Why HR Should Be Part of Your Acquisition Strategy

A Strong Acquisition Strategy Looks Beyond the Numbers

Financial and operational due diligence are critical to an acquisition. But looking only at the numbers can leave important questions unanswered.

What is the culture of the organization?

Which employees are critical to its success?

How dependent is the business on its owner?

How will employees respond to a change in ownership?

Are there leaders who can help carry the organization forward after the transaction?

These are people questions, but they are also business questions.

Kristin has seen the consequences of overlooking them firsthand. During the podcast, she recalled joining a private equity-owned organization after it had acquired a smaller company without completing HR due diligence.

“If we would have done some due diligence, there’s things that we could have potentially avoided. And it was very costly for the organization, Kristin recalled.”

Including HR earlier in your acquisition strategy gives buyers an opportunity to identify potential people-related risks before they become much more difficult or expensive to address.

Understand the Culture You Are Acquiring

An acquisition isn’t simply the combination of two balance sheets or operating models. It brings together people who may have very different expectations, histories, leadership styles, and ways of working.

That is why understanding culture before a transaction can be so valuable.

During HR due diligence, Kristin and the Lakeside team look beyond policies and files to understand what makes an organization work.

What are the things that they don’t want to lose in an acquisition?

What are the things that really make them different?

Those conversations can help uncover some of the intangible qualities that made the business attractive in the first place.

An organization may have long-tenured employees with decades of institutional knowledge. A founder may have built unusually strong customer relationships. Certain leaders may be central to maintaining employee trust or keeping operations moving.

Understanding those dynamics as part of the acquisition strategy can help organizations determine what needs to be protected throughout the transition.

Identify the People the Business Depends On

One of the most important questions to ask during acquisition planning is simple:

Who does this business depend on?

The answer may include the owner, but it may also include a top salesperson, operational leader, technical expert, customer relationship manager, or potential successor.

As Kristin explained:

“If we lose this person, this deal won’t go through. We aren’t going to get our value.”

Identifying key employees early creates time to develop a thoughtful retention strategy. It can also reveal where new leadership or specialized talent may be needed to support the organization through and beyond the transaction. For private equity-owned companies navigating these changes, Lakeside provides private equity recruiting support designed for periods of growth, acquisitions and transition.

In one example Kristin discussed, a key employee was brought into the process and offered incentives, including phantom stock, to encourage retention. The employee also received education about what to expect from the due diligence process so they could participate effectively and understand what the transition could mean for them.

That kind of planning takes time. Leaders need to identify key employees, understand what motivates them, communicate appropriately, and consider how to keep important talent engaged through uncertainty and change.

Making those conversations part of the acquisition strategy can help protect the people and knowledge that contribute to the value of the business.

Consider How Dependent the Business Is on Its Owner

Acquisition strategy is also important for business owners who may be considering a future sale.

One of the biggest areas to evaluate is how dependent the organization is on its owner.

If the owner holds the most important customer relationships, makes nearly every operational decision, manages key employees, and carries much of the institutional knowledge, transitioning the company to new ownership becomes significantly more complicated.

Kristin shared the example of a successful family-owned business whose owner was beginning to consider retirement. He originally expected his son to take over the company, but when that was no longer the plan, he needed to understand how the organization could continue without him.

Lakeside worked with the business to evaluate its leadership structure and determine where the owner remained essential. That process revealed a need for stronger operational leadership that could help make the organization less dependent on one person.

As Kristin shared:

“It’s always better when the owner has thought of those things beforehand so that they’re setting it up for the potential buyer to be a clean break.”

Building leadership capacity, clarifying roles, documenting processes, and delegating responsibilities can make the organization stronger today while also preparing it for a future transition.

And that work is not a one-year process.

Bring HR Into Your Acquisition Strategy Early

Whether your organization is actively pursuing an acquisition, preparing for a future sale, or simply building a stronger business, many of the same HR fundamentals apply.

Strong organizations understand their key talent. They have clear leadership structures and accountabilities. They know what makes their culture valuable. They develop people who can carry the business forward. And they address HR risks before those risks appear during due diligence.

That is why HR should not be treated as a final compliance check once a transaction is already underway.

As Kristin put it:

“HR is part of the business. It’s not a function.”

Bringing HR into your acquisition strategy earlier provides another perspective on what you are really acquiring, what you need to protect, where potential risks may exist, and how the organization can move successfully through change.

Hear More from Kristin on Poised for Exit

Kristin’s conversation with Julie Keyes goes beyond acquisition strategy to explore strategic HR, private equity, recruiting, succession and exit planning, building enterprise value, and Lakeside HR Group’s approach to supporting growing businesses.

Listen to the full episode of Poised for Exit to hear more of Kristin’s perspective and the experiences that have shaped Lakeside HR Group’s approach to HR consulting.

If your organization is preparing for an acquisition, considering a future transition or looking to strengthen the people side of the business before an opportunity arises, Lakeside HR Group can provide HR consulting support throughout the process, from due diligence and organizational planning to leadership, retention and post-acquisition transition.