. M&As are sold and executed on the promise of huge synergies, but detailed plans for post-merger integration (PMI) are often overlooked,” Mr Tucker advises. “In my own career (prior to executive search) I’ve worked in two companies that were acquired by a much larger business. New organisational structures, systems and processes, and standards were imposed on the acquired firms, with little explanation and little thought to how employees would react. Acceptance of the new culture was assumed, but not achieved. The outcome of course disappointed everyone. For PMI to succeed, management has to define and communicate a clear vision, carefully consider the appropriate and realistic rate of change, and make sure they have leaders in place who understand and are committed to the role of being a change agent. It’s a slower and in many ways a more difficult task than deal-making and due diligence, but without it, the deal is probably doomed.

Without clear direction from the top and proper communication with employees, chaos ensues. Because two or more companies are involved in this process, there are going to be pain points that arise from difference in policy, culture or direction. These need to be handled proactively, rather than reactively. Do not make the mistake of leaving important decisions to the last minute. The earlier you can implement a strategy for change the better.

Preventing employee concerns

Before you even sign off on a deal, you should identify the key issues you expect to come up during the process of combining your companies and think about how this may affect your employees. Bring your executive and HR team together, make a list of these challenges, and brainstorm some solutions. It is important to be ahead of the game, to prevent employee panic. If the process gets underway and your employees have not been considered, they may become fearful and resistant to any changes that do occur. If your employees are worried or feeling neglected, productivity will inevitably drop, which is something else you want to avoid during a merger or acquisition process.

Keep communication open

M&A processes are extremely busy and stressful times, and for the people in executive positions it can be easy to focus on the logistics and administration of the deal and forget to communicate with their colleagues and their team. For employees at lower levels who are not privy to the confidential aspects of what’s happening, it can be frustrating to feel like they are being kept in the dark. Most people find change difficult and if things are happening around them that they don’t understand, they will be much more resistance. Keep your lines of communication as open as possible. You could try:

  • Holding interactive workshops or training sessions for all employees (from all companies that are involved in the merger)
  • Maintaining an employee intranet or newsletter with updates and information on what’s going on
  • Encouraging team-building activities and social events to get new team members acquainted and involved in company culture
  • Scheduling regular meetings with your executives who can do the same with their teams, to give updates on the process and offer a chance for people to ask questions

Brief your HR department

Human Resources is probably the most integral part of managing your employees through this time. HR is the first port of call for your employees when they’re unhappy, and during M&A proceedings the department is more likely to be dealing with increasing concerns from existing and new staff. For this reason, and to prevent errors in data handling and in onboarding new team members, your HR department needs to be involved from the very beginning. You should set up processes to cope with the influx of new people or the loss of current employees, as well as levelling salaries, balancing job titles and restructuring internal hierarchies. Involve HR in the setup of your calendar and task list for the process, so that they know the deadlines you are all working towards. Ensure they always have up-to-date information, and they are given the support they need from higher up to effectively address any issues that arise. Employees will appreciate the security that comes from having an HR department that knows what is going on and can advise them accurately if they have a query.

Allow for feedback and input

A 2016 research paper published by the Innovative Space of Scientific Research Journals noted that 67% of mergers fail to meet their objectives due to “apathy towards the employees’ reactions and interests”. People like to be heard, so make sure that you give your employees a chance to give feedback and input into what is happening around them. Provide a dedicated outlet for this, whether it is through HR or via a feedback form or dedicated email address they can contact. Make sure your managers are accessible and available to their teams. Bringing your organisation closer together and making your people feel valued will give you the best chance of making it through a merger or acquisition and coming out stronger on the other side.

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Sources:

https://www.researchgate.net/publication/305406845_Mergers_and_Acquisitions_failure_rates_and_perspectives_on_why_they_fail

https://imaa-institute.org/effective-management-change-merger-acquisition/

https://www.forbes.com/sites/baininsights/2017/11/16/the-ceos-guide-to-managing-change-after-a-merger-infographic/#60b65a7a598b

https://www.bakermckenzie.com/en/insight/publications/2018/12/global-transactions-forecast-2019

https://www.willistowerswatson.com/en-CH/press/2019/01/mna-performance-to-bounce-back-in-2019-following-worst-year-for-deal-making-since-financial-crash

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Posted On 2019-06-05