M&A – ‘Champions League’ for HR Professionals
This is one of the most exciting moments in the life of a company, acquiring another business. The entire process, from non-binding offer to binding offer, deal signing, and finally deal closing, is intense, fast-paced, and full of deadlines.
It requires deep expertise from all parties, rapid turnaround of deliverables, and strong judgment.
The pre-deal phases focus on realistically assessing both opportunities and risks. HR typically becomes involved in the later stages, but its role is critical.
Start with the “Why”
Before anything else, it is essential to understand why the transaction is happening:
Expanding regional coverage
Gaining market share
Acquiring intellectual property or expertise
Accessing a client portfolio
Adding missing services to the strategy
The objective of the transaction, along with the post-closing plan, full integration, partial integration, or arm’s length management, provides the guiding framework for HR Due Diligence.
If the objective is unclear, HR Due Diligence becomes ineffective because priorities and risk assessment lack direction.
The 10 Key HR Risk Areas in Due Diligence
1. Remuneration
Review salary structures, bonus schemes, commissions, one-off payments, and collective bargaining agreements.
2. Benefits
Focus on pension liabilities, insurance schemes, company cars, employee stock plans, and holiday practices.
3. Top Executive Terms & Conditions
Assess retention risks and contractual conditions, including:
Retention and guaranteed bonuses
Change-in-control clauses
Share or stock options
Notice periods
Performance records
Expat assignments and key personnel
4. HR Operations
Understand the HR operating model, systems, payroll processes, HR services, and audit findings.
5. Employee Turnover
Analyse multi-year data by function and location to identify risks of knowledge loss.
6. Employee Absence
Evaluate sickness rates and patterns across functions and geographies.
7. Corporate Culture
Although partly intangible, understanding values, behaviours, and cultural identity is essential for integration success.
8. HR Policies
Review policies such as diversity, disciplinary processes, remote work, pre-retirement, time management, performance management, and sabbaticals.
9. HR Demographics
Analyse workforce data, including age, gender, education, tenure, and geographic distribution.
10. Litigation
Identify ongoing or potential labour disputes, regulatory issues, compliance risks, and potential fines.
Benchmarking Matters
Ideally, these risk areas should be compared against internal and external benchmarks to reach a well-informed conclusion.
However, reality often falls short.
The Reality of HR Due Diligence
In practice:
HR is often involved too late
Data may be incomplete or unavailable
Some information sits with external providers
Data may require anonymisation
Targets, especially competitors, may withhold sensitive information
Management teams may be reluctant to share confidential documents
As a result, HR Due Diligence is frequently incomplete.
Managing the Gaps
To mitigate this, HR must:
Validate key issues during management meetings before deal signing
Stay closely aligned with the M&A team
Push for a dedicated, high-priority HR workstream early in the process
Why It Matters
Given the critical importance of people-related risks in acquisition success, early and structured HR involvement is essential.
Investing effort upfront significantly increases the chances of a successful integration and long-term value creation.