HR professionals are key to successful mergers and acquisitions, CIPD reports

April 2008

Human resources can contribute to the success of mergers and acquisitions through the integration and transfer of knowledge and practices, according to a new report from the Charted Institute of Personnel and Development (CIPD).

The last few years have witnessed a sharp upswing in international mergers and acquisitions, with 172 cross border deals worth more than $1billion in 2006 alone. Yet many international mergers have encountered problems due to their complex nature. CIPD research shows that HR's contribution to mergers can be substantial, particularly on the issue of employee integration.

Frances Wilson, the Chartered Institute of Personnel and Development's International Manager said: "Mergers and acquisitions transcend national cultures often making the integration process challenging and problematic. HR can play a key role in making this integration a success for employees at all levels and in particular lead the transfer of knowledge so that organisations' personnel learn from the operations they acquire."

The report International Mergers and Acquisitions: How can HR play a Strategic Role? shows that 60% of overseas owned organisations growing through acquisition have already made deliberate attempts to share and integrate with the acquired firms' knowledge in the UK.

Frances adds: "If time is taken to understand and engage with an acquired firms' employee practices, organisations will be able to effectively share ideas and gain their new employees cooperation. This requires an acquisition strategy from HR to make sure that the mechanisms for learning are in place."

The CIPD research uses case studies from organisations in the financial and pharmaceutical sectors to identify five key steps for a smooth transition, which HR can play a major role in implementing. HR should:

• Ensure a commitment at the top of the organisation and an openness to learning from those at the centre of the company to welcome input from the acquired firm
  
  
• Integrate key staff involved in the acquisitions into common processes in such a way as to give them a voice in the new firm
  
  
• Ensure an incremental approach so that the acquired organisations keep intact positive practices, which led to them being purchased in the first place, so that learning can take place.
  
  
• Allow time to make sure the process of identifying, digesting, reproducing and sharing knowledge is fully absorbed.

Satish Pradhan, Executive Vice President of Group HR at Tata Sons, one of India's most respected conglomerates that has acquired 98 companies and operates in six continents, employing 289,500 people, said: "Leadership is about taking the view that 'people capabilities' are a source of competitive advantage. In mergers and acquisitions this is reflected in a business perspective that thinks "post merger integration" before "due diligence". When we scan, explore, consider or even begin to think about a potential M&A candidate we are already thinking about the future combined entity. This has huge implications for the way we approach and address issues right through the whole process from scanning to integration."

Satish Pradhan, will be speaking at the CIPDs annual learning and development conference, HRD on Thursday 17 April. For further details please visit www.cipd.co.uk/hrd

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