Europe HR Solutions
The One Stop HR Shop
for Europe
By Inez Vermeulen
Founder & Managing Consultant of Europe-HR-Solutions,
subdivision of Labyrinth Consultancy bvba
HR Guidelines European M&A
Effectively managing Human Capital Issues
www.europe-hr-solutions.com
Summary
1. What are the strategic people implications of an M&A? 2. Due diligence 1
2
2
3.Integration Planning – prepare for pre-close,
‘day 1’, immediate & extended integration 3
4.Integration – do by close 3
5.Cultural integration 5
HR Guidelines European M&A
Effectively managing Human Capital Issues
www.europe-hr-solutions.com
1. What are the strategic people implications
of an M&A?
Are you part of an M&A in which you have European countries involved? As the HR
leader or CEO you need to understand:
✓the global implications of current compensation and benefits plans
✓ assess and understand leadership culture
✓the value of human capital and the factors & strategies that influence it
HR has four roles: deal support, employee advocacy, post-deal driving the car
while building it and ongoing accountabilities.
2. Due diligence
While there are various levels of thinking during a due diligence process where each
issue is influenced by the size of the deal, risk tolerance of acquirer and the acquirer
familiarity with specific risk, the key HR potential issues to address are:
✓ Employment agreements: are there any large, excessive severance payments or
informal benefit promises?
2
✓ Compensation
& Benefit Plans: is there a large cost exposure? Are there unfunded or underfunded obligations? Are there any non-compliance issues?
✓ Payroll & salary Grade structure: how complex is the salary philosophy / structure? Is there a large number of Union employees?
✓ Short-term
incentive compensation: are there guaranteed bonus payments or
variance in eligibility between companies?
✓ Long-term Incentive compensation: are there a large number of unvested options outstanding that are ‘ out of the money’?
✓ Deferred compensation: are there large deferred compensation account balances with no funding or security?
✓ Staffing: what are the organizational & individual performance levels? What is the
history of severance payment practice?
✓ Organization culture: are there any executive level differences – social issues?
✓ HR function: what type of systems, employee data, compliance issues, service
delivery is there?
✓ Compliance: is there a high incidence of employment related litigation? is there im-
proper investment or use of defined benefit pension fund? Are there a large number
of temporary employees or contractors? Is there absence of employment related
policies & procedures?
HR Guidelines European M&A
Effectively managing Human Capital Issues
www.europe-hr-solutions.com
3.Integration Planning – prepare for pre-close,
‘day 1’, immediate & extended integration
Within the spectrum of organizational integration you can operate under two models:
✓ Investment model: leadership is left intact; systems, policies and processes, human capital strategies & culture are left to the discretion of management
✓ Assimilation model: leadership is replaced; systems, policies and processes, human capital strategies & culture are replaced with the acquiring organization.
International considerations:
Local legislation may limit ability to share information between organizations
Employee data privacy considerations
TUPE ( Transfer of Undertakings ( protection of employment ) ) and other legislative constraints
Works council communication & negotiation / co-determination
Varying transition agreements and closing dates
Timing and process to effect redundancies
3
4.Integration – do by close
In order to effectuate a smooth transition your project team must have clarity on the
integration strategy:
✓ Confirm timing, rules of the road and business drivers
✓Set degree of integration
✓ Measure gaps in programs, practices and human capital system
✓ Prioritize HR core processes
✓ Develop employee messages
✓ Agree on strategy of day 1
Keep your focus on five areas:
✓ Closing issues
✓ Technical / legal issues
✓ Service issues
✓ Engagement issues
✓ Retention issues
HR Guidelines European M&A
Effectively managing Human Capital Issues
www.europe-hr-solutions.com
Integration
Pursue actions which will most likely create the integration success. Try to form
project teams who need to focus on:
✓Understanding human capital needs of the business
✓Determination HR staffing needs for transition period
✓ Definition of post-closing HR operating model
Integration leadership
Determine the vision, values, and strategic objectives of the new organization.
Define the skills, behaviors required to deliver the strategy and development of
the guide to fill gaps is a very important exercise.
Integration total rewards
Does the deal trigger a need to define or redefine the total reward strategy?
Which total reward program need to be integrated or adjusted to achieve the
business goals?
Integration staffing alignment
4
Define staffing needs within new org design
Understand business rationale for staffing process
✓Leaner operating model
✓Redundancies?
✓Facility closings?
Build company values into process design
Determine timing, process, and package for terminations
Communicate and conduct staffing process & implement retention programs
Integration
Integration sales force
Examine customer contracts and territorial agreements
Develop sales coverage model
Analyze current sales coverage
Determine forecasting and goal setting practice
Design sales compensation structure
Roll out new model
HR Guidelines European M&A
Effectively managing Human Capital Issues
www.europe-hr-solutions.com
Integration performance management
Maintain business performance during period of change and uncertainty
Establish approach to performance management
Define key performance measures for integration and longer term period
Integration compliance
Review, prioritize and take action around key compliance issues identified in Due
Diligence
Determine approach to maintaining compliance going forward
How to integrate compliance into new HR operating model?
5.Cultural integration
Culture is the key driver of individual behavior and the outcomes are those business
results which are derived as a result of these individual behaviors.
5
Research conducted by Mckinsey has revealed Cultural Transformation Tools® to
be the most effective tools for formulating, measuring and managing a corporate
culture. Corporate culture is the ultimate tool for attracting and retaining talented employees and for increasing your company’s performance, both in hard and soft terms
(financial and HR).
During and after a M&A the goal is to align two different organizational cultures,
increasing performance and further development of your company.
It is important to map out your current and desired corporate culture, to describe
the strengths and weaknesses of your organization, including its condition on an
individual, relational, organizational and societal level.
Creating an aligned culture is a stimulus for the top level of your organization to also
integrate values within your systems and processes.
HR Guidelines European M&A
Effectively managing Human Capital Issues
www.europe-hr-solutions.com
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info@europe-hr-solutions.com
www.europe-hr-solutions.com