Aligning corporate cultures is key to success for M&A deals in Canada
TORONTO, Dec. 17 /CNW/ - How companies approach people issues in a merger or acquisition has a far greater impact on aspects of a deal's success than many would expect, according to new research released today from Towers Perrin. In fact, this latest data indicates that companies that address people issues in a merger or acquisition (M&A) early position themselves far better for deal success.
The Towers Perrin survey compared the integration practices of companies that considered recent M&A transactions to be successful in meeting primary goals with those that believed their deal was less successful. This comparison helped pinpoint specific differences that contribute to overall success. Two notable examples are the relative importance of employee-centric thinking and early involvement of the HR function in driving this thinking and helping business leaders focus appropriately on people issues.
"This research shows that the success of M&A deals relies heavily on how well dealmakers align and integrate both the company - and their people," said Eric D'Amours, Towers Perrin's National M&A Practice Leader for Canada. "Depending on the purpose of the transaction, what separates very successful deals from others could be as simple as the way the two organizations manage people issues and related risks. Of course, the execution may not be that easy."
The survey was conducted with over 400 senior HR and business executives globally, including 118 Canadian respondents, who provided qualitative assessments of the success of their organizations' recent M&A deals.
Perhaps the most surprising finding from this research is that the performance of the corporate HR function in some non-traditional areas (i.e., business areas that are not people-related, such as target evaluation and due diligence) is more of a driver of success than its traditional work. For example, 42% of companies assessing their deal as successful reported that HR performed very well in influencing and shaping senior leaders' behaviour during their transaction. By comparison, just 15% of companies assessing their deal as less successful gave HR a similar rating. Simply put, in more successful transactions HR was nearly three times as likely to support the deal's priorities by providing senior leadership with strategic insights and recommendations.
"It appears that HR executives are building 'next generation' skills that improve their business acumen and insight into their company's priorities, and that's being reflected in the success - or lack of success - of major business deals," said D'Amours. "The research shows that globally, HR in high performing companies - ones that have met key M&A goals - has built a reputation as a strategic business counselor, and has gained the trust of company leaders. In Canada, the biggest differentiator for high performing companies is their effectiveness at aligning their cultures. This echoes a recent study of Canadian financial executives by the Canadian Financial Executives Research Foundation, where effectiveness in cultural alignment was identified by financial leaders as a critical differentiator in deal success."
The study also confirmed that companies judging their deals successful engaged their leaders around people issues early and often in the transaction process. In fact, the Towers Perrin research found that companies judging their deals successful involved HR more often in all phases of the transaction than did those with less successful deals. This was true from the target evaluation phase (57% more often) through due diligence (58% more often) to integration planning (37% more often) and integration implementation (33% more often). By contrast, companies judging their deals less successful seemed to undervalue HR's role, not just in the early phases of a transaction, but also during implementation - when employee communication and buy-in are most critical.
Another issue separating the companies with successful deals from those with less successful deals is their approach to measuring transaction success.
"We know that companies measure what they value during an M&A deal and beyond," said D'Amours. "Revenue, profit margin and other financial metrics remain the most critical and most common, of course - but we're encouraged to see that the companies in our study with successful deals also measured key 'people' indicators far more frequently than did their less successful counterparts."
Specifically, 42% of the successful deal makers measured employee engagement and and 39% measured talent acquisition and retention -- both are critical elements in a transaction's success. By contrast, only 28% of companies with less successful deals viewed these as important factors in determining overall success of an M&A deal. As might be expected, greater HR involvement in the transaction had a major impact on these two critical issues, according to more than two thirds of those polled.
Towers Perrin's most recent survey on the M&A environment assesses HR's role in achieving M&A success and the specific skill sets necessary within HR to most effectively contribute to the M&A process' success. The survey targeted HR and business executives in medium to large organizations that had completed at least one merger or acquisition within the last three years. In total, 404 online surveys were completed by respondents in 25 countries from September 9th through October 9th, 2009. The theoretical margin of error associated with a sample of this size is +/- 4.87% at the 95% confidence level.
About Towers Perrin
Towers Perrin is a global professional services firm that helps organizations improve performance through effective people, risk and financial management. The firm provides innovative solutions in the areas of human capital strategy, program design and management, and in the areas of risk and capital management, insurance and reinsurance intermediary services, and actuarial consulting. Towers Perrin has offices and alliance partners in the United States, Canada, Europe, Asia, Latin America, South Africa, Australia, New Zealand and the Middle East. More information about Towers Perrin is available at www.towersperrin.com.
SOURCE TOWERS PERRIN
For further information: For further information: Laura Snell, (416) 355-7406, Laura.Snell@ketchum.com