New rules on acquisitions put HR issues into the spotlight

David Woods , 20 Sep 2011

mergers and acquisitions

Amendments to the Takeover Code by the UK Take-over Panel bring due diligence into much greater focus for the people-related issues in acquisitions – driving HR to the discussion table.

The amendments make clear makes clear that, where a company makes a "strategic review announcement" which starts an offer period, any potential offeror with which the company is already in talks with regard to a possible offer will be required to be identified in the announcement.

In such cases, the announcement must also specify the date on which the "put up or shut up" deadline will expire.

In addition, the amended Practice Statement encourages companies and their advisers to consult not only before making a strategic review announcement but also before making any statement that confirms that the strategic review is continuing.

Further reading

A 28-day period from bidders being identified and the requirement to withdraw or make a bid brings into focus much deeper due diligence in a shorter timeframe than may have previously been the case.

Peter Baynham, UK head of M&A consulting at Mercer, said: "Bidding companies initially tend to focus on the financial and legal aspects of a deal - considering the impact on employees much later in the process. The new rules will concentrate companies' minds on having early plans for organisational integration and restructuring effects, so they can move quickly if there is a leak.

"Many deals fail to deliver value to acquisitive companies due to lack of timely planning and communication around people and integration, which may lead to poor morale, reduced productivity and leakage of top talent." Mercer has also highlighted the increased role that HR directors will need to play in evolving an early people strategy for prospective acquisitions.

"In the past, HR directors have tended to receive a late invitation to the deal table. The rule changes should prompt a higher profile for HR in the early development of business expansion strategies," Baynham added.


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Good for HR can it deliver?

Jose Santiago 20 Sep 2011

While this will bring HR earlier intot eh picture of the deal can it deliver what is needed in 28 days? Will this change the view of deal makers to bring them in earlier and have a people plan covering the integration, design and structure to fit the new strategy, including the merging of roles and synergies? If not it will be a major challenge to cover all aspects and the risks some of these will carry. I see a need for xtrong cross fucntional teams workign together from early on if this is to succeed and make M&A less costly and have HR make a valuable contribution. Jose Santiago Atari Limited


Andrew Ades MBE MBA LL.M FCMI CMC MIC MCIArb 21 Sep 2011

In a knowledge-based economy, much of the value in a business lies in its people. It is therefore essential that HR directors sit at the top table from the outset of any consideration of future strategy and organisation - perhaps especially in terms of M&As where the actual value added by people at all levels must feature as a critical element in the cost and benefit analyses.

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