Mergers & Acquisitions (M&A) – How can Reward Make a Difference?

While there may be some current slowdown in M&A activity compared to previous years, the overriding reasons why organisations merge or acquire remain. M&A goals such as winning competitive advantage, increasing market share or reducing costs provide clear return on investment (ROI) outcomes are still typical.

There is plenty of evidence that people management practices play a central role in the success (or failure) of an M&A and what role does reward play? Also, as the trend for multinational M&A activity grows, where does this feature?

Establishing a clear set of objectives from the outset is key. While Due diligence is sometimes seen as the first step on the M&A cycle, it may following a lengthy phase of seeking out target organisations. From an HR perspective, making a quantifiable assesssment of people assets, liabilities and risks are relevant to the deal price and its future success. Making a tangible assessment of cultural fit also matters where this impacts the integration phase.

When it comes to planning for the M&A deal date, the project scope needs to include factors such as communications, employment continuity planning and retention of key people. Take a look at the Tips section below to see what needs to be included in your M&A reward checklist. Just Rewards will cover M&A integration later in the year so look out for it.

Tips: What Needs To Be Included In Your M&A Reward Checklist?

Alignment to business strategy – Establishing a clear ‘NewCo’ business strategy upfront is critical in driving the wider people management and reward strategy. Clearly, this should be in place by the time the M&A deal is finalised since this will increase the scope for a successful integration.

Top team reward – Managing the reward arrangements of the top team is typically agreed ahead of the M&A deal. This may not be surprising since alignment of the top Executives is critical to post deal success. Ideally, these arrangements help establish a common framework for the organisation.

Pensions, Pensions, Pensions – Pensions may be the most critical issue in establishing a successful M&A deal today. They form a significant part of the due diligence process, helping to determine the deal price and assessment of risks going forward.

Buying in specialist M&A pensions expertise is essential for both pre-deal and deal stages.  Longer term assimilation or alignment should not be overlooked in the cultural integration plan. Public relations disasters when it comes to pensions still act as a stark reminder of the need to get it right.

Pay structures – There are two main post-deal options here - to set up a new or merged pay structure or retain the pre-deal structures. Factors will depend on the ‘NewCo’ strategy, the similarity of operations and the countries in question.  While a new pay structure supports M&A integration goals, it needs to be weighed against the inevitable disturbance and cost of merging.

Bonus schemes and performance – Similar to pay structures, there primary options are to set up a new or merged bonus framework or retain the pre-deal bonus schemes. While there may be advantages to a unified bonus framework this needs to be weighed up against how effective existing arrangements are in rewarding outcomes and performance. 

Benefit Schemes – M&A deals offer opportunities to harmonise benefits across employee groups and achieve cost reductions though greater economies of scale. Consider the feasibility of Flexible Benefit arrangements which are becoming popular in countries such as the UK, Ireland and USA. 

Communications – While last on this list, implementing an effective M&A communication strategy is probably the number one priority. Essential during all stages of the M&A cycle, it remains a major success (or failure) determinant for integration and return on investment.

Website Of The Month

This month we look at the FT.com website established in 1995 is the internet partner of the Financial Times which started life back in 1884 as the Financial News. It arguably bags the reputation as the world’s leading name in business news.

Why look at the site? – As a global information provider getting over 40 million page views a month, the staggering array of awards won in 2007 is testimony.

What works well? – Up-to-date news from around the world combined with in-depth analysis and comment. 

The FT.com scores highly on Mergers & Acquisition (M&A) content with journalist for Excellence awards in M&A reporting.

What could be improved? – While the Dear Lucy agony aunt 'column' is fun to read, it may be surprising to see it is often the most popular blog on FT.com

Reward News

Take a look at the Reward Conferences and events coming up this year:

E-reward.co.uk conference in London on 'Winnable solutions for reward success' on 4 June 2008

World at Work Total Rewards Europe 2008 conference in Brussels on 29 to 31 October 2008

If there are other topics you would like to read about, or if you would like to contribute to Just Rewards, click here.

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** Please note that this advice is provided as guidance only. If you need specific advice relating to your requirements, please call Reward First on + 44 (0) 1367 710 618.