The need to retain talent and create positive employee experiences during the acquisition process is becoming one of the biggest strategic needs for the technology industry.
Retaining talent, capitalizing on synergies and mastering smooth and productive integrations are the goals of most mergers and acquisitions. For the technology industry in particular - a highly competitive and fast moving sector that leverages M&A as a means to grow - these objectives have become even more central to business strategies because companies are increasingly being acquired for their talent, and integration success or failure directly impacts future financial performance. This is why attention to human capital issues during expansion decisions is becoming one of the biggest strategic trends in the technology industry.
Tasman Consulting LLC recently spoke with human resources (HR) and corporate development executives from SuccessFactors Inc. (NYSE: SFSF), Salesforce.com Inc. and Cisco Systems Inc. (Nasdaq: CSCO), all current clients of the firm, who examined how these goals are achieved and the key aspects of dealmaking that are critical for HR M&A professionals.
Among the main tips cited by the experts are: the importance of a unified approach between HR and corporate development teams, the focus on creating a positive employee experience during the transition process and the attention to culture assessments and integration. This can be facilitated by solid advanced planning, transparency, and a targeted effort to engage the acquired company early in the process.
The importance of the partnership between HR and corporate development relies on the role of both areas during the entire lifecycle of the deal - from HR negotiations all the way through to integration planning and execution, explains Judy Blegen, VP applications and business process design at Success Factors.
"I am a firm believer that integration should lead with HR. The excitement of the announcement wears off and all people, regardless of level, need to have their personal questions addressed before they can effectively focus on the heavy lifting that is integration," Blegen says, adding that HR can bring value early in the deal process by highlighting important areas of cultural alignment or misalignment, helping the team remove obstacles and clear hurdles to get the deal done.
"I've actually seen deals fall apart in HR negotiations because there was just too much of a cultural misalignment," she says.
During SuccessFactors' acquisition of Plateau, the company had to integrate globally in a tight time frame, while managing strict cost synergy goals. Tasman brought the leadership teams from both companies to work together on all of the employee organizational planning. By quickly aligning the teams on clear goals and having them work together through hands-on interactive sessions, the firm was able to meet the time frame while maintaining employee morale. Tasman also introduced them to the cultures of each firm and helped them adapt to the styles of each organization. The time and energy spent at the beginning stages made employees happier in the long run and helped the company meet its financial targets.
Angela Whatley, director of employee success M&A at Salesforce.com, agrees that in order to drive a successful integration in a fast-paced and growing company, being clear about the plan from the outset is crucial. "We must help employees identify what's changing in the acquisition process and what's not changing. Also, get the key talent engaged," she says. Regarding international deals, she also provides a practical tip: it is important to keep in mind the tax structure in the country in which the company is dealing and how the employing entity is going to be structured inside the company.
"This drives a lot of the integration," she says.
And don't underestimate the unknown. "No matter how many deals you've done, or how sophisticated your processes are, there are always unknowns that you can't control," states Whatley. She further explains that there are many intangible factors, such as leadership styles, that do not appear in the data room during due diligence, which can change the whole process of integration.
The case of Salesforce.com is exemplary in that the company is a novice serial acquirer on a fast-paced growth track. Nonetheless, they engaged Tasman with their recent acquisition of Buddy Media in June 2012 to ensure a smooth integration of employees globally.
Today more than ever, the success of an acquisition is determined by the smooth and succinct integration of employees and management from both companies. This project was particularly attractive to Tasman due to its large scale and cross-border nature. Tasman assisted in driving the employee integration plan while minimizing the impact to business.
Clare Markovits, director of corporate development acquisition integration at Cisco, discussing effective employee "on-boarding" practices, says "Because we are a serial acquirer, we really have invested in our acquisition integration capabilities. We get involved right around the term-sheet stage to start with early diligence and early planning and then we drive to an integration plan even prior to when we actually sign a deal." A quick on-boarding process minimizes disruption to the employees' day to day business, she adds.
Cisco has built out a practice that focuses around four key capability areas: people, process, governance and experience. For Markovits, talent goes first, because it is one of the key features of the deal process. "For us, why we acquire is by and large for the talent and the main driver behind why we lose employees is because they're dissatisfied typically with the integration process - really, as we said it's very disruptive. We cannot minimize that disruption, but we can normalize it as quickly as possible."
Having worked with these top acquirers, Tasman credits its success to the firm's ability to clearly understand and articulate the key important HR factors in deals. There is no question at Cisco that the people component is critical to their ability to achieve their business goals. This knowledge across the executive team helps ensure the business funds and implements the best people practices for every acquisition. Cisco, SuccessFactors and Salesforce.com each have executives that recognize the importance of the people component.
Attention to human capital issues during expansion decisions is becoming one of the biggest strategic needs and thus, is a trend in the technology industry. The insights shared by Tasman's clients exemplify the approach that the firm uses in helping them navigate the HR aspects of M&A. Having hands-on experience with such a wide variety of deals allows the company to provide practical advice and expertise.
Shari Yocum and Niki Lee are managing partners and co-founders of Tasman Consulting, a human capital advisory firm in San Francisco. Yocum has more than 18 years of experience working in HR and M&A, while Lee has managed over 50 domestic and cross-border acquisitions over the course of eight years.