Industry Insights

M&A Series: Talent Classification improves chances of a successful merger or acquisition

February 1, 2018
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For over 20 years, I’ve been perplexed by the inability of the M&A process to properly capture, recognize and sort out all the people that are involved in the integration of two companies. Needless to say, the top handful of senior executives are reviewed in a painstaking manual process and it is crucial that one starts at the top. But after the top tier, things quickly dissipate and there is a lot of guesswork that must be used to get the newly combined entity as productive as quickly as possible. Because of the sheer volume and complexity of data, many of the human capital integration issues are dealt with over the ensuing months and years and can add a considerable drag on the earnings of the company and morale of the employees.

In the absence of a scalable talent classification process, this is the current state of M&A. For most companies, labor is by far the largest expense. It is surprising, and in my own personal experience frustrating, to not know the job families, skill gaps and experience background and levels of all the people involved in an M&A event. With upwards of 80% of mergers failing, I believe that this lack of classification directly contributes to why so many mergers and/or acquisitions never deliver on their promises..

I have been on both the acquired and acquiring side of M&A transactions and understand the potential issues that can arise. I was the CEO of a company that was acquired in the early 2000s and was asked to be the chief revenue officer of the new company. The acquiring company wanted to get into the telecom industry on a global basis and wanted to utilize their existing salesforce to achieve that goal. We had the product to sell and they had a sales team they hoped could deliver. We worked quickly to implement and capture the opportunity.

Unbeknownst to myself and the other senior leaders was, who in the existing sales organization had the type of B2B enterprise sales skills the new company required to hit our revenue targets? We were blind to the talent of our global sales force and we didn’t have enough time or expertise  for our sales operations team and HR to go through the entire sales staff. We took our best guess and hoped that this new organization could deliver. And, it was a disaster. After we lost our two largest prospects, we stopped, surveyed our customers, prospects, and our staff and discovered the problem; we had too many outsides sales and too few business development managers. It had taken over six months (two painful quarters) and we never fully recovered.

Fast forward to today. My excitement in being involved with Vettd is because of our ability to create and deploy custom AI models that provide real and immediate solutions to real business problems. Vettd has solved this issue by taking the guesswork out of talent classification. Today you can create AI models on our platform that will classify part or all of the talent in a company and a target company and give you a combined view of what talent both companies have, irrespective of their titles, department or compensation.

In future blogs in this series, I’ll delve more deeply into how talent classification can be used throughout the various stages of the M&A process: from diligence & negotiation, to candidate/target selection, post-integration analysis,  to finally corporate development and competitor talent analysis.