Failure to address “people-centric” issues can jeopardise a cross-border M&A deal

"Sure, M&As grab headlines for their multi-billion dollar deal values. But if you think it is only sale-price which is the key to success of such deals, you may be in for a surprise.


Talent management, executive rewards, coupled with governance and organisational culture have emerged as key factors to successful cross-border M&A, according to the results of Mercer’s 2012 Asia Pacific Cross-Border Post-Merger Integration Survey.


“Failure to address “people-centric” issues appropriately can jeopardise the overall success of a cross-border M&A deal,” the survey says.


"Planning and execution around critical areas such as talent management, executive rewards, governance and organisational culture are essential during all stages of transactions," said Mr Len Gray, Mercer’s Global & Asia-Pacific M&A leader.


Forty-one companies across Asia Pacific that had recently acquired a new overseas-based business were interviewed by Mercer. Those interviewed on a one-to-one basis from these companies include: Human Resource Directors, Business Development and Corporate Strategy Executives from forty-one multinational and large local companies across a wide range of industries (retail, energy, food and beverage, financial services, engineering and technology) participated.


Only 24 per cent of the respondents cited sale price as a critical success factor for their M&A.


The majority, 76 per cent, said that business and organisation integration was the most important success factor, followed by talent retention (59 per cent), pointing to a strong emphasis on people- related issues.


Interestingly, almost 60 per cent of respondents identified culture as a top key challenge during integration, but most companies’ integration plans lack the right kind of detail.


“Working with HR on a robust integration plan prior to deal-close is vital, and means that critical people-related details are properly addressed and managed,” the survey revealed.


The experiences of survey respondents indicate that engaging HR professionals from the outset helps protect against unanticipated people issues arising during integration.


It indicated that 66 per cent of companies see executive compensation and benefits as their primary focus during HR due diligence. However, many companies do not have a clear strategy for managing differing executive reward schemes. Handling discrepancies between pay packages on a case-by-case basis can lead to prolonged and costly negotiations.

Further, 61 per cent viewed governance of the acquired company as the second most important initiative during integration. Strategies reported range from taking majority board seats and appointing key executives, to leaving the new company in the experienced hands of its existing leadership. Either way, organisational governance is seen as a key consideration when mergers span borders.


The report also found that a culture integration strategy will not fly without the buy-in of senior leaders. Any successful plan needs to be developed, owned and driven by these key influencers.


Keywords: cross border M&A, merger and acquisitions, M&As, talent management, Mercer 2012 Asia Pacific Cross-Border Post-Merger Integration Survey, Mercer survey, Mercer."

(Source: ‘People-centric’ issues key to successful cross-border M&A: Mercer survey, by Richa Mishra, Business Line, July 27, 2012)