M&A deals are inherently optimistic—why would companies merge, acquire, or divest if they didn’t expect positive outcomes? But post-Day One reality doesn’t always live up to the expectations set during diligence, and not only because the numbers don’t add up. People issues in the form of culture clashes and negative employee experiences can also erode or even erase anticipated deal value. Offering a distinctive, digitally enabled employee experience even before Day One can eliminate common roadblocks and lay the groundwork for the new organization and its people to hit the ground running and thrive.
Companies are hunting for opportunities…
In 2018, dollar levels again approached record levels with nearly 52,000 M&A deals valued at $4.07 trillion1. Corporate and private equity executives who study mergers and acquisitions anticipate further acceleration of deal flow in 2019—both in the number of transactions and in their size—which would further extend several years of record M&A activity2. These events have been driven by a variety of factors, with many companies looking for opportunities to grow revenue, benefit from scale, access new markets and distribution channels, and accelerate their transition to digital.
…But value can be elusive
While the opportunities are abundant, achieving value through the M&A life cycle remains a challenge. The increase in M&A activity is taking place during a period when many organizations are struggling to compete and adapt in the face of unprecedented disruption. Intensifying economic, social, and political pressures are compelling organizations to reinvent themselves, engage with stakeholders, and cultivate performance in a human way.
M&A transactions in every form—mergers, acquisitions, joint ventures, alliances, and partnerships—are among the most challenging disruptors an organization and its employees will face. Whether acquirer or target, organizations need to apply ruthless focus and iron discipline to prepare for closing the deal on Day One and then executing on the strategic rationale that brought the deal to fruition. Driving a deal to value creation not only requires identifying a critical sequence of activities and milestones but also lining up the resources and tools to achieve them. A Day One plan is part of that solution, but so is a broader program to reduce risk, capture value, and provide continuity to both internal and external stakeholders.
Management and boards need to be aware of the risks associated with M&A transactions. Although some are wildly successful, there are far too many transactions that destroy shareholder value, once all the integration dust settles. Investor scrutiny of deals continues to be important. In 2017, for example, shareholders litigated against 73 percent of all transactions valued in excess of $100 million involving Delaware-incorporated companies.3
Cultural integration and positive employee experiences are critical for M&A success and can be an area of risk if not properly managed. This is not an idle caution. Deloitte research suggests that:
- 43 percent of M&A deals were delayed, terminated, or experienced a negative impact to purchase price due to culture issues4
- 73 percent of deals experienced delayed synergy realization due to culture or employee experience issues5
Why are these seemingly “soft” people issues so important? A transaction shakes the ground under people’s feet. If the executives in charge are losing sleep over this, imagine how the people without direct control are feeling. Employees’ concerns need to be tackled head-on with two-way, honest communications that keep everyone informed and invested. This also sets the tone and lays the groundwork for a culture that respects the human experience at work, something shown to be closely tied to business outcomes. MIT research shows that enterprises with a top-quartile employee experience achieve twice the innovation, double the customer satisfaction, and 25 percent higher profits than organizations with a bottom-quartile employee experience.6
Connecting through a digital workplace
In Deloitte’s experience supporting M&A activities, using social, mobile, analytics, and cloud technologies to support traditional workplace functions can help transform the employee experience. Organizations that strive to “be digital” can help leaders and employees remain productive and intent on delivering value to the company by reducing overall disruption.
Companies can create a distinctive employee experience for the combined workforce, keeping them engaged and focused on delivering business outcomes while also working to align cultures and integrate employees. During a typical M&A transaction, it’s not uncommon for the buyer and target employee populations to interact through a variety of disconnected platforms or manual workarounds, a recipe for confusion and ¬disruption for leaders and employees on both sides of the deal.
Let’s look at the impact an M&A deal can have on a variety of employee activities and how digital tools can help enhance employees’ first experiences with their new company and colleagues.
Communication and engagement
Deloitte research suggests that digitally maturing companies are achieving transformation at a faster pace than others7. Digitally mature enterprises are also the hunters and targets for M&A transactions. These organizations increasingly operate with cross-functional teams and other hallmarks of the 21st century workplace that employs traditional on-site employees, remote, “tenured” employees, independent contractors, telecommuters, and gig workers.8
Managing communications and preserving engagement in such a diverse environment is a challenge that must be addressed because these individuals are key to the success or failure of an M&A event. A historically low unemployment rate coupled with intense competition for skilled employees creates an environment in which the most valued workers can easily bail if they don’t understand what’s going on or feel it’s in their best interest to stay.
Throughout an M&A transaction it’s critical that employees on both sides and at all levels of the affected organizations be kept apprised of what’s taking place and what actions have to be performed. This carries a real risk of information overload if communications are not well coordinated across functional work streams (e.g., HR, IT, finance, legal). This can lead to fragmented messages, with employees more likely to receive messages that don’t apply to them.
Digital tools can make it easier and more efficient to communicate, ensuring that messages are timely and targeted, which in turn improves the employee experience.
- Communications can be tailored to specific employees, and employee populations, based on content, timing, and need. This can be made easier through microsegmentation using personas and other HR data for each employee.
- Employees can receive communications via preferred delivery mechanisms with fewer duplicate messages. Analytics makes it possible to identify the number of people who have read a communication, enabling organizations to determine if additional communications are needed and, if so, the best way to deliver the message (e.g., face to face, via town halls, electronically).
- Employees can pull up relevant content on their own, when they need it, using digital search functions. This eliminates the need to sift through large inboxes and sort through duplicate or overlapping messages.
Organizations going through an M&A transaction typically have a sizable number of activities that need to be completed by employees. These activities may vary by employee type and by location, which can quickly become overwhelming.
As a result, organizations often take a manual, labor- and time-intensive approach to reconcile employees’ status against activities completed across various spreadsheets owned and maintained by each function.
Fortunately, digital tools offer much simpler ways to do this, providing organizations with immediate impact—critical during a transaction. Among the advantages of going digital:
- Employees better understand what’s required of them and when.
- Organizations can populate a list of required activities, aligned with employee type and specific date ranges. These activities will dynamically appear to employees only when required and during the window when the activities should be completed.
- Employees can electronically submit required paperwork. These types of submissions can free organizations from having to organize transition events and rely on employees to provide required documentation during a static time frame.
- Organizations can track real-time status on employee progress against completing required tasks through dynamic reports, and automate follow-up to remind employees of uncompleted actions.
Reporting and analytics
A key component of driving an improved employee experience during a transaction is the ability to report on and analyze employee interactions. Digital reporting can assess the number of people who have read or searched for information related to a particular topic and track the percentage completed against an activity or a to-do list.
In addition, organizations can use real-time analytics to facilitate real-time adjustments of the communication and engagement strategy with employees. This can lead to an overall reduction in the mediums and messages employees must sort through to receive and act on critical information.
Where to start
M&A isn’t slowing down. The ever-changing economic, regulatory, and external business environment may affect the drivers behind transactions, but improving value from each transaction will only continue to increase in importance.
Organizations recognize that an integrated employee experience is as valuable and can have as much (or more) of an impact as a customer experience strategy. Just as you would strive to make a transaction seamless and beneficial for your customers, digital technologies can help you do the same for employees—and, ultimately, for the organization as a whole.
Deloitte has developed a tool we use with M&A clients—ConnectMe™. ConnectMe is a cloud-based employee engagement platform that can drive more efficient and effective outcomes for M&A activities. It offers employees a digital platform to view real-time updates and complete tasks required for Day One and post-close.
For the deal team, ConnectMe automation reduces the time spent tracking employee documents, reducing risk and opportunities for error. It reduces costs associated with the need to deliver messages, which can be personalized down to the employee level, enhancing the employee experience.
ConnectMe can add value to M&A efforts in three key ways:
1. Communication and Engagement: It offers a streamlined, integrated portal for records of files, transactions, and messages with the ability to create forms, workflows, and reports.
2. Meet Tight Deal Timelines and Mitigate Risk: It is a dynamic tool that can help meet the needs of aggressive M&A timelines with live updates and push notifications to target company employees released in real time, allowing for more flexibility and quicker response to deadlines.
3. Automated Data Insights and Reporting: It operates on a secure platform that allows for greater control, flexibility, and feedback. It delivers secure document delivery with tracking and on-demand visibility into progress and potential risks. It can be customized to create surveys to gauge employee feedback (e.g., pulse surveys).
ConnectMe provides the speed, flexibility, and extensibility that an organization needs as it looks to integrate and acquire other organizations.
Of course, ConnectMe is not the only platform designed to deliver communications and information securely, promote collaboration, and execute M&A tasks in an efficient manner. Every organization will adopt its own approach. The critical thing is to have an approach…to recognize the need to protect deal value, as well as the potential to actually enhance that value, by addressing the people side of the equation. It may seem ironic that a digital workplace solution can enable this human-centered approach. But given the fast-paced and often overwhelming nature of life today, taking steps to simplify and improve communications, transactional tasks, and reporting and analytics, particularly during the disruption of an M&A, is both employee centric and business savvy.
is a principal Deloitte Consulting LLP’s Human Capital M&A practice. She has advised clients on more than two dozen transactions on topics ranging from operating model, organization design, culture integration, change management, and HR functional integration across the full M&A lifecycle.
2. Deloitte, The state of the deal: M&A trends 2019.
3. Cornerstone Research, Shareholder Litigation Involving Acquisitions of Public Companies: 2017, p 1, https://www.cornerstone.com/Publications/Reports/Shareholder-Litigation-Involving-Acquisitions-of-Public-Companies-Review-of- 2017-M-and-A-Litigation.pdf, accessed June 18, 2019.
6.Kristine Dery and Ina M. Sebastian, “Building business value with employee experience,” MIT
CISR Research Briefing 17, no. 6 (2017). Innovation was measured by the percentage of revenues from new products and services introduced in the last two years. Customer satisfaction was measured by industry-adjusted Net Promoter Score (NPS) 2016.
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8. Beyond office walls and balance sheets: Culture and the alternative workforce, https://www2.deloitte.com/insights/us/en/deloitte-review/issue-21/workplace-culture-and-alternative-workforce.html, accessed June 19, 2019.