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Tips for handling employees in an m&a jm clark

Mergers and Acquisitions (M&A) aren’t always successful. In fact, most get a C- grade from managers and 50% of companies report a 50% drop in productivity after a merger. We all know that change management is critical, but the employee piece is often forgotten when a company is acquired...and unhappy employees can derail a merger. Included here: 5 key factors needed for M & A success and employee-related elements to consider as you bring together two or more companies.

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Tips for handling employees in an m&a jm clark

  1. 1. %rgotten Employees Foil M & A Success . _ - - Bylane-Michele Clark jmc@theQgroup 416.424.6644
  2. 2. M&A: Not Always Successful Deal ' 70% fail to achieve anticipated synergies. ‘”’°°'*‘°'""°"”’ ' 50% report a drop in productivity in the first 4 — 8 months. ' 47% of acquired senior managers leave within the 15‘ year; 75% within 3 years. iifiazaxvs I Only 23% earn an internal Rate of Return. °"= "L°9°"° ' ' Average grade from managers: C- ' 58% fail to add significant shareholder value. Sources: The Wall Street Journal, Forbes, Fortune, CFO Magazine
  3. 3. In my opinion, the top 5 things to get right in any Merger or Acquisition: 1. Choosing the right company, for the right reasons, which includes making a decision in—line with the strategic plan. “Ve're buying the company, the brand, the building but mostly we're buying the golden eggs. "
  4. 4. 2 . Good, impartial, thorough due diligence Now that you ve taken a bite would you like to know what it is? ”
  5. 5. 3. Doing a good job of integratingthe new employees and choosing carefully which ones to let go. “Since yourjob cre(lenn'als are idenricrtl. we'll play n1usic(II clmirs. "
  6. 6. 4. Communicating details of the change — and the reasons for it - to clients, employees, suppliers, distributors, other stakeholders, the trades and the industry at large.
  7. 7. 5. Management of the brand (corporate and product) through the process. PROFITS I 5 ix 1:} rue’ /4&4 I told l‘0ll we coulrln ‘r call the Succ0r(1sl2 1.‘-pack “Du: ,n Succosoniuch "
  8. 8. Too many companies don't consider all five of these success factors when going through the process, but that's a topic for another time.
  9. 9. We all know that change management is critical, and that employees are the key to success, but the employee piece is often forgotten.
  10. 10. “Culture issues” rated among top failure factors, yet ranked last in type of info gathered during due diligence Hard Assets 90% Market Share and Distribution 36% Tech and Biz Competencies 78% Financial Aspects of HR 75% Mana ement Capabilities and 710/ illingness to Cooperate ° Major Shareholders 55% HR Policy Matters 56% Workforce Potential 49% 6 - anisational Culture and 46% Change Dynamics Watson Wyatt Worldwide Study: Assessing and Managing Human Capital: A Key to Maximizing the M&A Deal Value
  11. 11. I 1- ‘, ‘i ' G’ H (‘,7 . “i T’? /5 I 7 l {'72) 7 #7 l , / , “R , ’ : «{-, _’‘. l_ E4 . . . - ‘ _ /5 . . l — -4.-E (9 __ ‘_. V . , H’ (, . if r 7 1 l “A .4 " / ‘When people are anxious and scared about 4 I I «- i“iwhat’s coming next, they focus on themselves. ..
  12. 12. and not on customers, quality service, costs and speed, ‘which is why productivity drops.
  13. 13. Proper planning and good communication can go a long way in preventing people from running for the hills and bottles of Prozac.
  14. 14. Key to success: Evaluating the employees at all companies involved and determining who is right for which position in the new, melded organisation. l . Z:3«:3*«"'
  15. 15. Take time to really get to know the employees’ strengths, weaknesses and way they perform their roles, so you can be confident about which ones to keep and which ones to let go.
  16. 16. Obviously, it’s important to have good on-boarding and exit . .|oI1"°°‘ —procedu; ;e_s_ in plaeesnfmmnthe getg . , > '_y. 1
  17. 17. 'z~/ V . ,.». _-V . _w‘ . _ , - ”’- 2:. ‘«'~; " ' Senior level managers are affected differently than front line staff; you must allow for this. T "" , .". v;e'. _-«A21--'
  18. 18. 9' ofr‘ ': '1;/ ' . " l 1,»; ‘( fit . fig , ‘I I ; _ . _ «'7 - -- ~ 7 ‘ -7 ‘st *'-*7*7 .1". . .7 A < V - ~ I '. q‘ , *1 Senior people wonder where they'll fit it, A , ,.o_. §~s-yrl “what kind of authority they'll have in the new organisation. .. and whether or not _ithey'll even have a__j’o_b. -. _ XL , .’s “g - :5 s br¢'[_ 3.. it I >1
  19. 19. ‘the sooner you can let them know - and get them to hetp you thtough the 4- X " ~- ‘ ""*. s., ,§ ~
  20. 20. l _. ____. .«. e« , . XS Front line employees wonder about where they'll fit in, how their work and teams will change, what their new boss(es) will be like. ..
  21. 21. 1 ' _. $4.: -- "_-1 , 1 ' ’- - z; '7} 7 7 , _..4., ;.«. —a- _ 1., - - ‘L. . ‘-4 ~: _«— at ; _. __ _— ‘av — _, ,, ,.u; ' = ‘ 42-. ‘ , :'. 5% " -'-7— : <.. :__ - .4 _. T -- - -'4. . ..__. ' _ _ . . . ,- V; v, 7 ‘- 9’ #4‘ , ; , __ c1.— , : - _ ‘ . '—- 447 —— . ' 1 c ‘ - - '. ._- _ -- "’__‘— V. - . . Front line people need to know that they will get guidance and. .. f' . ’ _ , . / '’'_ ’ __, . *-« . ’_,
  22. 22. -—e«—. s‘_‘ ‘ > ~.4» __ and that their interests will be protected.
  23. 23. When talk about beingzsol; dior; ;merged fuels the water cooler chatter, people/ ’b'_ec'orfi. ,e"'a| most desperate for info. 1' 5 Y“ . M4! . ' ‘ ‘K A f ‘as ‘e , ,—r _ f_— ' 6' :1 “WV. . . - J. “L «/
  24. 24. 1A In the absenceof real info, people ill make up their own stories. l H I 1 ~_'. ‘ i I 1 l u 3% ' ‘I x ll .1! l n l i l
  25. 25. Solid, consistent communication is one of the key success factors in bringing organisations together. As is good planning. : u" 5 ‘l““ ", - 7 :12 ’ Lg. ‘ xx .3 3!. fl* I 7‘v, ‘- ‘- L ‘ I ? .+ _. /''7 ‘M5. V '4 l ‘ I / 4 N I. A‘. . ‘E I f . , _' i l L . , ,4! A I , .. . i/ 7,: K 7 R‘ X .
  26. 26. Multiple studies show that companies that start early, when the merger or acquisition is in its formative stages. ..
  27. 27. and that fully integrate systems. ..
  28. 28. People. ..
  29. 29. .- ’r: ~_ 1‘ : s~/ ."'; . _. " ~ 75° "";31 x I / 3 ‘ R2’ ‘hi ‘Va r‘ « . . . b I‘. 1 and brands within 6 months are 5 — 7 x more profitable at the end of 18 months than companies that ”ease” the new corgpany (and its employees) into the fold’. , ‘*' 9*‘ M: l’
  30. 30. It's an important consideration as you work through the earn out part of the contract, too.
  31. 31. If you want teams to work well together, you need to introduce them properly. .. . .4
  32. 32. /36‘ V. “ ‘ . . ’. - ‘VI, v“g ~, v__ I I "‘. .’ 7 ‘C ’ . r’ ‘it “jfrdl-. A -—. al-X‘ _ ‘ 3* G-— . ‘:~": s§ "~ I’ ‘ ‘~ T‘T‘'-7aa. :, * . ' q'“‘€- if / ‘ . » . _ “~ . 4% I v 1 and the Iifies of responsibility and reporting structure must be clearly defined.
  33. 33. You can’t afford to lose good employees from either company, but put them in jobs for which they are not suited or skilled and you’ll lose them anyway.
  34. 34. Ironically, many companies promote key employees only to fire them when they can’t handle the new role, often because they didn’t get the training they needed.
  35. 35. Not too bright, huh?
  36. 36. I . ‘ —)/ _/y, ’r‘: o.‘ K A / ' ,3‘ . _ y _ '-, -;. ;§; — 9‘ r ’ '-'. » '3. A . “u_ Vi, _ g V. ;(', w, ‘ , iv ‘ " t¢u". " x'- 3, . ‘ . '14 l ’. ' yrs , ,5’ i . ‘ , r' / " t - . » ~ ‘ . f« n. J‘ K ‘; ‘ W -. i I" l " 3 .1 6 ' In addition to relevant training, knowledge sharing is critical / to a smooth transition. /4;. “ ‘ i
  37. 37. ‘Li 3 ‘Q . - . . , ‘ * 0 ‘F I m , J' _/ iv‘ ‘‘/ §~‘, ‘? ~ , ’ ". ‘—'r, < "‘‘) Don't think this is important? (63% of CEOs surveyed in 2012 categorized this as "unnecessary HR f| uff”. ) Consider. ..
  38. 38. U Mr 4;! c-. ' 4. ~r« sir: ‘JEU nu 3 t 50% report a drop in prod. uctivity M ty , _ r in fi_rst.4— 8 months. _ ,5 I z ’ m k ill , ' ‘ii . _ II V ‘ ullunml. , lg: _«_, I . 4 nl lll lllill "=3 E I: II ' l! ‘ '' n" , l p lHII III! g ! . l I l _ I ' 4 O‘
  39. 39. Studies show a direct correlation between lack of communication] effort to integrate new employees and loss of productivity.
  40. 40. This can impact the bottom line — and taking a healthy company into the red is never good for anyone’s career — let alone stakeholders and shareholders.
  41. 41. r at . : l. i f 2 J . /1‘ C , _. is _ I l g I 1 ‘ _‘ V‘ _, A I, . l _. . ‘ . " l , 1 ‘ i , I g r, - ~: . 1" “» t»‘--‘—“ W’ 1 iii? ’ '. ~=>’ “ "I li*i’<. »' v ' r’ “ ill? 4 ‘= '5. I ~ . A‘ , it ; K “ ll, ‘ lv _ 1 . _ vi l . .' . ” ~ v I I ‘ "I H . Iv - ‘ I f : f ' 5‘ V “ ‘ "' - '~'-1 vi‘ ’__j; . 1.»; Q ‘ll’ I .3 A. r r‘ “" ' J}. I . ' 1 r Also hard on the company: 47% of acquired senior managers leave within 15* year; 75% within 3 years.
  42. 42. JIIIIIV II. III? Cover Jinx 'll. Kl . ‘l': '»lll: ’lllf’illl. Ill‘’ll'. l"! l"'I| ‘1'lll“l7‘ll. ‘l‘I‘. "‘, ll-'ll: ‘ll"l-‘f-'9 lllll. l'>lk‘' l). ml(r-l‘cn/ -r .1 lr. -5 ll: .il u 1- iunniml lu‘ Mimi ii lu: rrx in ll ry, -u : l'i. -mp, ‘ u . u ui. 'r_‘r sl rqu. slx' Mviiicthing _u I! Luv Ill 'ln- I1 nx5.m‘-n‘ ll. -. n. mi. ~un--f nI. n.3.--: '~ l‘l. lll! ':‘: '- '. -.. ih. -u' l-“l ll, i‘. lllill. |'. [1lilI¥' l‘''lllU'' . um. ( Let 111.1! in. iiI. agc’s. m: mm in ~. --ni -vl Jlhl‘ lrmlr! :-. n3m~. ;:-: .ll-. . ‘l ~ Forbes Magazine
  43. 43. When senior people feel powerless in the face of changes, the exodus can be even quicker. .. . l xx. «Q _m “*0
  44. 44. and the loss of "key men” impacts all aspects of operation as key knowledge and skill sets race out the door with them.
  45. 45. ii. .. e’lure'd bya ‘S competitor or open their own firm i and c9rnp_e#te ag inst you. 3 "’»'—w_"g"_' ~*< ‘A . . . r, ‘i. 4». .
  46. 46. Ax~; '* J; >"‘ ': .‘. 'V ; ‘’’X. ._. . They can take clients wit them and/ or affect the relationships with your remaining clients. ‘F * or J7 rt * . .'.7*/ ' J 1 9"‘ ~ _ - '
  47. 47. -_ ~ . .. . __ - I ' J». —. Ag‘( _‘ ‘, '~ if The loss can also compromise your existing supply/ distribution chain. l -. A 7' ‘W ' ‘ L ‘A"' '3 -" 3'5 A ‘l 1. — S—' I. 7: IL - . ~ . ,, . ' "'- " . | la’ . vs: t ' 7- ‘e '~ I - -': ‘,*—*. -'*~ M’- . ,.. .., .._. _._ . , . .. . ‘i t . .. .«-. -.». —. L . ,.. .. :1.. . . . -« —— v-. —s. ._. , .3 "' 1.. ‘v h". —x - uv. ' : . , .j. __—. I_. ..‘§. ._, ,_ 7 . ,, _ _ 1 —cr, . ‘, . _’)~ 4-. - . *— . ..— , ._x' v — « Av I r I . , . (4 I g I n ‘n g r . ; - / / . 1 . l . - . I. 1‘ '3: " __ .7 . ‘T _ *-7.-Mi
  48. 48. Talent can be time consuming andlor expensive to replace. Relationships can be hard to repair. ‘
  49. 49. Sometimes companies take years to recover.
  50. 50. The solution? Pay attention to the five success factors outline at the beginning: 1. Selecting the right company, for the right reasons. 2. Good, impartial, thorough due diligence. 3. Doing a good job of integrating and training the new employees and choosing carefully which ones to let go. 4. Communicating details of the change — and the reasons for it — to all stakeholders. 5. Management of the brand through the process.
  51. 51. These slides were extracted from our “Managing a Mosaic” course. For more info, please contact: Jane-Michele Clark jmc@theQgroup. com 416.424.6644 . ,/

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