Human Resources plays a huge part in any M&A transaction, especially in a divestiture. Separating employees from the parent company certainly has many challenges and complexities that you need to prepare for. If this is your first time doing a divestiture, then you're in luck. Walking you through planning a divestiture from an HR lens is Sallie J. Cunningham, Director, People M&A at Apple.
"You can generate excitement about the future of the (divested) business only once the employee's basic needs are met." - Sallie Cunningham.
It means identifying a particular group of people that is essential to the operation of the divested asset. When you are getting ready to prepare for a divestiture, you have to understand exactly what the product or the asset is being sold. Only then can you identify the people who are part of those assets.
While doing this, you will have a group of dedicated full-time people to the asset and people involved in it part-time. According to Sallie, if a person dedicates more than 50% of their time to the asset, they should be part of the ring fence.
Identifying this fairly early is essential because this will part of the diligence process. Buyers will want to know what is part of the deal, and the people who are part of the ring-fence should also be made aware that they are not going to be eligible to apply for roles outside of the ring fence within the company.
The first part of the diligence process is the employee census which involved the ring-fence. However, due to the General Data Protection Regulation (GDPR), they do not release personal information until it's absolutely necessary. Early in the process, they release aggregated information such as average salaries by function or location.
Talking to the buyer's HR will help a great deal because most of the time, request lists don't reflect what they want or need from you as the seller. Usually, buyers will ask for employee handbooks, policy manuals, and copies of employment contract templates. Some buyers will even ask for things like employee engagement, survey results, and affirmative action plans.
Having a good VDR with password-protected files and security features is critical. It is important not to share sensitive information with potential buyers, especially when they are competitors who may end up not completing the transaction.
Employees usually freak out when they find out that the business that they're in is being sold to another company. Having a credible leadership team in that segment, who can articulate good reasons for doing the deal, will help drive the engagement.
"When employees see the leadership team excited about the future, they will be more inclined to follow." - Sallie Cunningham.
But at the end of the day, it's all about job security. People will want to know if they will still have a job post-close. While that is the buyer's job, your job as the seller is to try your best to make the transition a good experience for your people.
"This is where the fun begins."
At this point, you're home stretch. Your job is to help the buyer create excitement for the employees. Developing a good communication plan with the buyer is crucial for day one. An engaged workforce is a productive workforce, and it is in everyone's best interest that the divested business succeeds.