Workforce Transitions: The Most Overlooked Component of M&A

It’s a problem that’s there before there are any clear signs—and even before negotiations turn into closing documents. The management of each business’s workforce and the successful management of workforce transitions are the key prongs of a successful M&A transaction. Yet many businesses completely neglect this important issue until it’s too late to fix the damage.

Workforce Transition Challenges

Most M&A transitions fail to realize their original goals. Though executives attribute this failure to many factors, workforce issues—incompatible cultures, turnover, management issues, poor morale, employee anger—are at the heart of most of these issues. Employees know they might lose their jobs, or at least what they like about their jobs. They’re going to have many questions, and if you can’t adequately address their concerns early, expect a rocky road.

Effectively Managing a Workforce Transition During M&A

Whether you’re the acquirer or the seller, your commitment to a smooth transition must be steadfast. The following tips can help all parties manage their workforce and minimize disruptions during the transition:

• Plan earlier than you think you need to. You should have a clear idea of how a transition might affect your workforce well before beginning formal negotiations. After all, workforce management and a transition plan need to be part of the final transition, and should therefore factor into negotiations. Be mindful of strategies that can benefit your staff, since benefits to staff ultimately benefit you.
• Communicate. Then communicate some more. When the transition becomes public, good communication that anticipates employee’s concerns can make or break the merger. Provide details about the transaction, information on what staff can expect, a timeline for the merger, and a way for stakeholders to contact you with feedback. Don’t be dismissive or unclear. Your goal here isn’t to market your company; it’s to answer questions that affect people’s lives.
• Get help and support from experts. Particularly for middle market M&A, talent management and M&A consultants can offer vital insights and support the many demands of HR management. They offer objective insight and can help you anticipate concerns before they turn into major problems. They’ll also provide guidance about which employees should stay, empowering you to answer your staff’s questions earlier and more comprehensively than you otherwise could.
• Listen to your staff. Don’t give lip service to communication. The people who are on the ground running your business have key insights and their opinions matter. Treat them that way. Act on their insights when doing so is practical or useful. Impersonal communication cannot substitute for in-person contact, so invite employees to talk to you in person.
• Know the importance of culture integration. Business culture can make or break a job. Consider how an employee feels when they transition from a laid-back environment with lots of vacation time to an environment of micromanagement and too much work. The two business’s cultures must be a good fit. If they’re not, find ways to integrate the two cultures in a way that maximizes employee well-being.
• Plan for changes in policies and benefits. Your staff will want to know if their benefits will change, or if they can still take a family vacation. Ensure shifts maximize benefits for employees wherever possible. Openly communicate about changes that may be poorly received and explain how these policy changes may be offset by other benefits.

After the Transition

Following the transition, communication will continue to be key. You must be willing to openly discuss issues with your employees. It’s also critically important not to rush changes. And finally, respect the motivations of employees who choose to depart. Mergers can be tough and your staff must work to protect themselves.

About Edgemont Partners

Edgemont Partners is a specialist healthcare investment banking firm providing the highest level of mergers and acquisitions advisory services to founder-owned and entrepreneur-run healthcare and life sciences companies in the lower middle and middle markets. Our world class transaction expertise is a result of our extensive and proven track record of success. We have advised on over 150 transactions representing more than $60 billion in combined value.