Managing employee benefits after a merger or acquisition

We wanted to take a look at the key steps to managing employee benefits after a merger or acquisition, so we caught up with Head of Human Capital M&A at Willis Towers Watson, Jana Mercereau. 

“Famed business management guru Tom Peter once famously proclaimed that “if a window of opportunity appears, don’t pull down the shade”.

A company merger or acquisition can present both challenges and opportunities – and, in some cases, the opportunities may not knock again in a hurry.

Such a move is a catalyst for change. If you are going to embark on a new future for your organisation, the time to rethink your benefits programme and wider benefits strategy is now.

Strategic planning – the key to success

Willis Towers Watson research, conducted in collaboration with Cass Business School, has helped identify the key ingredients to successful M&A deals. Above all else, the two most consequential contributors have been found to be the deployment of an experienced deal team and effective, early, planning.

Multinational conglomerate deals, in particular, can be highly complex. In many cases, businesses may have the relevant experience, but will lack resourcing capacity. Alternatively, they may have the capacity but lack the necessary expertise. In either case, appropriate external support can prove to be one of the most critical factors to deal success.

Effective planning meanwhile, from a compensation and benefits perspective, involves acquiring all relevant information on the benefits of targeted acquisitions at the outset to ensure decision-makers have a full picture of the status quo. Everything, from the benefits that are currently offered to different categories of staff to the levels of cover on these benefits, should be taken into account.

Moreover, bringing HR partners to the table during the due diligence process is essential to help identify the key harmonisation, employee integration and retention risks. These steps can ensure planning is underway well in advance of deal close.

The strategy of managing employee benefits after a merger or acquisition that is ultimately adopted will depend upon a range of factors including budgets – whether the company has targeted a cost-neutral integration or has budgeted for increased benefits spend – benefits benchmarking, possible salary and pay scale restructuring, cultural considerations, and the wider corporate objectives of the consolidated benefits programme.

It should be remembered that treating merged organisations as separate entities in terms of benefits provision can prove an unnecessary cost burden as dealing with multiple suppliers introduces a higher degree of administrative complexity.

We are increasingly seeing companies cutting the corporate flab, divesting themselves of non-core assets, and establishing benefits programmes that support their roadmap towards a leaner and fitter business future. This can mean getting rid of legacy programmes that have failed to meet employee needs, have failed to engage the workforce and that have failed to deliver value investment or ROI.

The consultation route to least resistance

Change can be a difficult pill for many to swallow and there is no silver bullet to completely eradicating the possibility of employee dissatisfaction. The process has been likened in some quarters to pulling off a plaster – you can do it quickly and painfully, or you can do it slowly and painfully. The more hastily it is undertaken however, the greater the risk that insufficient time and resource will be devoted to the it, resulting in a breakdown in communication.

Clear and careful, two-way, communication during the obligatory consultation process is paramount. A one-size-fits-all approach will rarely be appropriate, with tailored messaging required to address the changes and challenges affecting specific personnel. The opportunity should be then afforded to employees, or their representatives, to ask questions or feedback their concerns.

Changes that are then made in the wake of this consultation, should take place in an incremental, step change, fashion. Furthermore, these changes should continue to be supported with clear communication, so employees know what they can expect now, what they can expect following the finalising of sale and purchase agreement terms and what the future holds in store.

It is worth noting that the Takeover Panel has now made it a legal requirement for an announcement of a firm intention to make an offer to include the “the offeror’s intention with regard to the business, employees and pension scheme(s) of the offeree company”.

Mind your step – a glance at the horizon

In addition to opening the window to a benefits programme overhaul, M&A activity can also present an opportunity to review its ongoing strategic management.

A company may have inherited, for example, a workforce in a new country that isn’t directly supported by a locally-based HR function. To minimise the administrative burden and enable improved data-driven decision-making, management information system should be in place that offer visibility and dynamic reporting on benefits provision across all areas of the organisation.

A best practice, approach to managing employee benefits after a merger or acquisition takes account of such considerations – before, during and after the event – will ultimately help pave the way to a successful and productive business future.