OE Cam was delighted to host an executive roundtable debate on the topic of “Beyond the Financial: Holistic Approach to Mergers & Acquisitions” with Glenn Leech, Managing Director of Connect Education & Care as guest speaker.  The event was well attended by both CEOs and HR Directors at the Ham Yard Hotel in London on 11 November 2015.

With 2016 predicted to be a bumper year for mergers and acquisitions (M&As), businesses are being urged to look beyond the financial and place equal emphasis on the people that come as part of the deal.

With this high focus on M&As, OE Cam is urging British firms to make the HR Director an equal partner with the Finance Director when undergoing the due diligence process that pre-empts a deal.

OE Cam’s Managing Partner, Martyn Sakol, highlights that around 83% of mergers fail to achieve their goals* with the majority of theses failures due to ‘people issues’.

“At OE Cam we work with organisations to assess the capability and culture of the target acquisition’s key team members. The value of the exercise is so significant that is has become a key factor in fixing a realistic value and minimise the risk in any deal.”

Martyn Sakol explains: “Human elements can act as an indicator as to the true nature of a target organisation and can highlight potential issues early enough in the process so that appropriate measures can be put in place. Our process reduces the risk of losing value during and immediately post the merger due to people. One area of key importance is to provide the insight into leadership capability, behaviour and attitude that enables the acquiring company to act swiftly post acquisition, delivering changes that ensure that value is maximised from day one.
Martyn Sakol and guests at the Ham Yard Hotel

With a number of top mergers and acquisitions expected in 2016, such as Marriott hotels with Starwoods, Ladbrokes with Coral, and Anheuser-Busch InBev with SABMiller, companies clearly need to consider the impact that the ‘people’ in the business will have on the deal and factor it into the due diligence process in the same way that financial disclosure and review is undertaken.

Martyn goes on to say:

Companies need to be decisive about the management in the acquired business, as a simple mistake to make is to keep the wrong leader in place and become over-reliant on the existing senior team. It is crucial for businesses to understand the management team, understand their allegiances towards the acquired MD, and examine their motivations and drivers. The lower the management level you can assess the better – pre-deal or immediately afterwards.”

An example of a company which has developed a holistic approach to M&As is Connect Group PLC which has seen rapid change through thoughtful acquisitions, since its demerger from the WH Smith Group in 2006. As part of its M&A approach, Connect Group has developed a systematic, rigorous process to human due diligence, recognising its importance to the overall assessment of opportunity and business fit.

Glenn Leech, Managing Director of Connect Education & Care, one of the company’s four operating divisions, says that Connect Group is currently on track to achieve its target of significantly diversifying its profit from its original reliance on newspapers and magazine wholesaling.  Leech was previously Connect’s Group HR Director, and he explains that the people aspect of successful acquisitions is an area which differentiates the company’s approach from many other that are investing in mergers and acquisitions. “We’ve spent considerable time with OE Cam, considering how we to develop the most effective assessment as part of due diligence. Working together we identify the most important people factors that will be necessary for success, also considering how our due diligence findings might translate into actions once the acquisition has been finalised”.

“We try to understand the capability of people we are acquiring, focusing also on cultural dynamics such as the effectiveness of the relationship in the senior leadership team. This informs our approach and quickly highlights if there are things that we will need to do differently.  In one example, we swiftly identified that we would need to put strong ‘people processes’ in place to affect the kind of change we needed.”

Leech explains: “Obviously the scope for analysis is dependent on the extent we can get in to the business pre-acquisition, but there have absolutely been instances where HR-led due diligence has informed how we invest in a business, what the likely costs and benefits will be and indeed whether or not we want to buy at all.

0112 Taking Seats (1)

Martyn Sakol concludes: “The holistic approach to maximising the effectiveness of acquisitions can be broken down into four separate strands: planning ahead, rigorous due diligence, a focus on capability and culture, and the need to execute thoughtfully but quickly.  The way in which Connect Group has made this strategy a systematic part of its acquisition process is outstanding. It is a very good example of the holistic approach to M&A”.

 

 

For more information about Holistic Acquisitions, please contact Martyn Sakol at martyn.sakol@oecam.com or telephone our Cambridge office on +44 (0)1223 269009.

* Information sourced from The M&A Paradox: Factors of Success and Failure in Mergers and Acquisitions written by Yaakov Weber, Christina Oberg, Shlomo Tarba [2014]