Over the past two months, we have been discussing questions to consider when entering into a joint venture or merger (see Part 1 and Part 2). Once you and your potential partner have aligned on your business philosophy and products or services, it’s time to start thinking of your employees.
When going through a merger or acquisition, your employees are some of the people who will be most affected. Use this time of transition as an opportunity to reengage and reconnect with employees. In joining with another business, you are given the chance to examine areas where your business and employees can flourish.
M&A deals need to be good for employees, as well as the company. Employee buy-in is huge and will determine the success of the deal once you’ve checked off questions asked in our two previous posts (Part 1 and Part 2). To check off that the employee/human capital makes sense for an M&A deal, you need to do an evaluation. Ask yourself, and your future business partner, the following questions:
- How are each of the companies structured?
Are your businesses structured vertically or horizontally? If vertical, how many levels of management are there? Furthermore, are departments organized by function, product type or geographical location? Take the time to think through how these structures will combine in a way that makes sense for the new business.
- Does each company have strong department heads? Are there overlapping strengths or weaknesses in leadership?
Naturally, when combining two companies, there will be some overlap in employee roles or department functions. After the merge takes place, how will these departments fit together and what effect will it have on the employees’ roles? Will there be a shift in chain of command? How will duplicate roles be handled?
- In addition to Human Resources, what are the physical assets each party brings to the table?
Making sure employees buy-in and have a smooth transition goes beyond company and department structure. Their assimilation will hinge on how complicated they perceive the shift in daily activity to be. Is there a good fit with facilities, machinery, and/or technology? Will there be savings or economies of scale?
Change impacts all people differently. While some employees will be excited by the new direction your company is taking, others may need some convincing. In order for the merger or joint venture to transition smoothly, it will be important for employees to feel comfortable with the change.
Be sure to check back again next month for our final installment in the Business Combinations series, which will focus on financial health.
ABOUT THE AUTHOR – STUART GUTWEIN
Stuart Gutwein is co-founder and attorney at Gutwein Law. His career encompasses over a decade of experience in several areas of business including mergers and acquisitions, business formation, and product development. He currently serves on the Indiana Business Law Survey Commission, serves as a board member of M25 Group and is an active member of the Ag Law Council of the Indiana State Bar Association.