The role of human resource in mergers and acquisitions (M&A): The hand that nurtures!!!!!!!

Abstract

Recent years have seen a significant rise in M&A activity, and Indian companies have played a crucial role both as acquirers and targets. Inorganic growth strategies like mergers and acquisitions have been championed by both Corporate Managers and Investment Bankers as important engines that help companies to grow fast, enter new markets, expand customer base, and acquire technology and expertise. Traditional wisdom would suggest that M&A's should be able to unlock shareholder value through economies of scale and consolidation of assets and human capital. Research, however, shows that approximately 70 per cent of mergers and acquisitions fail to achieve expected results and about 50 per cent actually destroy value. While there are hundreds of reasons for the high failure rates of M&A, ranging from CEO ego satisfaction to incoherent due diligence methodology, a London Business School research points out that most of the key reasons can be termed “soft issues” which is management parlance for Human Resource issues like cultural differences, mismatch of leadership vision, differences in remuneration structuring and Human Resource policies. An acclaimed McKinsey study on mergers stated that the overwhelming reason was “something loosely called culture”. When it comes to culture, employee communication and other so-called ‘soft issues’, the Human Resource function has a role to play in making the M&A activity successful. Most experts believe that getting Human Resource involved at the very beginning of an M&A decision would help employees deal with the culture shock post merger or acquisition.