Mergers and Acquisitions

In an increasingly globalised world, cross-border mergers and acquisitions (M&As) have become more common – and more lucrative. For example, in 1985 the value of cross-border M&A deals amounted to approximately 32 billion US dollars. By 2022 this had increased to an estimated 1.05 trillion US dollars.

The benefits of cross-border M&As are numerous. Companies can expand their reach, access new markets and hopefully expedite their growth. One recent survey found that 60% of global CEOs intend to make at least one acquisition in the next three years.

But perhaps one of the most lasting benefits is the potential for integrating already diverse teams and drawing on a wider pool of global talent.

More specialised skillsets. Unique perspectives. Fresh ideas for solving old problems. There are many reasons why your employees are often crucial to the foundation of a successful cross-border M&A.

There are benefits for your employees too. A cross-border M&A can offer your staff new opportunities for career growth within a new company structure.

That’s why the most successful cross-border M&As put HR due diligence and proactive change management at their heart.

In this blog post, we’re going to dig a little deeper into the key employee-centred benefits of cross-border M&A and explain why it can be such an exciting and ultimately profitable opportunity for a newly merged organization.

Access to Skilled Talent

One of the primary motivations for a company choosing to either merge with or acquire a new business in the first place is the opportunity to access a wide pool of knowledge or talent. Whether you’re an acquiring company, or your organisation is being acquired itself, a merger or acquisition represents an opportunity to address talent shortages or take advantage of specialised technical expertise that your existing company may not possess.

For example, it’s common for mergers and acquisitions in the technology sector to be driven by a need for talent in specialist fields such as software engineering, data science or cybersecurity (and this trend is likely to be accelerated by companies looking to fill AI skills gaps).

Likewise, in the healthcare industry, cross-border M&As can provide access to medical professionals with specialised training or experience in a specific therapeutic area.

As well as technical expertise and specialist skills, companies navigating an M&A can also benefit from regional market insights. For global companies, localised employees bring much needed insight into a region or market’s cultural nuances and regulatory frameworks.

But M&As unlock more than just an understanding of new localities. A successful M&A also delivers much needed cultural diversity that can benefit your company in the long-term.

Cultural Diversity

A multinational M&A is more likely to bring together employees from more diverse backgrounds. This, in turn, offers opportunities for your newly merged company to benefit from the added perspectives, experiences and backgrounds that a combined workforce can offer.

With diversity of perspective comes diversity of thought. The combined workforce that’s created by a merger or acquisition can, hopefully, engender new ways of thinking and stimulate the creation of new strategies or even products!

However, unlocking the potential of cultural diversity during your cross-border M&A requires having a proactive change management strategy from the start. In order to capitalise on the cultural benefits, it’s important to solidify your M&A due diligence strategy. In order to achieve this, we’d suggest asking yourself the following questions.

• How can you communicate the changes brought about by your M&A inclusively and transparently?
• How can you ensure that your acquired employees in new markets are receiving benefits that are as good or better than the previous incarnation of the company?
• How can you ensure that new org structures are clearly laid out during the M&A?

Furthermore, a culturally diverse workforce can enhance an organization’s ability to navigate and thrive in global markets. Employees with a first-hand understanding of different cultural contexts can provide valuable insights into local customer preferences, business practices, and regulatory environments, enabling the company to tailor its offerings and approaches accordingly.

Knowledge Transfer

We’ve already touched on how the added cultural diversity created by an M&A can, in the best-case scenario, lead to more diversity of perspective for your new organisation.

But the truly successful mergers and acquisitions go further. By bringing together teams across borders, you can engender a culture of knowledge-sharing and upskilling in your newly merged workforce.

This knowledge-sharing could take on any number of forms.

• Formal training programs and/or management coaching
• Mentoring initiatives across newly merged teams

For example, let’s look at a scenario where a large software company acquires a small AI startup. The software company may have an established product development process, strong project management skills, and rigorous quality assurance methodologies. These knowledge and skills can be shared with startup employees, helping them to improve their product development efficiency and software quality.

On the other hand, the startup may possess market-leading algorithms, specialist knowledge in machine learning, and innovative approaches to AI application development. These specialised skills and knowledge can be transferred to the software company, thereby enhancing its capabilities in AI and machine learning.

The startup’s unique understanding of the AI domain, insights into the latest AI trends, and novel approaches to AI solution development can also help the parent company to innovate and stay competitive in the rapidly evolving AI field.

The benefits of such an M&A are numerous: smarter product development, enhanced operational efficiency and a stronger company culture.

Better Career Opportunities

In many instances, an M&A means an expanded organisation. And an expanded organisation means expanded career opportunities.

This is especially true of cross-border M&As.

Your new, combined organisation may offer a wider range of job roles, departments, and functional areas, enabling employees to explore new career paths or pursue lateral moves that align with their evolving interests and aspirations. This can be particularly beneficial for those seeking to broaden their skill sets or transition into new areas of specialisation.

Furthermore, the expanded scale and resources of the combined entity may provide more opportunities for internal promotion and leadership development. Employees may have access to enhanced training and development programs, as well as greater visibility and exposure to senior leaders across the organisation.

However, to fully capitalise on these expanded career opportunities, companies must implement effective talent management strategies and provide clear communication about available career pathways and development programs. Fostering a culture of internal mobility and actively supporting employee growth can help retain key talent and maximise the potential of the combined workforce.

Let’s revisit our example of a software company that acquires an AI start up. Software engineers in the acquiring company could find they have the opportunity to delve into specialised AI projects, thereby broadening their skill set and enhancing their career prospects. Similarly, employees of the AI startup may get chances to take on leadership roles in larger-scale projects, boosting their experience and career trajectory.

Retention of Key Talent

One of the critical challenges in cross-border M&As is the potential loss of key talent during the integration process. But this can be avoided by proactively identifying the synergies between your two companies and making sure your staff feels included in any change management process.

In the last section, we discussed the enhanced career opportunities as a key benefit of any cross-border M&A.

Clearly delineated career opportunities can be a powerful incentive for your best and brightest talent to stay with you in the aftermath of a merger or acquisition.

Additionally, the cultural diversity and exposure to new perspectives inherent in cross-border M&As can create a more dynamic and intellectually stimulating work environment.

Then there’s the incentive of enhanced benefits and compensation packages offered by your newly combined company. We’ve already mentioned how a key pillar of improved employee retention should be offering benefits packages that are the same or better than those of the previous company.