Sunday, 17 April 2016

Lack of people focus hampers financial success of M&A


Many insurers see cultural integration as a major post-deal challenge, but few use employee engagement as an indicator of integration success.

DUBAI, 17 April 2016 - Nearly half (42%) of insurance companies recognise the critical importance of cultural integration and of hiring and retaining employees to the overall success of a deal, according to a survey* of senior insurance executives conducted by Willis Towers Watson M&A Risk Consulting in conjunction with Mergermarket.

The research shows that the respondents focus on top-line growth as measure of success for acquisitions. The extent of revenue and commercial synergies (62%), return on capital (55%) and financial synergies (48%) are the most frequently cited factors. However, the research also highlights that only 12% use employee engagement as an indicator of integration success.

Steve Allan, EMEA M&A practice leader at Willis Towers Watson, said: “Employee engagement and customer experience have a known link to improved financial performance, so it is disappointing that employee engagement does not feature more prominently among deal-success measures. Unaddressed cultural clashes are the most cited reason for deal failure which, without proper measurement warning signs, may be overlooked and could ultimately lead to a deal failing to deliver on its promise.”

Additional research entitled ‘Serial Acquirers in Modern Times: How to Handle the Assembly Line?’, by Mats Stenerson Kallum** goes further by suggesting that early involvement of HR is critical to a successful deal. It also covers the lessons learned from serial acquirers including the importance of people in the outcome of deals.

Steve Allan said: “Serial acquirers have become experts at M&A, so for this group to recognise the importance of people in the outcome of deals suggests that we should all take heed. Keeping people issues front and centre at all stages of the deal process should support a successful integration process, and ultimately help deals keep on track to reach their financial objectives.”