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back to index backGLOBALtalk May,  2007


HR Challenges During M&A Transactions in Asia Pacific

Merger and acquisition (M&A) activity in Asia Pacific has increased dramatically in recent years. In 1998, Asian M&A transactions accounted for only eight percent of worldwide deals, however today that figure is closer to 25 percent. During this time, M&A deals have also grown in sophistication and complexity, and issues such as cultural adaptability and an understanding of local HR policies are fast emerging as having a strong impact on the long-term success of many deals.

Hewitt recently conducted the Mergers and Acquisitions Asia Pacific Study 2006, which sheds light on the complex and challenging HR issues that many companies face when pursuing a merger or acquisition in Asia, and provides valuable insights into the lessons other companies have learned from their experiences.

The study brings to light several key findings. Most significantly, not only has the volume of M&A activity in Asia Pacific increased substantially over the last five years, but is set to further increase in the future, particularly over the next two to three years.

With this increase, there is also the realization that improvements in the deal process among many companies will be required in order to better meet deal objectives. For example, when it comes to those HR issues that impact the success of a deal, the study highlighted the need for more formal tools and processes during the M&A integration process.

The Mergers and Acquisitions Asia Pacific Study 2006 also assessed the effectiveness of the due diligence process at participating organizations, revealing that long-term, post-merger integration issues are of lesser concern to most companies than immediate and short-term objectives. Consequently, many integration and transition challenges are not being sufficiently addressed, which can lead to potential long-term risks. Additionally, the study discovered that the retention of key staff and compliance with local labor laws are the most important work streams during the due diligence phase.

Significantly, most companies in the study consider cultural fit and employee communication to be the most critical and challenging HR issues to overcome during an M&A transaction. Surprisingly, although widely acknowledged as critical, formal assessments of cultural fit or employee engagement during the course of the transaction and integration are only applied by a minority of participating companies.

The majority of participants identified cultural fit, leadership assessment, and employee communication as the top three issues that merit more attention in future due diligence and integration projects.

In addition, the Mergers and Acquisitions Asia Pacific Study 2006 showed that less than half of respondents considered the integration of merged or acquired companies as successful or very successful. To address this, companies should take the following steps in the future: improve their management processes, undertake a more comprehensive assessment of target organizations, begin the integration and preparation process sooner, create a better alignment between synergies and integration, bring additional groups into the deal process sooner, and move with greater speed through integration.

About Hewitt's Mergers and Acquisitions Asia Pacific Study 2006

In order to gain a thorough understanding of the extent to which HR issues are treated as a key strategic priority during a merger, acquisition or joint venture, Hewitt Associates conducted the inaugural Mergers & Acquisitions Asia Pacific Study 2006 from March to April 2006. The study explores the alignment of HR issues with corporate direction and HR's ability to deliver tangible benefits in a merger or acquisition. Companies in Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, Korea, New Zealand, Singapore, and Thailand were invited to participate in the survey, which was available in English, Chinese, Japanese, and Korean. Seventy-three global and local companies participated.

Source:  Hewitt Associates Asia - GAI


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