Managing Relationships In M&A

The process of merging or acquiring a business is a painstaking undertaking and typically unfolds over several months or sometimes years of planning and preparation. Most of this planning is directly related to a number of tangibles, including financial data, due diligence, stakeholder proposals and agreements, and more. 

However, there is one vital aspect of M&A that tends to get lost or overlooked in the process – People. 

When two companies merge, so do their ethos, values and cultures. Mishandling or ignoring the integration of these values and relationships can be detrimental to the success of any M&A transaction. These relationships with living resources are not exclusively limited to executives and employees, but also encompass business partners and various other stakeholders in their respective ecosystems.

While most dealmakers tend to leave the matter of culture and relationships in limbo until the meat of the negotiations are over, the right time to address these matters is actually much earlier in the process. Typically, due diligence processes involve the identification of key employees and executives, who will be retained once the transaction is completed. It is at this stage that relationships must come into play. 

Let’s take a look at some strategies and good practices to build and sustain relationships with primary internal stakeholders, aka Executives and Employees: 

Executives 

During the pre-acquisition process, before the finalisation of the transaction, it is vital to engage with new executives, and have interactions in close settings to foster an atmosphere of transparency in communication. 

The post-acquisition period is for setting and managing expectations while maintaining relationships of transparency. Given the new avatar of the combined entity, strategies and plans must be created to align individual and organisational goals and priorities and get everyone on the same page on the road ahead. This includes setting deadlines and expectations for periodic updates, reports and reviews. 

Employees 

While transparency is the key to maintaining healthy relationships with executives in the pre and post-acquisition period, the secret to fostering and maintaining strong employee relationships is knowing what to communicate, and when and how the communication must occur.  

During the pre-acquisition period, while matters are still largely up in the air, it is recommended to communicate only when necessary and provide relevant information that is not likely to change over the transaction period. Making assurances, or indicating future possibilities that may or may not come through, can result in a sense of disillusionment and unease amongst employees who may view the situation as a series of broken promises and let-downs on behalf of management. 

Once the transaction is complete, it is important to take the perspectives of the employees on board, while simultaneously communicating structural changes and operational developments in an efficient manner.  

Change, by nature, is destabilizing, and employees will likely have concerns regarding their job security, benefits and more. On the other hand, operational concerns such as changing processes and procedures, integration of IT systems and tech platforms and other key aspects must also be addressed clearly and in detail to avoid confusion and employment insecurity. 

From Relationships to Strategic Partnerships 

Thinking of both employees and executives as strategic partners in the process of an M&A is an approach that has demonstrated value in case studies from across the globe.  

Invite personnel from both organizations to interact on common ground. Evaluate the strengths and resources of both workforces, and how the merging of teams can provide value in terms of additional expertise. Give employees time to adjust to the new normal and make preparations for a short period of lowered productivity while individuals navigate the changes and challenges. 

At the end of the day, there will always be a loss of talent where people are uncomfortable with changing structures and procedures, but the aim is to maintain equitable relationships and retain the best employees from both companies. 

While the act of merging two entities is challenging, sustaining strategic relationships with people at both ends during the process can go a long way to smooth things over. To keep morale high, carry out actions with transparency and accuracy, and make people feel like they are an integral part of the larger picture.