Redpath Insights


The Human Element of the Mergers and Acquisitions Process

by Mark Gibbs, CPA, CGMA

July 2, 2018 โ€” Mergers and acquisitions are hard work, and as we find due diligence, deal feasibility, quality of earnings, tax planning and structuring, and valuation answers for clients, Redpath and Company also sees additional factors that may run against your chances of success.

Your deal may sound great on paperโ€”an opportunity to meld minds and create a larger pie that you had been fighting over only recently. However, humanity can get in the way of accomplishing the idealized vision you set out to achieve.

Human capital is at least as important as profitability, liquidity, and the like.

For example, managers may not collaborate well across firms that are being combined even if there are benefits to doing so in terms of new perspective and experience. It may have little to do with job security; they could even be artists in their respective roles with a secured path upward or laterally. Sometimes, itโ€™s just the drive to compete. That is a real motivator for some, and to combine forces with your former market competitor and expect that drive to go away could be unrealistic.

The company mission statement

Okay, so weโ€™ll have a unified vision for our offices and plans that define the โ€œwhatโ€ and the โ€œwhoโ€ across all regions and specialties. Is that the right way to approach the issue? There is a high probability that no-one will care deeply about these platitudes.

Ask yourself instead what each workplace means to its surrounding areaโ€”and ask your people. What are challenges unique to their operation? What would be lost if it went away? These are the types of questions that will reveal kernels of truth, and they might be different for each location. A sense of shared purpose can only come about when this kind of authentic feeling is discovered and leveraged.

Make the connections

The systems used for version control of documents, intranet, accessing benefits information, and directories need to be equally accessible to everyone, and your people need to be accessible as well. Encourage meetings in small groups or in pairs, in or out of the office so that there is ample opportunity for clarification of roles and processes. Your owned talent must be utilized in training, realigning, and energizing the firmโ€™s people.

Itโ€™s hard work

Because the M&A process involves a fatigue-inducing amount of energy to carry out, alignment is important. Your teams need to feel that their collective performance determines the future of the firm. Your people must look beyond their individual record and work well with many others with what could be incomplete information.

You can assist your best and brightest, outspoken and/or respected natural leaders by being transparent when it comes to the amount of work to do and the schedule for doing it. Then, you can offer relief by either bringing in extra temporary help or by allowing lower-level employees to grow into some of the normal work of your leaders. The benefit of the latter is two-fold; you free up the schedules of your mission-critical staff involved in implementation for the hard work they must do, and you can also see who shines when given additional responsibilities, which in turn could inform later choices for who gets promoted.

Itโ€™s normal for there to be discomfort in the M&A process, but the financial aspects donโ€™t have to be lumped in there with the human element. Reach out to Mark Gibbs, Managing Partner at Redpath and Company for solutions to your Merger and Acquisition process.

Mark Gibbs, CPA, CGMA

Mark Gibbs, CPA, CGMA

Mark Gibbs is managing partner of Redpath and Company and has been with the firm since 1986. He continues to serve as a client manager and has extensive experience in commercial audit services. In recent years, he has spent considerable time working on merger and acquisition due diligence on both the seller side and buyer side with his clients, as well as with private equity firms. He has been a member of the board of directors since 2006 and was named managing partner in 2014.

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