emea M&A

Four human capital factors to consider during an M&A deal

  • A sense of purpose helps companies achieve their full potential; to succeed businesses have to deliver impact and have to show impact integrity.
  • As most CEOs are now fighting COVID, it is an ideal chance to estimate their performance and find out how valuable your M&A target is.
  • It is time for businesses to use the whole open talent economy instead of focusing on the traditional employment model.

2021 deals are expected to be dominated by divestitures and consolidation. ‘It’s a buyer’s market and finding the winners just got a whole lot easier thanks to COVID-19 — if you know what to look for,’ says Lisa Gamboni, founder and CEO of Dealside, an economist and psychologist with over 30 years of expertise.

There can be no doubt that mergers and acquisitions are multi-layered. Aside from the thorough research of documents, from financial records to business models to intellectual property, one element often receives little attention, namely human capital, i.e. people. Nevertheless, people are regularly considered to be the most important asset of any company. Without the proper management of human resources, the majority of M&A deals are bound to fail.

During ‘The Power Of Human Capitalization And Data In Divestitures And Consolidation’ webinar, Gamboni dived deep into the 4 human capital factors that matter most during M&A transactions. They can tell you a lot about the value of the target, she believes, as well as about the potential price of a company. These factors are 1) purpose; 2) CEOs; 3) culture; and 4) talents. Let’s examine each of these a little bit closer.

Purpose

‘Businesses have to deliver impact and have to show impact integrity, just as they have to show financial integrity if they are to succeed’, as Sir Ronald Cohen, an international philanthropist and venture capitalist, puts it. Lisa stresses, that merely making money isn’t the goal of a business that aims at creating a long story for itself. Recent research on international markets showed that 71 percent of the respondents agree that if they perceive that a brand is putting profit over people, they will lose trust in that brand forever.

A sense of purpose helps companies achieve their full potential; she says. It is necessary for a company to function properly, otherwise, it loses its right to operate for key stakeholders. Gamboni says that there are more than two thousand academic papers devoted to the issue of organizational purpose: the vast majority of those state that having a purpose at the heart of an organization results in profits, i.e. equity returns.

CEOs

‘If a purpose and impact are in place, what’s happening in CEO-land?’ asks Lisa. Rather often, the CEO is one of the key factors that make a difference. Currently, she says, most CEOs are fighting COVID, and it is an ideal chance to estimate their performance and find out how valuable your M&A target is.

What distinguishes the CEOs who are successfully conquering COVID constraints from those who aren’t? According to Gamboni, they

  • focus on facts and data;
  • make decisions prioritizing speed over precision (without being reckless);
  • work at the front line, sharing struggles and successes;
  • reconcile dilemmas and accomplish what matters, positively pushing people to get things done;
  • keep careers moving, helping people and the company grow.

As for the characteristics important for a successful CEO, she underlines empathy and trust. The latter, Gamboni adds, is to be built through transparency. ‘They understand how critical transparency is to create and manage connections in the whole organization.’

Another important thing for a CEO is their ability to see ‘three horizons of strategy.’ Today, Lisa says, that a lot of top managers are totally trapped by the COVID situation, forgetting to go beyond today’s realities and think ahead. However, it doesn’t mean one shouldn’t stay in touch with reality, as a leader ought to be aware of social issues as well as employee anxieties.

Resilient culture

Standing tall in the current high winds also requires a strong organizational culture. Our expert stresses that in this case, ‘you’ll get what you put in’, underscoring the importance of constant investment into the company’s corporate culture. Leading with energy and passion, Lisa says, will help to get people more engaged and include them in the problem-solving process. Thus, a company can develop a strong brand trust, both internally and externally, that people are proud of and ready to protect.

If that’s the case, loyal employees can willingly deliver more than is expected of them. ‘In the most resilient cultures I’ve seen, people are ready to go the extra mile. ‘If most people are giving a little extra every day, the results you get will be stunning,’ Lisa believes. Not so many organizations can boast about having such a culture. Nevertheless, looking for an object to add to your portfolio, Gamboni says, one should be looking for these attributes as they indicate a potentially worthy investment.

Talent

Currently, Lisa says, the markets are seeing ‘a talent war’ like never before. The COVID situation with its closed borders makes it even more heated. In today’s realities, it is absolutely vital to get the right talent in the right place. However, quite often the best talents on the market are not willing to be fully employed. Still, being a part of the growing gig economy, they are ready to share their skills and expertise with you for a fee.

‘Access is no less important than ownership,’ sums up Gamboni, and suggests that it is time for businesses to use the whole open talent economy instead of focusing on the traditional employment model.

She also cited the fact that less than 20% of employees deliver more than 90% of business value. Usually, that means that management puts additional pressure on certain positions. ‘It is vitally important to give the right set of challenges to the right people at the top of the value creation process. Do not confuse it with the collaboration buzz because collaboration overload is just a nice way to say ‘lots of time wasted on silly meetings’, as Lisa ironically puts it. Teamwork, she believes, isn’t always the best to get things done.

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M&A EMEA