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Why Your HR Department Is Critical to the Success of Your Merger or Acquisition

June 13, 2023

by Leah Davis, CPA

If your business is facing a merger or acquisition, there’s a lot to think about. But in between the flurry of financial statements, valuation reports, and price negotiation, there’s one element you shouldn’t ignore: the people. Thinking through things like personnel issues, critical regulatory compliance, compensation and benefits, and talent retention is critical to a successful transition. After all, your company won’t be worth anything if talented people aren’t left to do the work.

Here’s why you should get your HR professionals to the M&A table ASAP.

1. Meet compliance and due diligence requirements.

Involving your HR professionals early on is key to starting the transition on the right foot. In addition to ensuring compliance with employee and payroll-related regulations, HR can manage the workforce due diligence aspect of the M&A process. This can help you be aware of any potential employment risks, personnel issues, or cultural clashes before it’s too late to change your approach.

2. Provide transparency within reason.

This can be tricky. Obviously, you want to let your employees know about the impending change as soon as possible. But at the same time, making an M&A announcement without having the answers needed to address employee concerns isn’t very kind. A good rule of thumb is to share when the deal is very probable, and you can confidently answer questions related to layoffs, payroll, benefits, and leadership. Your HR department can help you proactively and clearly communicate what’s going to change and what’s not.

3. Take steps to retain key people.

Your HR professionals can help you understand how the transition could impact your key employees and the options you have for ensuring their commitment throughout the merger or acquisition. You may need to think about who you can and can’t afford to lose, as well as whose experience, knowledge, or loyal employee following will be critical to the transition’s overall success. Yes, there will be tough conversations. Yes, your HR professionals can guide you through them.

4. Understand what needs to happen at closing.

Generally speaking, there are two types of acquisitions: stock sale or asset sale. Each has its own set of highly regulated processes that must be followed at closing. Regardless of the type of acquisition you’re facing, your HR team’s expertise is critical to keeping your organization in compliance and getting the deal done right.

5. Identify and own leadership changes.

This step is critical to the success of any M&A. Before the acquisition happens, the acquiring firm must be clear on what will happen to the leaders of the firm they’re acquiring. What will happen to the founders? The CEO? The mid-level managers? The buyer must be really honest with themselves about who stays and who goes, and then communicate this as soon as possible to employees. Dragging out a decision to cut loose the seller’s leaders is often confusing for and detrimental to employees. Your HR department is instrumental in not only addressing exit and severance agreements, but in crafting communication around leadership changes as well.

6. Communicate new expectations.

Once you’ve established the new entity and determine who’s in charge, clearly communicate where the organization is headed and how it will get there. Part of this involves determining an organizational hierarchy and establishing decision-making protocols as soon as reasonably possible. Once again, your HR professionals can help you thoughtfully communicate new expectations to ensure everyone understands and feels secure in the process.

A key ingredient for a successful transition

Including your HR department in the early stages of your merger or acquisition can keep you from overlooking important considerations and, more importantly, develop a plan for moving ahead as one organization. Abdo has a team of experienced HR professionals who can help to facilitate and advise on all aspects of the M&A process. If you have questions about this topic or would like to explore how we can help, contact us today.


Meet the Expert

Leah Davis, CPA

With experience and empathy, Leah develops customized solutions to help employers solve their people challenges.

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