How to manage people through a merger or acquisition – Part 1

People Puzzles HR Directors Andrea Richardson and Jackie Kibbler give their perspective on how to plan your people strategy for a merger or acquisition. Part 1 involves preparing staff for the changes before the merger so you don’t lose star performers.

Acquiring or merging with another company is a huge logistical process, both legally and financially. But there are often huge implications for staff too, which can sometimes get overlooked.

Like any purchase, forewarned is forearmed. ‘It’s essential to undertake thorough due diligence prior to any merger or acquisition activity, using experienced individuals who know the right questions to ask, as without this you could miss vital information,’ says Jackie Kibbler.

Examine staff contracts

‘A big piece of advice would be to gather as much information as you can about the people in the new business, before any acquisition,’ Jackie advises. ‘It is important to review staff contracts; to understand what kind of liabilities you might be taking on, including length of service and any pension arrangements as this could have a financial impact if you are looking at making synergies at a later date. You might not necessarily think of these things until you come to do it, but by then it’s too late!’

Andrea Richardson agrees that getting sight of staff contracts is a key part of any merger or acquisition process. ‘It should certainly be done beforehand as part of the legal process,’ she says. Explaining that this information will usually be in the seller’s ‘data room’ at their solicitor’s offices along with the finances and other legal contracts.

Consider TUPE implications

If you need to integrate existing staff into a new company you’ll need to consider TUPE – Transfer of Undertakings Protection of Employment – before changing anyone’s contract. TUPE protects employees’ terms and conditions, so for example, if an employee works an eight-hour day and the new company’s is nine hours, the new employer cannot simply impose their conditions on the employee. There would need to be a negotiation.

TUPE also protects pay, benefits and pension arrangements. ‘It applies indefinitely so you can’t just say, “It’s been two years since we bought the business, we have to change terms and conditions” – you need to have an economic, technical or organisational reason to make a change.’ explains Andrea. ‘If you change the structure, that might give you an organisational reason to change T&C’s. If, for example, you offer someone a new job with a new package. But I should stress that TUPE can be quite complicated as it changes often – you need someone who knows their stuff to do it properly.’

Plan your restructure

Some business acquisitions might not warrant a restructure, but many do. An HR expert can advise what the organisation needs to look like going forward. ‘Sorting out the structure is the first thing that has to happen, especially at the senior level, because you need to know who’s in charge,’ says Andrea (read our next article for more on carrying out a restructure).

Introduce yourself to the new company

The selling company would normally consult with their employees about the fact that they’re selling the business. In most cases, senior people in the purchasing business would visit the site and introduce themselves before the deal is finalised. Giving them an idea of how they plan to run things post sale. This is the start of an important communications piece that needs to run throughout the change management process, so it’s important to start how you mean to go on to keep key staff on board.

Avoid costly mistakes

There are consequences if you don’t get the people part right of a merger or acquisition.

‘If you don’t comply with the TUPE regulations properly, there’s a financial penalty of up to 13 weeks pay per person,’ says Andrea. ‘There’s also potential loss of reputation if you do things wrong, you could lose key people, contracts or clients. All of those things could go wrong at an early stage.’

Get an HR person involved as early as possible!

An HR consultant would also prioritise staff engagement to get employees on board. ‘In my experience, SMEs tend to focus on the legal and financial perspectives of any merger or acquisition. They wouldn’t necessarily look at things like communication and staff engagement,’ says Jackie. ‘Good communication and employee engagement is so important and can make the difference between a successful and unsuccessful merger or acquisition. It is important to understand the company culture and values of the business to ensure the retention of key people.’

Read our next article on After the sale – restructuring, redundancies and holding on to key people.

If you need help planning some big changes, why not see if People Puzzles can help? Contact us today or give us a call us on 0808 164 5826 or email [email protected].

 

Jackie Kibbler, People Director

Andrea Richardson, People Director