Why So Many M&As Fail, And How Can HR Help?

Strong HR initiatives can help avoid unnecessary friction, confusion and lack of unity

When people make a large purchase, like a house or a car, they try to do everything they can to be sure that it’s the right fit for them. With mergers and acquisitions (M&As), companies do the same thing. Numbers are hammered out for months, endless paperwork is put in order, presentations are delivered and meetings are held. Despite all of this, over 70% of M&As are still considered unsuccessful according to the Harvard Business Review. 
 

So why do so many M&As fail after so much investment of time, effort and money? And what can companies do about it? The truth is, organizations can do all the negotiating and numbers crunching in the board rooms, but at the end of the day, a successful M&A is about one thing – employees working together. 

One of the biggest reasons acquisitions fail is the insufficient focus put on company culture and the people that are at the heart of it. Fortunately, strong HR initiatives during the M&A process can help avoid unnecessary friction, confusion and lack of unity. Here are some common M&A roadblocks and the HR best practices to overcome them. 

1. Lack of Communication

Challenges can arise early in the M&A process if there is a lack of communication between two entities, such as between teams and departments or different levels of the organizational ladder. Often during M&As, communication is siloed with the intention of avoiding confusion while strategies and procedures are established. The thinking is that information should be shared only once it’s completely solidified, that way employees will feel confident in their leadership’s direction.

Unfortunately, these good intentions can have adverse consequences. It is essential that communication is a priority throughout the M&A process–it should be done early and often. Mergers can have employees feeling uncertain of their job security, their changing roles and their new environment. The best way to alleviate these concerns is by sharing information as it becomes available as much as possible so that everyone is kept informed.

One way HR can accomplish this is through consistent, established processes, such as weekly company-wide emails, that circulate up-to-date information. These communications should come from a trusted authority within the organization and address any relevant concerns employees may be having. Which is why another crucial component of a successful M&A is two-way communication. Employees should know where they can provide feedback and input so that their voice is heard, and leadership can address their needs.

2. Emphasizing Administration Rather than Mission

Another common mistake during the M&A process is placing an overemphasis on administrative concerns. Of course, with so much to be done organizationally it’s easy to fixate on the tasks that are important to keeping the company running. However, the focus of a merger should not be on company politics, but rather on company culture.

In practice, this looks like unifying company values and building a collaborative process through each step of the M&A journey. From the beginning, leaders should be thinking about how to align the core values, missions and messages of each company to create a purpose-driven organization. Too much attention on administrative details too early on can result in these elements becoming afterthoughts when they need to be built into the foundation.

HR teams should act as a bridge between leadership and the larger employee community to develop a roadmap for unifying the company culture. This means prioritizing conversations about what it means to work at an organization – consider a company with defined values like “creativity, passion and innovation” merging with a company that identifies as “honest, consistent and accountable,” these values can certainly work well together, but there would need to be discussion to align them with a common mission. These conversations should take place early on in the M&A process to ensure there is a strong, shared visions for the company that employees can use as the foundation for the work they do each day. From there, the administrative details will flow much more easily because everyone involved has a solid foundation to work from.

3. Siloed Employee Initiatives 

During M&As, HR departments will have to decide how to meld various initiatives that were established within each company. It can be detrimental to the success of the merger if the two companies keep initiatives such as DEI or mental health awareness siloed, because it restricts employees from unifying under a single company culture. For instance, if one entity has built a community for women of color, and the other entity has built a community for working mothers, there should be conversations around how these two communities could work together to create the strongest common culture. HR departments should understand that this doesn’t always mean combining into one group, but rather creating opportunities for people to collaborate and show up as their whole selves. 

With so much in flux during an M&A, planning the future of company-wide initiatives helps employees feel secure that they can continue to bring their whole person to their workplace. Programs built around principles such as DEI are important to the employee experience, and employees really value these aspects of their community. When these programs disappear or are neglected during the M&A process, employees can lose their sense of belonging and therefore their purpose at work. 

During an M&A, HR professionals should map out the future of company-wide initiatives with input from employee participants to understand the best way forward. This may mean consolidating some under a single umbrella and keeping others distinct while raising awareness of how employees can take advantage of programs that may be new to them. 

Everything Should Come Back to People

HR professionals already know that for any company transformation to be successful, the focus must be on the people who work there. M&As are no exception; for two organizations to truly come together as one, individuals must be able to effectively collaborate with each other to accomplish their daily tasks. By prioritizing employee needs and co-creating a common vision, mission and culture, leaders can unify two entities to create something even stronger. 

Tracey Leahy is the SVP, Chief Human Resources Officer at Rocket Software. Connect Tracey Leahy