HR transactions. Unleashing the value added in corporate deals October 2014

Transcription

1 Unleashing the value added in corporate deals October 2014

2 Disclaimer EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young LLP is a clientserving member firm of Ernst & Young Global Limited operating in the US. This presentation is 2014 Ernst & Young LLP. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is in violation of US and international law. Ernst & Young LLP expressly disclaims any liability in connection with use of this presentation or its contents by any third party. Views expressed in this presentation are those of the speakers and do not necessarily represent the views of Ernst & Young LLP. This presentation is provided solely for the purpose of enhancing knowledge on tax matters. It does not provide tax advice to any taxpayer because it does not take into account any specific taxpayer s facts and circumstances. These slides are for educational purposes only and are not intended, and should not be relied upon, as accounting advice. Page 2

3 Did you know 70% of acquisitions fail to achieve the projected synergies 85% of failed acquisitions are attributable to mismanagement of cultural issues 30% responded that human capital costs of investing in emerging markets were higher than expected 55%-77% of all mergers fail to deliver on the financial promise announced when the merger was initiated 47% of key employees leave within the first year following a transaction 75% within the first three years 86% of corporate executives believe HR s involvement in integration planning is highly valuable <50% of corporate executives believe their HR group is well equipped to address culture and change management issues Page 3

4 In many transactions, people represent the highest cost and greatest risk. Properly managed, HR can be a driving force behind maximizing transaction value. Trends in transactions Restructuring driven by regulatory changes across the UK and Europe Increase in divestitures, especially distressed assets Labor challenges in emerging markets Emerging market investment in developed markets Restructuring of internal HR functions to lower cost locations Increased financial risk related to pension plans Increased focus to develop HR M&A capabilities Page 4

5 Transaction types and typical challenges Types of corporate transactions Carve-out Divestment Buy-side due diligence and integration Sell-side due diligence Restructure/reorganization Initial public offerings (IPOs) Joint venture An assessment of risk and value Financial risks Deal risks Operational risks Preserving value of the asset Avoiding delays or failed restructuring programs Mitigating risks to business operations Risks that affect the valuation: Change in control triggers cash payments to target employees Unfunded pension arrangements Employee litigation and claims are not sufficiently provided for in the accounts Significant one-off or stranded costs Risks that could jeopardize the transaction or restructuring program: Lengthy employee consultation Employees refuse to transfer Employees strike and stop work Adverse media attention from employee-related issues Risks that can negatively impact business operations: Loss of key management and leadership Loss of other key employees/skills through loss of shared service or legal transfer regulations Lengthy transitional service agreements (TSAs) are required for payroll, HRIS Lack of cultural alignment/ integration Page 5

6 Typical transaction life cycle Typical transaction life cycle Due diligence Negotiations Day 1 readiness Post close Restructuring Successful corporate transactions Due diligence Separation and carve-out Integration and synergies Restructuring Identify, preserve and realize deal value Sustain and improve business operations Identify and manage deal risks In scope employees Compensation and benefits HR function Employee relations Human capital enablers Identification of inscope employees Key talent assessment and retention Organization design Workforce analytics and planning Expatriates Executive compensation and employment contracts Employee compensation and benefits Equity incentives Pensions Employment tax HR operations and TSAs HR systems and payroll HR policies and procedures HR risk and compliance Culture and values Communications and consultation Employment law Employment transfer Redundancy and severance HR financial synergy opportunities Change management and employee communications Page 6