Canadian Underwriter

Lack of “people focus” hampers financial success of M&A: Willis Towers Watson

April 19, 2016   by Canadian Underwriter

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More than four in 10 (42% of) polled insurance companies “recognize the critical importance of cultural integration and of hiring and retaining employees to the overall success of a deal,” according to a survey of senior insurance executives conducted by Willis Towers Watson (WTW) M&A Risk Consulting in conjunction with Mergermarket.

Handshake of businessmen on blur businesspeople backgroundThe research shows that the respondents focus on top-line growth as a measure of success for acquisitions. The extent of revenue and commercial synergies (62%), return on capital (55%) and financial synergies (48%) are the most frequently cited factors, WTW said in a press release on Tuesday. However, the research also highlights that only 12% use employee engagement as an indicator of integration success.

The survey was conducted by Willis Towers Watson M&A Risk Consulting, supported by researchers from Mergermarket, who canvassed the opinions of 750 senior insurance executives from life, property and casualty and composite insurers, as well as reinsurers, regarding their outlook for M&A in the insurance industry, and their own company’s plans and strategy. The companies involved were split equally across the Americas, Asia and Europe, Middle East and Africa regions.

“Employee engagement and customer experience have a known link to improved financial performance, so it is disappointing that employee engagement does not feature more prominently among deal-success measures,” said Steve Allan, EMEA M&A practice leader at WTW, in the release. “Unaddressed cultural clashes are the most cited reason for deal failure which, without proper measurement warning signs, may be overlooked and could ultimately lead to a deal failing to deliver on its promise.”

Additional research entitled Serial Acquirers in Modern Times: How to Handle the Assembly Line? by Mats Stenerson Kallum of the Mergers and Acquisitions Research Centre at Cass Business School in London, United Kingdom goes further by suggesting that early involvement of HR is critical to a successful deal. It also covers the lessons learned from “serial acquirers,” including the importance of people in the outcome of deals.

“Serial acquirers have become experts at M&A, so for this group to recognize the importance of people in the outcome of deals suggests that we should all take heed,” Allan said in the release. “Keeping people issues front and centre at all stages of the deal process should support a successful integration process, and ultimately help deals keep on track to reach their financial objectives.”

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