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Acquisition Magic – An inside look at avoiding common pitfalls & keeping engagement high

Acquisition Magic – An inside look at avoiding common pitfalls & keeping engagement high. BAHREC Presentation – May 16, 2012 Karen D. Rohde. Acquisition Post-Mortem.

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Acquisition Magic – An inside look at avoiding common pitfalls & keeping engagement high

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  1. Acquisition Magic –An inside look at avoiding common pitfalls & keeping engagement high BAHREC Presentation – May 16, 2012 Karen D. Rohde

  2. Acquisition Post-Mortem “If there was one thing I underestimated, it was how seeming small issues become a lot larger than you think. People’s fear makes them do insane things. Maybe we didn’t do enough up front understanding of the psychology behind this. Looking at all the issues, day in & day out, 90% of them were people, job and retention related.” EVP & Acquisition Executive Sponsor BAHREC May 16, 2012--Karen D. Rohde

  3. Overview • The Change Curve • Acquisition Strategy & Objectives • HR Focus Areas • Acquisition Stages • Key Takeaways BAHREC May 16, 2012--Karen D. Rohde

  4. The Change Curve Perceptions / Performance Light at the end of the tunnel High expectations Realization of effort and complexity Time Change Implementation Un-managed Change Managed Change Despair Goal #1: Minimize the negative impact of integration Goal #2: Maximize the positive changes brought about by integration BAHREC May 16, 2012--Karen D. Rohde

  5. Transition or Neutral Zone New Beginnings Endings RECONCILE REORIENT RECOMMIT The Change Curve Confusion Trust Shock Enthusiasm Withdrawl Commitment Hopeful/Skeptical Denial Anger Acceptance Resistance Bargining Anxiety Conflict High Stress Confusion Undirected Energy Creativity BAHREC May 16, 2012--Karen D. Rohde

  6. Relative Magnitude of Change Acquirer Acquiree BAHREC May 16, 2012--Karen D. Rohde

  7. Acquisition Strategy Acquirer Acquiree • Scale • Acquire like companies to achieve scale and cut costs • Capability • Acquire new or complimentary capabilities, e.g., technology, IP, etc. • Money • Worth a lot more to Acquirer than the general market • Rescue • Failing business needing a bail-out BAHREC May 16, 2012--Karen D. Rohde

  8. Deal Objectives Acquirer Acquiree • Pay as little as possible • Preserve acquisition’s “value” (to acquirer) • Avoid disruption to their business • Close/integrate quickly to achieve strategic value drivers • Maximize sale price • Preserve value as stand-alone business • Avoid disruption to their business • Make sure recover if deal falls through • Regulatory approvals BAHREC May 16, 2012--Karen D. Rohde

  9. HR Priorities to Preserve Deal Value • Identify organization & talent implications • Evaluate & mitigate risk vs. eliminate • Evaluate resourcing requirements • Formalize governance & decision making structure • Focus on “employee experience” • Communicate, communicate, communicate • Help employees understand transition timing – set expectations appropriately (Day 1 / 100 / Future State) • Frequent and direct communication builds credibility and trust BAHREC May 16, 2012--Karen D. Rohde

  10. Key HR Work Flows--Organizational • Organization Structure • Legal Entity & Tax Structures • Executive Assessment & Selection • Workforce Transition • Selection • Retention • Reduction • Staffing and Recruitment • Culture & Change • Diversity & Inclusion • Employee Communications BAHREC May 16, 2012--Karen D. Rohde

  11. Key HR Work Flows--Functional • HR Policies & Procedures • Compensation & Leveling • Executive • Sales • Employee • Benefits • Human Resources Information Systems (HRIS) • HR Service Delivery • On-Boarding • Training • Legal & Labor Relations BAHREC May 16, 2012--Karen D. Rohde

  12. HR Influence • Facilitate discussion • Raise risks, with suggestions • Ensure goals/vision are clear, agreed upon & communicated • Help settle executive disputes • Speed up integration by smoothing change curve • Settle employees concerns ASAP • Retain customers • Minimize disruption to business • Attain post-close future state BAHREC May 16, 2012--Karen D. Rohde

  13. Common Pitfalls • Focusing on current business value of talent instead of future business value of talent • Overestimating new talent • Underestimating risk of talent attrition • Misguided and overly expensive retention • Expensive re-recruitment • “Empty promises” & “gifting” • Failure to quickly cut or redeploy redundant talent • Insufficient communication (amount and depth) BAHREC May 16, 2012--Karen D. Rohde

  14. Acquisition Stages Idea Approvals Term Sheet Definitive Agreement Close End State Months – Years 2 Weeks – 2 Months 2 Weeks – 2 Months 5 Months – 12 Months 9 Months – 2 Years BAHREC May 16, 2012--Karen D. Rohde

  15. The Players BAHREC May 16, 2012--Karen D. Rohde

  16. The Change Curve Perceptions / Performance Light at the end of the tunnel High expectations Realization of effort and complexity Time Change Implementation Un-managed Change Managed Change Despair BAHREC May 16, 2012--Karen D. Rohde

  17. Acquisition Stages Idea Approvals Term Sheet Definitive Agreement Close End State Months – Years 2 Weeks – 2 Months 2 Weeks – 2 Months 5 Months – 12 Months 9 Months – 2 Years BAHREC May 16, 2012--Karen D. Rohde

  18. Stage 1: Business Planning Acquirer – Deal Team Acquiree – • We are brilliant! • We are clever! • This will be the best thing ever! • Clueless BAHREC May 16, 2012--Karen D. Rohde

  19. Stage 1: Business Planning Acquirer – HR Acquiree -- HR • Gain understanding • Ask critical questions • Research target • Identify human capital risks • Clueless BAHREC May 16, 2012--Karen D. Rohde

  20. Acquisition Stages Idea Approvals Term Sheet Definitive Agreement Close End State Months – Years 2 Weeks – 2 Months 2 Weeks – 2 Months 5 Months – 12 Months 9 Months – 2 Years BAHREC May 16, 2012--Karen D. Rohde

  21. Stage 2: Negotiation Acquirer – Deal Team* Acquiree – Deal Team* • We are more brilliant! • We are more clever! • This will be the best, best thing ever! • This is great! • This is terrible! * Very limited Executives and Board BAHREC May 16, 2012--Karen D. Rohde

  22. Stage 2: Negotiation Acquirer – HR Acquiree – HR • Prepare HR M&A Plan • Identify Partner requirements • Provide Term Sheet input • Incorporate HR Budget forecast • Gain understanding • Ask critical questions • Research acquirer • Identify human capital risks BAHREC May 16, 2012--Karen D. Rohde

  23. Acquisition Stages Idea Approvals Term Sheet Definitive Agreement Close End State Months – Years 2 Weeks – 2 Months 2 Weeks – 2 Months 5 Months – 12 Months 9 Months – 2 Years BAHREC May 16, 2012--Karen D. Rohde

  24. Stage 3: Due Diligence Acquirer – Deal Team* Acquiree – Deal Team* • Better than we thought • What a deal! • Not as great • Let’s lower the price • Make them pay more • Let’s show them how much we’re worth • What’s in it for me? (WIIFM?) * Very limited Executives, Others and Board BAHREC May 16, 2012--Karen D. Rohde

  25. Stage 3: Due Diligence Acquirer – HR Acquiree – HR • Human Capital DD • Data analysis • Risk analysis • Risk Mitigation Plan • Operating restrictions • Retention of key talent • Combined company • Employee treatment • DA Communications • Engage Partners • Help map HR processes and policies • Gather and provide data • Educate Acquirer HR • Negotiate for fairness • Operating restrictions • Retention of key talent • Stand-alone • Employee treatment • DA Communications BAHREC May 16, 2012--Karen D. Rohde

  26. Acquisition Stages Idea Approvals Term Sheet Definitive Agreement Close End State Months – Years 2 Weeks – 2 Months 2 Weeks – 2 Months 5 Months – 12 Months 9 Months – 2 Years BAHREC May 16, 2012--Karen D. Rohde

  27. The Change Curve Perceptions / Performance Light at the end of the tunnel High expectations Realization of effort and complexity Time Change Implementation Un-managed Change Managed Change Despair BAHREC May 16, 2012--Karen D. Rohde

  28. Amount of Planning Work Acquirer Acquiree BAHREC May 16, 2012--Karen D. Rohde

  29. Integration Team & Sub-Teams • Insures efficiency and cross-company coordination • Clear process for information exchange (data room) • Clear meeting and information flow structure • Clear roles • Aids decision making and tracking • Provides single point of escalation to Executives / Integration Team • How much and on what issues will we take a stand? BAHREC May 16, 2012--Karen D. Rohde

  30. Sample HR Sub-Team Charter BAHREC May 16, 2012--Karen D. Rohde

  31. Stage 4: Integration Planning Acquirer – Deal Team Acquiree – Deal Team • We were brilliant! • Hope they don’t mess it up • What’s our next deal? • We were brilliant! • Too bad the employees weren’t as excited • I need to start my job search BAHREC May 16, 2012--Karen D. Rohde

  32. Stage 4: Integration Planning Acquirer – Executives Acquiree – Executives • WIIFM? • Bigger = Better • Impact to me? • We need an Integration Team • Too distracting • WIIFM? • Will I have a job? • If not, what do I get? • Do I want a job? • Too bad for the employees • I need to start my job search BAHREC May 16, 2012--Karen D. Rohde

  33. Stage 4: Integration Planning Acquirer – Managers Acquiree – Managers • WIIFM? • Impact to me? • Impact to my employees? • WIIFM? • Will I have a job? • If not, what do I get? • Do I want a job? • What do I tell my employees? • I’d better start looking BAHREC May 16, 2012--Karen D. Rohde

  34. Stage 4: Integration Planning Acquirer – Employees Acquiree – Employees • WIIFM? • Impact to me? • Why that and not…? • WIIFM? • Will I have a job? • If not, what do I get? • Do I want a job? • I’d better start looking BAHREC May 16, 2012--Karen D. Rohde

  35. Stage 4: Integration Planning “They are idiots” “They don’t listen” “Who do they think they are?” BAHREC May 16, 2012--Karen D. Rohde

  36. Stage 4: Integration Planning Acquirer – Integration Team Acquiree – Integration Team • Why doesn’t anyone want to be on this team? • Let’s get organized! • Can I be involved? BAHREC May 16, 2012--Karen D. Rohde

  37. Stage 4: Integration Planning Acquirer – Integration Team Acquiree – Integration Team • They keep asking the same questions over and over • We need time to evaluate and make a decision • They never answer our questions. • They keep changing their mind BAHREC May 16, 2012--Karen D. Rohde

  38. Stage 4: Integration Planning Acquirer – Integration Team Acquiree – Integration Team • We’re dying! • Direction changing • Reworking for the nth time • We’re brain dead • They’ve had months to make up their minds – why can’t they just tell us? BAHREC May 16, 2012--Karen D. Rohde

  39. Stage 4: Integration Planning Acquirer – HR Acquiree – HR • Integration Partner • Integration Team Effectiveness • HR Guiding Principles • Culture Assessment • Organization Work Flows • Functional Work Flows • Training • Manager • On-boarding • Day Zero/One Communications • Executive Team Dynamics • Lack of visibility • Avoidance of conflict • Change in Control benefits • Integration Team Effectiveness • Retention Plans • Tools for managers • Change management • Short term focus areas • Employee engagement • Day Zero/One Communications BAHREC May 16, 2012--Karen D. Rohde

  40. Acquisition Stages Idea Approvals Term Sheet Definitive Agreement Close End State Months – Years 2 Weeks – 2 Months 2 Weeks – 2 Months 5 Months – 12 Months 9 Months – 2 Years BAHREC May 16, 2012--Karen D. Rohde

  41. Stage 5: Integration Acquirer Acquiree • “They” become “us” • They aren’t as stupid as we thought they were • “We” become “them” • They are finally beginning to understand our business BAHREC May 16, 2012--Karen D. Rohde

  42. Stage 5: Integration HR • Combined Communications – focus on WIIFM? • Help employees understand transition timing & set expectations appropriately (Day 1 / 100 / Future State) • On-boarding & Manager Training • Exits and redeployment with dignity • Track Human Capital Metrics • Retention • Assess M&A performance & document lessons learned BAHREC May 16, 2012--Karen D. Rohde

  43. Key Takeaways • Every deal is unique • More structure = more trust • Culture = language lessons • Organizational clarity = speed • Be a cushion, not a brick • Take care of HR first BAHREC May 16, 2012--Karen D. Rohde

  44. Questions? BAHREC May 16, 2012--Karen D. Rohde

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