Advance Look At New Survey Finds HR's Role is Crucial to Successful Mergers and Acquisition.

Business Editors

LAS VEGAS--(BUSINESS WIRE)--June 26, 2000

Preliminary Findings Released at SHRM Annual

Conference, Imagination 2000

When companies involve their human resource departments in the early stages of a merger or acquisition, there is a greater likelihood of success in achieving merger synergies and overcoming obstacles, according to the preliminary results of a new survey on the role of the HR function in mergers and acquisitions.

[pilcrow (paragraph sign)] The survey, titled How the Human Resource Function Adds Value During Mergers & Acquisitions, was conducted jointly by Towers Perrin and the Society for Human Resource Management (SHRM) Foundation. The full survey results are expected to be completed in mid-July. The preliminary findings are based on 279 initial responses from senior HR professionals around the world.

[pilcrow (paragraph sign)] "When you consider that only one in five deals is an unqualified success from a financial, competitive and employee perspective, these findings take on added significance," notes Jeff Schmidt, Managing Director for Strategy and Organization at Towers Perrin and director of the survey project. "The primary reason for disappointing results in M&A activity has less to do with deal-making than it does with the M&A process -- specifically, consideration for the impact a deal will have on people. The human resource function can help strengthen the M&A process if it has the essential business literacy and competencies to play a broader and more significant role in the process.

[pilcrow (paragraph sign)] "There are four stages in the life of all mergers and acquisitions -- pre-deal, due diligence, integration and implementation," states Schmidt. "According to the survey responses, the human resource function has little strategic involvement in the first two stages and significant involvement during the latter stages, where aligning programs and addressing staffing issues are key concerns.

[pilcrow (paragraph sign)] "Ideally, HR should be more substantially involved throughout the entire process. Particularly in the due diligence and integration planning stages, HR should play a key role in decision making and HR should be at the management table wherever people and related organizational/cultural issues are considered."

[pilcrow (paragraph sign)] The survey found that, during the due diligence phase of mergers and acquisitions, most companies focus on bottom-line issues such as benefits (89%), executive compensation (87%) and employee pay (81%), while paying much less attention to people issues such as learning and development (34%), recruiting and retention (42%) and organization design or development (46%).

[pilcrow (paragraph sign)] "The survey confirms what many of us in the HR profession have known for some time, that companies place more emphasis on numbers rather than people during the merger process," said SHRM President and CEO, Michael R. Losey, SPHR and CAE. "The survey also confirms that the most important factor in successful mergers and acquisitions isn't numbers -- it's people. Hopefully this survey will help to educate employers that they must approach people issues as strategic and give them due consideration and attention during all stages of the merger process."

[pilcrow (paragraph sign)] "HR professionals must understand the general economics of deal-making, the related business issues and the methodology for successfully incorporating the `people' component in these deals. It is also critical for HR to understand how to identify and manage discrete areas of risk such as loss of business momentum, employee alienation, and cultural frictions, and to take or recommend actions for eliminating or mitigating these risks," stated Schmidt.

About SHRM Foundation

[pilcrow (paragraph sign)] The SHRM Foundation is the 501(c) (3) non-profit organizational affiliate of the Society for Human Resource Management (SHRM), the world's largest society of HR professionals, with over 140,000 members. As the research and development arm of the profession, the SHRM foundation funds leading-edge HR research, publications and educational initiatives to advance the profession and increase the knowledge and effectiveness of HR practitioners.

About Towers Perrin

[pilcrow (paragraph sign)] Towers Perrin is one of the world's largest management and human resource consulting firms. It helps organizations improve performance and manage their investment in people, advising them on human resource strategy and management, organizational effectiveness, compensation, benefits and communications. The firm has more than 8,000 employees and 78 offices in 74 cities worldwide.