Humans play a vital role in transforming organisations. Shifting demographics and changing social expectations from today’s workers are reshaping the corporate landscape. To attract, engage and retain employees, companies are introducing innovative employment policies and work practices. Organisations, too, are demanding their people work in new ways to leverage artificial intelligence (AI) and other automation technologies.
All of this is introducing new dynamics for dealmakers. As the rate and pace of transformations differ across geographies, within industries and between companies, investors will need to broaden their scope of due diligence to human resources.
The human side of due diligence builds on the KPMG Diligence+ proposition that calls for a broader assessment of a company’s people-related liabilities and risks as well as the drivers that can unlock future value creation opportunities. By considering the human elements at play, dealmakers can capture a more complete picture of a deal’s value as well as its future viability.
The human side of due diligence
Assessing a deal’s people-related risks and opportunities
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How can assessing the human side of a company inform deal decisions?
There are three phases of human resources, that when analysed during the due diligence process, can help dealmakers mitigate risk, identify opportunities and maximise long-term value across the deal lifecycle.
Risk
Change in control triggers, distributions and other post-close requirements for key management and the broad-based employee population. This includes assessing any transaction-related payments that may be material to the deal that could impact value or create an attrition risk of key leaders and talent.
Opportunity
The ability to understand the current market and existing organisational structure provides perspectives on the ability to attract and retain talent. This includes market benchmarks in terms of compensation and employee value proposition. It also requires the buyer to consider how strategies that will have employees saying, “Even without this deal I’d have chosen to work for this organisation.”
Value
Analyse workforce strategies that may impact deal valuations. These could include headcount growth, talent movement, compensation and benefits packages, equity-based and variable pay that drives retention, and longer-term HR operation structures that may create synergy opportunities, such as migrating systems or benefits providers.
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Dale Treloggen
Partner, Head of Transaction Services
KPMG in Denmark
Lauren Morrissey
Partner, Transaction Services
KPMG in Denmark