Corporate TreasuryCentralisationGeneralPoor employee engagement ‘dents M&A success’

Poor employee engagement ‘dents M&A success’

Many insurers see cultural integration as a major post-deal challenge, but few use employee engagement as an indicator of integration success a survey finds.

Nearly half (42%) of insurance companies recognise the critical importance of cultural integration and of hiring and retaining employees to the overall success of a merger or acquisition (M&A) deal, according to a survey of senior insurance executives.

Broking and advisory group Willis Towers Watson M&A Risk Consulting and researchers from Mergermarket canvassed the opinions of 750 senior insurance executives from life, property and casualty and composite insurers, as well as reinsurers, on their outlook for M&A in the insurance industry, and their own company’s plans and strategy.

The research, split equally across companies in the Americas, Asia and Europe, the Middle East and Africa (EMEA) regions found that respondents focused on top-line growth as measure of success for acquisitions. The extent of revenue and commercial synergies (62%), return on capital (55%) and financial synergies (48%) were the most frequently cited factors. However, the research also highlights that only 12% use employee engagement as an indicator of integration success.

“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 Willis Towers Watson.

“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 goes further by suggesting that early involvement of human resources (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 recognise the importance of people in the outcome of deals suggests that we should all take heed,” said Allan.

“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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