The Unsung Hero of M&A

In the intricate dance of mergers and acquisitions, numbers often lead the way. Balance sheets, profit and loss statements, and operational efficiencies frequently become the focal points. However, lurking in the background, often overshadowed but equally vital, is the human element.

Delving Deeper into the Human Element of M&A

1. The Silent Peril of Overlooking People Issues: In the rush to finalize deals, many dealmakers amass a treasure trove of financial, commercial, and operational data. Yet, they skim over or entirely bypass the organization's beating heart: its culture and the roles its people play. This glaring oversight, often termed as a lack of "human due diligence," can have repercussions that echo long after the ink has dried.

2. Ripple Effects of Neglecting Human Due Diligence: The immediate aftermath of sidelining the human element can be a jarring talent exodus. But the tremors don't stop there. Research paints a grim picture, indicating that companies continue to hemorrhage executives years after their mergers. This talent drain leads to a cascade of issues: confusion over roles, infighting due to clashing decision-making styles, procrastination, and even paralysis in decision-making. The result? A sharp decline in productivity and morale. Alarmingly, nearly two-thirds of companies see their market share shrink in the first quarter post-merger, and by the third quarter, this figure skyrockets to 90%.

3. The Transformative Power of Human Due Diligence: It's not all doom and gloom. When acquirers roll up their sleeves and delve deep into the human psyche, they unearth invaluable insights. They can pinpoint capability gaps, identify potential areas of friction, and discern differences in decision-making processes. Armed with this knowledge, they can make informed decisions about key personnel during or immediately after the deal's announcement. A revealing study by Bain & Company underscored this. In 15 deals deemed successful, a staggering 90% of acquirers had zeroed in on and earmarked key employees for retention either during the due diligence phase or within the first month post-announcement.

4. Crafting a Robust Human Due Diligence Strategy: So, what's the secret sauce for effective human due diligence? It all starts with a crystal-clear understanding of the deal's core purpose. This foundational clarity paves the way for subsequent decisions about the merged entity's culture and organizational blueprint. The spotlight then shifts to gauging how seamlessly the target company's structure and ethos align with the acquiring company's vision. This assessment informs decisions about which top executives to retain, potential leadership reshuffles, and strategies to manage and assuage the concerns of the broader employee base.

While the allure of numbers in M&A is undeniable, the human element is the glue that binds everything together. Sidestepping it can spell disaster, while embracing it with open arms can set the stage for a harmonious and successful merger or acquisition.