Protecting Human Capital During a Deal
From the LOI stage to the first 100 days, ACG Growth Summit panelists discuss HR risks and opportunities in a transaction
An M&A transaction is a hectic process with the potential to significantly impact an organization’s employees and, if mismanaged, jeopardize the company’s greatest asset—its people.
During the ACG Growth Summit on April 2, hosted in partnership with Texas ACG Capital Connection, a panel of experts discussed human resources risk management ahead of a deal, Day 1 HR transition readiness and post-merger execution.
Moderated by Marcela Maxson, a business performance advisor with Insperity, the “HR Harmonization in the First 100 Days” panel featured Rob Marchitello, CEO of Signal Power Group, a sustainable energy solutions provider; and Kevin Venturini, executive vice president of strategy at Clearfork Midstream, a provider of midstream solutions for oil and gas producers in basins across North America.
The panelists shared their experiences from past transactions and offered takeaways for protecting human capital during a deal:
ACG Event Recap
WHAT: ACG Growth Summit in partnership with the 20th Texas Capital Connection
WHERE: Hyatt Regency, Dallas
WHEN: April 2, 2024
THE TAKEAWAY: By having a plan, communicating clearly with employees, and having effective HR infrastructure, acquirers can protect valuable human capital and position their deal for success.
Anticipate changes for employees early in the deal process. Without full access to a company’s employees, evaluating talent early in a transaction is challenging. That’s compounded by concerns among sellers about integrating employees prior to closing, panelists noted.
To assess talent in the pre-letter of intent stage of the deal, Venturini suggested looking role by role at what will change for a company’s employees after the transaction—“what will be different in how they come to work, whether it’s Day 1, Day 30, Day 100 or a year from the transaction.”
Changes to consider aren’t limited to benchmarking or compensation benefits, Venturini added, but include how an individual’s job responsibilities will look different post-acquisition, and whether that presents new risks or opportunities for growth. He cited an acquisition by his company that was predicated on taking a “cost-efficiency-focused” business into “growth mode,” and how anticipating changes to various job roles helped them get ahead of issues and concerns early in the deal process.
Communicate clearly and establish stability. A transaction can be unsettling for employees, many of whom fear change or question their job security. Panelists suggested mitigating those concerns by communicating as much as possible.
“Especially when you’re in a smaller company, you tend to huddle with the management team and try and run the business, and you just expect employees to do what they’re supposed to do,” said Marchitello. “But our philosophy is overcommunicate, whether it’s strategy, HR, sales or compensation.”
Having systems in place to make the integration run smoothly is also important. “Relying on companies like Insperity is invaluable to us, because they have that infrastructure and process in place to help onboard people,” Marchitello said.
Insperity can also help provide consistency amid the change, through reliable payroll and benefits administration, Venturini added. He suggested looking for “things that you can keep constant, that you can keep as something that [employees] can anchor to during this change, with the world going crazy around them.”
Have a plan but solicit feedback—and be flexible. Although a business owner might be enthusiastic about an acquisition—and the payout that comes with it—employees tend to feel uncomfortable about the impending change. Having a plan for what comes next can help alleviate those fears. “Putting a checklist in place, or an Insperity in place, and having a process is so important to the deal, especially through that first 100 days,” said Marchitello.
Putting a checklist in place, or an Insperity in place, and having a process is so important to the deal, especially through that first 100 days
Rob Marchitello
Signal Power Group
Maxson noted the important role of not only having a plan but articulating it. “I have personally seen transactions where the lack of communication or a delay in communication can lead to a lot of uncertainty from the employee side,” she said. “That’s a lot tougher to fix, right? They have to go back and then say, ‘OK, actually we do have a plan for what this is going to look like.’ It sets the tone for what’s to come.”
The panel cautioned against taking an exclusively top-down approach when setting the company’s direction. Venturini recounted a council that was set up after his company’s acquisition of Azure, where employees could bring up concerns, questions and ideas, some of which altered the original plan for the business. “I think that earns a lot of credibility down the road,” he said. “And especially if you mean it and it’s authentic, I think you can really accelerate the time it takes for the cultures to get to know one another.”
Since 1986, Insperity’s mission has been to help businesses succeed so communities prosper. Offering the most comprehensive suite of scalable HR solutions available in the marketplace, Insperity is defined by an unrivaled breadth and depth of services and level of care. Through an optimal blend of premium HR service and technology, Insperity delivers the administrative relief, reduced liabilities and better benefit solutions that businesses need for sustained growth. With 2023 revenues of $6.5 billion and more than 90 offices throughout the U.S., Insperity is currently making a difference in thousands of businesses and communities nationwide. For more information, visit https://www.insperity.com/acg.
Middle Market Growth is produced by the Association for Corporate Growth. To learn more about the organization and how to become a member, visit www.acg.org.
