Hr Role in M&a

financial services
Why HR Can Make or Break Your M&A
In implementing an M&A, most managers focus on the financials. But success often hinges on how you deal with people issues and cultural integration. Is your HR unit up to the task?
By Andrew F. Giffin and Jeffrey A. Schmidt

I

n 2001, an admittedly sluggish year for mergers and acquisitions, the global financial services industry undertook M&As valued at more than $100 billion, placing it among the top 10 industries in M&A activity. Some of the major buyers included American International Group, Prudential, Swiss Reinsurance and Wellpoint Health Networks. Unfortunately, many mergers and acquisitions fail to meet their objectives, which are typically to accelerate growth, cut costs, increase market share or take advantage of other synergies. The recent announcement by AOL Time Warner that it will charge up to $60 billion to its net worth for impaired goodwill from past deals underscores the burdensome legacy that many companies confront long after completing their mergers or acquisitions. Why do so many M&As fail to meet expectations? And what can organizations do to improve the chances of a successful deal?

For insurers, the problems are compounded when two companies:
■

combine mature, low-growth businesses

■ fail to cut duplicate cost structures as expected ■ are unable to rationalize or coordinate distribution networks ■

Andrew F. Giffin is a principal of Tillinghast – Towers Perrin in New York. He specializes in global insurance organizations, bancassurance, financial services strategies and competitive market analysis. Mr. Giffin has an M.A. from Boston University and a J.D. from the University of Wisconsin.

face expensive systems reconciliation

■ experience conflicts in combined management.

Nonetheless, the life insurance industry, in particular, plans to continue merger activity as its primary growth strategy because most believe it has been effective in the past.

Deals Can... [continues]

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