M&A Integration: Creating value through smarter, strategic HR operations

By Courtney Allen, Restaurant Management Practice Leader at Adams Keegan

While evaluating acquisition opportunities, investors consider an array of factors to determine the viability of the opportunity. These include revenue, cash flow, net income, management team, and strategic fit, among others. Careful consideration of these factors helps ensure that an acquisition will provide the long-term ROI that owners and private equity investors are seeking.


When an acquisition target meets the investors’ criteria and a merger occurs, the tricky part really begins. Integrating disparate organizations can be daunting. Handled poorly, the integration can hurt both the legacy and the acquired businesses, confuse employees and impact customer satisfaction. And in hospitality industries, poor guest experiences can quickly have a profound and lasting impact, potentially ruining assumptions of revenue growth and ROI targets.


That’s why another factor should be given due diligence commensurate with other financial metrics – integrating the people operations of the two businesses. Taking a fresh look at that side of the business can not only integrate the merged operations more smoothly, it can become an unexpected source of value creation. A seamless integration process can lead to a more efficient organization, even providing a cushion of a few basis points from the start, to help owners and investors increase the value of their investment as quickly as possible.


In addition to the integration opportunity, a close examination of many organizations will reveal a great deal of costly and unnecessary labor allocated to manual, transactional HR activity. While the HR function is vital for any healthy company, it should fulfill a strategic, not a tactical, role. Outsourcing this tactical HR function to a unique partner like Adams Keegan can unlock additional organizational resources and flexibility.


What’s the best way to create that value? Don’t forget the tactical HR function when evaluating acquisition opportunities. Not only can a different approach lead to a quick, seamless integration, but it can also ensure ongoing legal and regulatory compliance and create long-term operational efficiency, leading to significant annual savings.


The challenges of integration
Owners and investors place tremendous pressure on general managers and other operational leaders. These on-site managers are responsible for running day-to-day operations, hiring employees and serving customers, in addition to corporate initiatives related to sales and profitability growth. As the leaders closest to front-line employees, these pressures become even greater in the integration process, during which these managers carry much of the burden. Company owners don’t always understand this difficulty, so the managers are often not equipped with the tools necessary to succeed.
This is a critical oversight. While speed is of the essence in the M&A process, you can only force feed your employees so much until things go wrong. Rapid change without a solid plan can lead to incomplete training, a lack of regulatory compliance and missed sales targets. Large businesses can’t afford those types of mistakes.


The right time to change
While owners and managers look at the M&A process through different lenses, it is possible to satisfy all parties if the proper consideration is given to understanding integration needs and willingness to change established processes. In fact, M&A integration is an ideal time to reconsider the administrative HR function of the future organization. Unfortunately, traditional payroll bureaus and software-as-a-service (SaaS) providers are ill-equipped to tackle this type of strategic initiative. It requires a partner with the expertise, willingness and ability to customize its approach for each client.


Create long-term benefits
We believe that only Adams Keegan and our distinctive approach is uniquely suited to help hospitality operators create long-term value during the M&A process. Unlike our competitors, we don’t sell “off-the-shelf” solutions. Our consultative approach allows us to understand our clients’ needs and develop the solution that makes the most sense for the client’s long-term benefit.


We view the M&A integration process as an opportunity to improve organizations in three ways:

Integration and onboarding. We’ve addressed the difficulties of the integration process for GMs, but it’s also an opportunity to make all new employees feel better about changes to the organization. Demonstrate your onboarding capabilities, as well as a roadmap for the future. If you manage your people well, reaching business goals becomes much simpler. 

This is also an opportunity to revisit management systems and how they interact with one another. Does the HRIS integrate with POS, ATS, GL, and other critical platforms? This a great time to evaluate those processes.

Legal and regulatory compliance. This can easily slip through the cracks in a large organization. Adams Keegan recently brought on a large franchise restaurant operator with over 100 locations, that was on the verge of operational shutdowns in multiple states due to a lack of regulatory oversight. They transitioned to Adams Keegan for HR and payroll service in the midst of an acquisition, and resolved their compliance problems at the same time. 

Long-term operational efficiency. Transforming the internal HR support structure provides a massive, yet often neglected, opportunity to create value during the M&A process. Right-sizing the internal HR function to operate at maximum efficiency in can lead to hundreds of thousands of dollars in annual savings, while improving service to employees with the right partner.

Adams Keegan understands the dynamics and demands of busy companies in service industries. We know the importance of moving quickly when acquisition opportunities present themselves, and the opportunity cost of mistakes or insufficient speed to merge. M&A can propel a business forward or slow it to a crawl. We work with our clients to ensure that M&A becomes a competitive advantage and can create value for smart organizations.