A Merger Boom, An HR Headache

When it comes to mergers, the people in the human-resources department are often among the last to hear. Frequently they’re also the ones hit with an enormous workload.

A recent report found that 54% of British companies surveyed see M&A activity increasing. That’s generally good news for a national business environment that has been struggling for growth, but it raises the bar for CHROs, who must lead their newly formed firm through a slew of talent-merging issues, as well as determine how to combine different hiring, benefits and pay policies. “HR often gets invited late in the process,” says Grant Duncan, a Korn Ferry senior client partner and sector lead in the firm’s Consumer practice. By then, the corporate decisions may already have been made. “As a result,” Duncan adds, “there is little the HR team can do to help out.”

Experts are upbeat about British merger activity in part because growth at UK firms has slowed; it has gone no higher than 1% since the beginning of 2022. Such sluggish performance tends to get M&A bankers excited. “In the tech sector you can see that some companies are having a hard time,” says AJ van den Berg, a Korn Ferry senior client partner in London. That’s likely due to disruption caused by artificial intelligence, and the firms impacted are looking for alternative ways to survive. “A lot of organizations are finding it hard to hide,” notes van den Berg. Of course, companies in other sectors may also become targets for bankers.

When HR is asked to work at speed on a merger or acquisition, they tend to focus on the so-called hard factors, says Emma Cornwall, Korn Ferry’s senior client partner and solution lead for leadership and professional development in UK and Ireland. These hard costs include looking at IT systems, personnel costs, potential liabilities in the event of layoffs, pension commitments, and bonus incentives. “But that means you don’t have the time to focus on soft matters,” she says. 

The top-ranking soft matter is evaluating the cultural differences between the merging companies. Envision a potential clash of cultures if an engineering company is merging with a design company: The two would more than probably have diametrically opposed ways of working. Despite culture being seen as a soft matter, “cultural integration is the biggest cause of M&A failure,” says Drew Hill, a Korn Ferry senior client partner based in the firm’s London office. 

Hill says 74% of non-US mergers lead to cultural-integration issues, versus 54% of US mergers. “The best M&A firms use cultural-integration playbooks that highlight values, the right leadership styles, and governance/decision-making.”

One solution that’s been repeatedly suggested is to bring HR to the table when mergers are being considered. “Get the HR leaders fully involved early in the process, having signed a non-disclosure agreement,” Duncan says. “That means issues can be dealt with early on.” Bringing in HR earlier also takes some pressure off of the team needing to work at speed. “A lot of HR teams are quite light,” he says. “Too much extra work and ultra-tight deadlines can break the team. “

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