In the face of ever-changing markets and despite uncertainty in the current financial environment, mergers and acquisitions (M&A) continue to be a popular growth strategy for businesses looking to expand their reach, grow, and increase market share. These transactions can have a significant impact on employees, and it is crucial for companies to consider the employee experience when undertaking M&A deals.
There can be many reasons underlying the proposed M&A. Some of the most common goals are to increase profitability and efficiencies, based on expansion of tools and the team by combining resources, companies can reduce costs and improve overall performance. However, doing so may lead to eliminating positions or changing job responsibilities for certain personnel, which can cause anxiety and uncertainty for employees.
This month’s Legal Risk Management Tip will discuss tips employers can use to help manage the employee experience during a merger and acquisition. With change comes opportunity – and remembering the employee experience is critical throughout the pre- and post-M&A period.
A Positive Employee Experience Involves Effective Communication, Retention, & Culture
To minimize the negative effects of an M&A on the employee experience, it is crucial to have a communication plan in place as successful companies focus on effective communication throughout the M&A process. Whenever possible, the leadership team needs to be transparent about the changes that will take place, and the reasons behind them. As leaders, through active listening there is an opportunity for leadership and management to acknowledge challenges and collaborate with employees to gain better understanding of the collective experience. It is also important that leadership recognizes that there will be an impact on employees (and other business relationships).
To address uncertainty, clear and frequent communications are key. This includes providing regular updates and, to the extent possible and practical, discussing the company’s plans for the future including anticipated timelines and benchmarks.
During an M&A, it is possible that the firm can lose valuable employees and team members who they want to keep. To avoid this potential risk, companies can consider offering retention incentives such as equity or bonuses to key employees. These incentives often help to retain talent and ensure a smooth transition. Moreover, creating a work environment with happier employees where key employees are involved in the integration process so that they can have a footprint on the future of the company has a positive impact on the employee experience and leads to the overall success of the business.
In addition, companies need to consider the collective impact on the organizational culture and the synergies between the two organizations’ teams. Cultural differences can lead to conflicts and a lack of cohesion, which can negatively impact employee morale and productivity. Before the M&A is finalized, diligent companies and business leaders need to assess cultural similarities and differences and work together to address any potential issues that may arise.
For example, the acquiring company may have a different set of values, work behaviors, and management structure, which can be challenging for employees to adjust to. It can lead to confusion about the direction of the company and how a new onboarding employee will fit in with the new organization. Focusing on employee integration will help create a positive employee experience by putting people first. Start by addressing why things are done the way that they are and offer to hearing feedback on continuous ways to improve existing processes. Creating an environment where everyone feels valued will go a long way.
Managing change effectively requires awareness, flexibility, and a willingness to have some hard conversations when needed.
M&A can have a significant impact on the employee experience, and it is essential for companies to take steps to mitigate the negative effects. By being transparent and involving employees in the process, companies can create a more positive and productive work environment for everyone involved.
Finally, for those companies that are in a highly regulated environment such as financial firms, it is essential to work with counsel knowledgeable about the legal and regulatory considerations related to M&A deals. Employment laws and regulations also must be considered, particularly when negotiating employment contracts for onboarding employees from to the acquiring firm. Companies can take action as leaders take prudent steps to work with experienced legal counsel to ensure that all aspects of the M&A transaction comply with relevant laws and regulations.
M&A can be an effective growth strategy for businesses, but it is essential for companies to consider the impact on employees. By focusing on effective communication, retention of key employees, cultural fit, and legal and regulatory considerations, companies can ensure a smooth and successful transition and maintain a positive employee experience.
At Jacko Law Group, our Mergers and Acquisitions lawyers work closely with clients in the highly regulated financial industry including investment advisers, broker-dealers, investment companies, hedge funds, and corporate clients. Our JLG Team of experienced M&A attorneys provide customized legal solutions to assist in your next merger or acquisition, support due diligence efforts, and accelerate outcomes for your firm. For more information on how JLG can help, please contact us at (619) 298-2880.
Author: Alicia Bond, Director of Operations, Counsel, Jacko Law Group, PC (“JLG”). JLG works extensively with investment advisers, broker-dealers, investment companies, private equity and hedge funds, banks and corporate clients on securities and corporate counsel matters. For more information, please visit https://www.jackolg.com/.
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