Since a few years in my new role as Head of HR & Compliance at Sika, I have been given the opportunity to actively contribute in several cross-border acquisitions and integrations with a new focus on people relevant aspects. This is an area that feels familiar to me, having practiced for more than 15 years as an international M&A lawyer, advising clients, active in many different industries, on M&A deals and Group restructuring. We all agree that people and culture are at the heart of successful businesses. And this is also true in acquisitions, where ensuring retention of talents throughout the entire acquisition process and designing an effective people integration plan is critical to preserve both the knowledge and the goodwill you acquire. People bring new customers relationships, new competences, and new technologies. People bring growth.
With M&A transactions, a lot of uncertainty about the future adds to the ordinary challenges for the acquired employees. This means you have to actively manage employee attrition of the target starting immediately after the deal is announced (typically upon signing of an acquisition agreement) and ensure you set up monthly attrition reports by country, function and levels, investigate in segment with high level of attrition rates and take corrective actions where needed, up until closing of the transaction. This timeframe between signing of a deal and closing of the acquisition can vary from a few days to several months and can last for even more than a year in complex transactions, which require regulatory approvals, like merger clearance for antitrust purposes, in several jurisdictions. It is of paramount importance to minimize disruption and people’s uncertainty about their future. Purchasers should work closely with the target’s management - often in so called clean teams that allow sharing certain competitive sensitive information before closing - to quickly identify key employees that are needed for a successful Day 1 and long-term talents needed to achieve the growth strategy. This requires the development of a tailored and adaptable retention strategy that goes beyond financial incentive plans. To mitigate the risk of losing critical talents, retention conversations should take place as early as possible, as attrition risk is amplified for employees with unique skills and knowledge. Reassuring on new opportunities for personal and professional growth and engaging key employees to reduce mental noise is vital, as well as involving them in driving successful integration planning activities is a way to start building trusted relationships. Communication should be clear, simple, positive, and should stick to the facts. It is important to acknowledge that specific integration decisions may trigger unintended messages as they could impact acquired people. "HR plays a pivotal role in encouraging leaders to drive a proactive cultural integration, highlighting and communicating a cultural vision that identifies similarities, as well as differences early in the acquisition process through light culture surveys and management interviews" In any merger, prioritizing talent retention is crucial, even though some employee attrition is inevitable. The goal is to keep the ones you need and neutralize the increased effort of competitors to take advantage of the situations. In this scenario, HR facilitates the effort by involving senior managers in getting to know the key individuals, contributes to the communication strategy and integration decisions, besides designing, tracking, and adjusting the overall retention efforts. Apart from assisting in the design of the target organization and communicating changes in roles and reporting lines, HR also focuses on harmonizing compensation, benefits, job functions, titles, grading, and other policies. Business continuity is a priority and transitions to the future state should be planned, communicated, and implemented carefully and in compliance with local labor and legal requirements and processes, taking also cultural differences into account. Acknowledging complexity is key. HR teams should overinvest in preparation and secure the necessary resources and advise to support them in this journey. Closing the acquisition is not the end. It is just the beginning of the integration phase of the planned activities. The impact of changes on parts of the organization is different and can happen at different times. It is important to define and communicate a bold joint ambition for the combined companies that can generate excitement, inspire deep commitment of people to work together with a growth mindset that is driving openness to change and seeking opportunities to unlock the full potential of people and reinforce an integrated vision of value creation. Aligned leaders that model and inspire employees on shared values are essential to a successful acquisition. HR plays a pivotal role in encouraging leaders to drive a proactive cultural integration, highlighting and communicating a cultural vision that identifies similarities, as well as differences early in the acquisition process through light culture surveys and management interviews. Celebrating and emphasizing the culture ambition, through storytelling, involving people and facilitating conversations will increase awareness of the desired behaviors around strong values that drive effective engagement at all levels of the organization.