Lack of People Due Diligence leads to high failure rate of M & As

Most companies do a thorough job of financial due diligence when they acquire other companies. But all too often, deal makers simply ignore or underestimate the significance of people issues in mergers and acquisitions. The consequences are severe. Most obviously, there's a high degree of talent loss after a deal's announcement. To make matters worse, differences in decision-making styles lead to infighting; integration slows down; and productivity declines.

The good news is that people due diligence can help companies avoid these problems. Done early enough, it helps acquirers decide whether to embrace or kill a deal and determine the price they are willing to pay. 
Bain & Company conducted detailed interviews with managers involved in 40 recent M&A deals. In the 15 deals that generated excess returns vs. peers, 93% of the acquirers had identified key employees and targeted them for retention during due diligence or within the first 30 days after the announcement. By comparison, this task was carried out in only 36% of the unsuccessful deals.

People due diligence contributes to a deal's success by uncovering capability gaps, increasing retention, and identifying where key talent should be deployed in the new organisation. It also lays the groundwork for smooth integration. When acquirers have done their homework, they can uncover capability gaps, points of friction, and differences in decision making. Even more important, they can make the critical "people" decisions: who stays, who goes, who runs the combined business, what to do with more junior staff at the time the deal is announced or shortly thereafter. Making such decisions within the first 30 days is critical to the success of a deal.

Recrion is a People Management Specialist that has often been called in to pick up the pieces when mergers start to fail.  So why not get it right first time?  In our experience, getting the People Due Diligence part of the puzzle in place only works if it is given the highest priority and performed with full access to management.

For more information on Recrion's approach to M & A related People Due Diligence, contact Katherine Wiid on 01780 484910 or www.recrion.co.uk