An HR prescence at an early stage in negotiations may be the key to more successful mergers
Samuel Beckett’s famous axiom about his life’s purpose being to "fail, fail again, fail better" is one that is apparently dear to many chief executives’ hearts. They merge, acquire and deal like never before.
Boardroom confidence in mergers and acquisitions has taken the value of such transactions to an estimated global value of $2,200bn. In the UK alone, the DTI informs us, UK companies were involved in acquisitions and mergers worth some £53.8bn worldwide in 1998. That's up on the £19bn of 1997 and the £13.4bn of 1996.
And yet in over 80 per cent of the deals sealed, firms fail to produce any increase in value for shareholders.
But despite all the talk of commercial logic and synergies, they are normally a disaster.
According to a new study from KPMG, 80 per cent of senior executives believe the deals they have done furnished benefits for shareholders.
Yet, in fact, in 83 per cent of cases, the merger failed to yield any benefits at all.
Worse, in more than half of the 700 deals looked at by KPMG between 1996 and 1998, the deal actually destroyed value. In many instances, those executives are in no position to know either way, as almost half of the organisations never even bothered to find out if the merger had benefited anyone.
Forgotten people factor
And the reason a deal is usually doomed for M&A failure, personnel professionals will by now have guessed, is the forgotten people factor.
As Sue Cartwright and Cary Cooper argue in a new IPD book, HR Know-how in Mergers and Acquisitions, most M&A decisions are based solely on projected earnings and economies of scale.
The people involved are a matter for operational management after the glorious deal is done.
In one of the classic instances, Royal and SunAlliance had duplicate boards for over a year - a fine example of leading from the front.
"Too often the human resource management aspects are forgotten when firms engage in M&A activity," the authors say. "In many ways the process of merger is much like a marriage. Whether two organisational cultures are compatible is not a question often asked by boards and chief executives intent on finalising a deal."
And yet many in the personnel field have been arguing this for a very long time. Is anyone listening?
John Nicholson, chairman o