Labor Market Intel in an Environment of M&A Disruption
Mergers and acquisitions (M&A) can roil markets, affecting companies in a variety of ways. From the merger of United Technologies and Raytheon to the consolidation of Salesforce and Tableau, M&A activity over the last year has continued to transform the business landscape.
While they’re designed to boost organizational profitability and productivity, mergers and acquisitions often result in workforce planning challenges, particularly when the deal relocates the acquired company outside of its primary market. That puts added pressure on human resource (HR) professionals and recruiters, who will need to consider the following when looking for talent in a new market.
Fundamentals of Change
M&As generally take place during one of two different business cycles:
- Economic Peaks: This is when the competition across most industries is high, and organizations need to acquire new revenue streams to grow or create a business advantage. During economic peaks, the labor market is tight and unemployment is low.
- Recession: These are the times when companies lose revenue because of a business slowdown and find that merging with another entity can address financial needs. A recession often brings job losses and higher unemployment.
M&A transactions generally fall into two categories:
- A horizontal M&A is the merger or acquisition of companies offering similar products or services. The 1999 merger of Exxon and Mobil is a classic example.
- A vertical M&A is the merger or acquisition of complementary companies – each at a different stage of production – that ultimately improves a process. For example, the Walt Disney Company’s acquisition of Pixar Animation Studio created one of the most successful entertainment entities in the world.
Understanding the economic climate and the type of M&A transaction is essential for workforce planning, compensation benchmarking and talent acquisition. Of the two types, horizontal M&As tend to have a greater impact on jobs. Because these mergers offer similar products and services, there is often a duplication of roles and responsibilities among employees or departments. This redundancy is not cost-effective and becomes the impetus for layoffs. Job losses typically occur at the company being acquired or at the smaller company. And, with any M&A transaction, HR teams are the ones tasked with finding the right workplace management solutions.
In the face of a merger or acquisition, HR teams and recruiters must be proactive. Understanding and anticipating the needs of the “new” transformed company, combined with knowledge of the market in which the company operates, are key to planning for future talent needs.
Creating a staffing plan is a good place to start because it requires the organization to evaluate its strategic and tactical goals and discern how HR and other departments will support them. A staffing plan also prompts the team to consider how specific market factors – such as economic fundamentals, single employment events like a relocation or expansion, and other M&A activity in the metro area – will impact the new organization.
For example, if a large company is hiring hundreds of workers in the area, the competition for talent will heat up. Analyzing specific market dynamics like net migration numbers, for instance, will help HR teams better identify and recruit talent for their available positions. Job growth in a secondary market may prove to be more significant than growth in a core market. This information can help HR teams outline the best strategy for identifying job seekers in and around the affected metro.
In an M&A transaction, the acquired or merged company will often move to the purchasing company’s location. But, some employees won’t want to relocate to a new city for a number of reasons, or will only stay for a short time if the market isn’t conducive to their lifestyle. And, once the merger or acquisition is complete and normalcy sets in, talent gaps and different needs may emerge. In these instances, finding new workers will become a priority for the organization.
With data-driven analytics, including population growth and the number of local university graduates, HR professionals can leverage the right information to shape their recruiting strategies. Labor market intelligence thus becomes a vital tool for forecasting and planning. Workforce analytics can be applied to any metro, at any point in time, and provide valuable insight for talent acquisition across industries and job types.
Change is inevitable with any M&A. Access to a single source of reliable, objective information can be instrumental in helping HR professionals fulfill the organization’s labor needs – immediately and in the future. Regardless of where the new company is located, labor market intelligence provides the insight hiring managers will need to identify new talent pools and compensation strategies to boost business growth and performance.