Managing M&A from an HR Perspective

One way to mitigate the many risks posed by a transaction is to transfer it to the insurance space, where numerous solutions are available to relieve the business of pressures faced by risk in M&A scenarios (Fig 4). Many of these solutions are being driven by private equity companies, with demand from corporate strategic buyers increasing steadily.

Most of the recognized risks within M&A deals are transferrable to the insurance industry for a premium. Anywhere cash and collateral are being tied up for a period of time, strategic buyers are encouraged to look to the insurance market for potential risk mitigation. Aon has vast experience in this space and is actively engaging in discussions with strategic buyers, who wish to leverage our capabilities and expertise.

Due diligence is often seen as a cost to the business, but the ability to obtain qualitative and quantitative insights over a broad range of factors is invaluable. Fig 5 describes potential areas of due diligence, especially in critical areas

around cyber and intellectual property. Aon has additional capabilities in these areas through strategic acquisitions with a wealth of expertise available to Aon clients.

In many cases, the people (human capital) risk is seen as a small add-on to many other more traditional areas of due diligence, such as market and financial assessments. The benefit of human capital due diligence is the ability to anticipate integration processes in HR programs before deal close. This is only possible if the due diligence is conducted by a provider, such as Aon, that has the market data internally (data such as current benefit plans, retirement plans and compensation programs) and actively gathers data throughout the deal process, which can be utilized during the preparation phases of the integration process, before close. In addition to data, having the design and operational

execution experience allows us to assess the value capture in advance of the close.

In many cases, data for HR integration purposes is only collected post-close, which means unnecessary and costly delays are incurred. In most situations, synergies are then harder to achieve as a result, directly impacting the deal value and overall process, post-close.

In applying this approach, our experience shows that the ROI for human capital due diligence can be as high as 250 percent on purchase price adjustments.

Securing synergies early in the deal

In addition to data, establishing critical processes early in the deal process enables a swifter start and smoother integration.

Here are some selected scenarios where this is possible:

• Top leadership selection
  Selection process for the top leadership teams can in some instances start before the deal closing, allowing the organization and its team to have a clear organizational structure and leadership accountability from the very outset of the integration process. A well- designed process promotes a positive cultural impact and stability within the teams.
• Culture assessments
  Culture assessments should begin during the early phases of the deal, where information gathering is already conducted during due diligence. The full assessment of differences between the organizations’ cultures allows leadership teams to gain transparency around the potential roadblocks for integration and determine which differences are not critical for achieving business results. This transparency allows the teams to have a common language and quickly become a functioning team.
• Human capital benchmarking
  Conducting a pre-assessment of companies from the corporate deal team’s potential targets, based on human capital benchmarks and data, allows for a more transparent understanding of human capital issues and impacts.

Two of the biggest challenges within transactions are managing the complex project and tracking the results of the transactions. Based on Aon’s experience within the most complex deals, a comprehensive technology- based platform enables the effective management of corporate transactions within the deal process. The platform, TransAction ManagerTM, kick starts the project management process, from a one-dashboard view, freeing up time otherwise consumed by process and resource allocation in the early, crucial stages of any deal.

Adopting an integrated HR approach (Fig 6)

All too often within the HR workstream, optimization is conducted on an area-by-area basis, e.g., benefits programs are assessed and implemented independent of other compensation elements. Adopting this siloed approach typically increases cost, owing to missing potential trade-off opportunities between HR elements.

For instance, adopting a total rewards perspective allows for more effective negotiations, where “win” and “lose” scenarios are assessed and “trade-off” solutions are developed in advance.

Based on Aon’s survey done on total rewards in M&A, leading companies focus integration of reward programs on a single platform over a six-month period immediately following the

announcement, and the most successful approach is to adopt a country-by-country process, with priority assigned to countries with the biggest cost/synergy impact.