People in M&A

People in M&A

A full-process service to optimise synergies, improve performance, and achieve business value in transactions

Mergers and acquisitions (M&A) activities have surged in recent years for emerging markets. Significant changes are happening to the M&A market environment and competitions. Strategic M&A leads the way as more companies seek for corporate wealth and value growth during the M&A process through acquiring technology and talent. A successful M&A involves a number of complicated factors including politics, culture, legal, finance, taxation, etc. The management of people risk is a key factor within the M&A process. People-related issues have high uncertainties and low controllability, and are one of the most important potential risks in transactions.

The overall value of people transaction service is that it has taken the overall situation into consideration starting from the due diligence stage, aligning with the general direction of planning integration. It not only helps corporations to screen for potential people risks, but it also helps to evaluate the core value, resources, advantages of human resources, allowing businesses to achieve “quick wins” in integrating key capabilities and resources allocation. The overall value of the deal is realised through effective human resources management and a smooth transaction.

How we can help

With globalisation accelerating in full speed, the adoption of cross-border M&A strategy by Chinese corporations is no longer a new topic today. Many of these Chinese companies face various obstacles including the lack of experience, policy and territory issues during their process of “going global”. They also tend to fall into the “M&A trap” due to overlooking the importance of due diligence in the early stage and integration management in the later stage.

Private equities (PE) are active participants in overseas investments under economic globalisation. Different from global expansion, in M&A, PE focus on the retention of core personnel and the increase in enterprise value. As a result, the key challenge is how to effectively motivate the management and key talent during a cross-border investment. The interests between investors and management are aligned and the results of enterprise value are shared through long-term incentives to achieve the goal of retaining talent and investment targets.

Talent-related issues are essential in the process of corporate restructuring, in particular risk identification, key talent retention, efficient organisation blueprint design, future talent strategy formulation and more. We not only provide people services for strategic investors and private equities in cross-border transactions, but we also help corporations to solve important HR problems during their restructuring process.

From HR due diligence to after-merger integration, we help enterprises to identify potential people-related problems. We provide leading practices and form strategic integration plans, assigning professional teams to ensure there are strong synergies to achieve improvement in business performance. We help Chinese corporations to accelerate their globalisation process and establish globalised human resources management systems.

Pre-deal: HR due diligence

In the HR due diligence stage, the focus should be on the major risks that could potentially affect the deal; for example pension plans that could potentially impact liability, compensation and benefits that may affect future labour cost, as well as provisions that could be triggered by change of control. We help our clients to:

  • Identify HR practice compliance risks in the M&A process, estimate potential financial impacts and analyse the implications to deal price;
  • Identify organisation and HR management risks, and assess talent retention, carve out risks; analyse potential risks for future integration and operation, identify potential opportunities for improvement;
  • Develop HR operation transition framework and document it on transaction documents.

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During the deal: closing preparation and people integration

Closing preparation is a crucial stage for realising the deal value in a transaction. A successful deal is more than only “1+1” but rather it looks to achieve “1+1>2” in synergy management. There are tremendous differences in each company’s people management practice and corporate culture; for cross-border deals, it would even involve cross-culture communication. To ensure smooth operation after the M&A and to create synergy value, it is important to identify key activities in HR closing, identify opportunities for performance improvement, and develop integration strategy and action plans. We help our client to:

  • Identify key activities in HR closing, develop HR day-1 and day-100 plans to ensure smooth closing and post-deal transition; work closely with client team to carry out effective staff communication and facilitate team involvement and stability.
  • Identify key talent, develop incentive and retention plans to ensure smooth transition, and motivate core team to achieve synergy value.
  • Based on business needs and operation priorities, identify major risks and improvement opportunities; develop detailed integration plans for major HR modules, design post-deal governance model and organisation structure, HR planning as well as decision-making process to ensure operation stability and efficiency improvement.
  • Identify talent secondment strategy and positions, develop effective secondment management mechanism to ensure talent selection, secondment process and management are in order, establishing a globalised HR management system through cross-border M&A.

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Post deal: performance improvement

In the post-closing integration management process, there is no guarantee that M&A will lead to synergy although it has taken legal effect. At this stage, only by strengthening the integration of resources in particular people resources, that companies would have a chance to succeed.

We help our clients to:

  • Develop quantitative assumptions and models to track future synergy realisation based on the deal strategy and synergy achievement implementation plan.

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Full deal cycle project management and synergy tracking

M&A activities usually involve multiple initiatives and cross-functional work. We suggest corporations to coordinate strategically in three aspects: solution architecture, project management and change management.

  • Solution architecture: focusing on achieving M&A strategic goals, breaking down strategic goals into key initiatives, and clarifying the inter-dependences between sub-projects and work streams, identifying mainstream change and developing overall program blueprint as critical input for resource deployment and evaluation.
  • Project management: monitoring project progress, coordinating resources deployment, and identifying potential risks to ensure the maximisation of deal value.
  • Change management and communication: developing change management process and system to support smooth implementation of deal integration; through coordination, communication and managing the expectations of both buyer and seller to ensure a smooth transaction and realise the deal value.

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Contact us

Johnny Yu

Johnny Yu

Mainland China and Hong Kong Consulting Clients & Markets Leader, PwC China

Tel: +[86] (10) 6533 2685

Liuyang Li

Liuyang Li

Partner, PwC China

Tel: +[86] (10) 6533 5845

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