The ‘P' Quotient

HR managers should have a clear idea about the socio-cultural factors in the merger process, so that people integration is achieved along with the objective of organisational productivity.

- Dr Sumanta Dutta

The financial motive behind any M&A is to achieve synergy through economies of scale and widening the scope of better coordination. It enables a firm to further penetrate key markets and enhances its ability to deliver a wider range of products and services. Other than the financial aspect, non-financial elements like human capital are of paramount importance from an M&A perspective. People as individuals are considered a less measurable organisational asset, and less easy to be recognised in a study of the balance sheet than quantifiable assets or P&L accounts. They are often overlooked or given less consideration at the time a decision to merge or acquire is made.

An acquiring company performs due diligence on targeted companies; they will identify several key assets and liabilities; people are inevitably both of the above. No matter what the acquirer’s strategic intent is. It is often stated that despite all financial projections, two out of three of the M&As fail. The is due to the fact that human factor is systematically ignored.