THE M&A TOOLKIT: PEOPLE STRATEGY FOR BUSINESS SUCCESS

Keeley Mooneyhan, SPHR Managing Director

HR Matters, Inc. NHRMA Conference 2012

2

85% of Failed Acquisitions are Attributable to HR Issues.

• Leadership Engagement 1

•M&A Process and Key Terms 2

• Connecting the dots: Business to People Strategy 3

Today’s Learning Objectives

Leader Engagement

HR Leadership

and Engagement

Leadership Rhythm

Biz

Str

ate

gy

SWOT

Co

re H

R

M&A Milestones/Deal Flow

Strategy Identified

M&A Process

Negotiations

Letter of Intent

Confirmatory Due Diligence

Definitive Agreement

Sign/Close

Integration

What is Strategy?

"Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations".* * Johnson and Scholes (Exploring Corporate Strategy)

Outcomes of Setting Deal Strategy

Define how the organization will create value

Confirm areas of focus and strategic direction

Identify any gaps in resources (skills, knowledge, assets, budget, partners, etc.)

Understand the values and expectations of key stakeholders

HR Strategy: Key Strategy Steps

Define Objectives: What do we want to achieve

Define Strategy: How do we meet our objectives?

Tactics: What will we do?

Plan: What are our priorities, when, and who will do it?

Implementation: What is the Execution plan?

Structure

Definitive Agreement

Let’s Make a Deal

Letter of Intent

Target Company

Structure of M&A Transactions

Stock Purchase

Asset Sale

Joint Venture

TARGET

ASSETS

TARGET TARGET PARTNER JV

Letter of Intent (LOI)

• Initial Agreements

• Covenants

• Conduct of Business

• Non-disclosure Agreement

• Regulatory Requirements (Public or Private Company)

• Expiration/Non-binding Provisions

Confirmatory Due Diligence

• Intellectual Property

• Physical Assets

• Revenue History

• Third-party Relationships

• People

• On-balance sheet and off-balance sheet assets/liabilities

Definitive Agreement (DA) • Asset or Stock Purchase Agreement

(APA or SPA)

• Final financial, tax, and legal details

• Consideration

– Escrow

– Holdback

– Earn-out

– Carve-out

• Closing Conditions

• Representation and Warranty (Reps & Warranties)

• Indemnification

• Seller’s and Founder’s Non Complete

• Disclosure Schedule

• Transition Services Agreement (TSA)

• Employee Terms

– Key and Named Employees

– Stock/Equity Treatment

– Change In Control and Double Trigger

– Section 280G

– Non Solicits

– Non Compete

– Successor Liabilities

– International Considerations

Integration

SWOT Analysis

Greatest Strengths of Business and HR

Weaknesses of Business and HR

Where’s the Opportunity?

External Threats

Summary: HR M&A Toolkit Leader Engagement: Strategic Direction & HR Alignment • Work with Leadership team to define the business strategy including the product roadmap, desired

end state, guiding principles, and rules of engagement. • Define the people strategy to support the business objectives. Define what they can do/not do now. • Develop a coaching relationship, providing advice and guidance as business imperatives change or

accelerate.

HR Strategy to Support Business • Define corresponding people strategy for the business objectives • Document Value Drivers for each business and any acquisition objectives from a people perspective • Outline required resources to support the strategy

Organizational Details, Walking Deck • Capture the business strategy and corresponding people strategy • Document Value Drivers for each business and any acquisition objectives • Define which functions will be required to participate in a potential deal, who will lead each function

and whether or not the effort will require additional resources • Capture key learnings, historical data, and document plans of record

M&A Terminology • Familiarize team and leaders with terms that may have an impact on the people strategy. • Define additional terms for your organization

The Initial Plan and SWOT Analysis • Know the organization: identify organization strengths, weaknesses, opportunities, and threats. • Build a SWOT for every scenario when applying strategic goals and value drivers to any acquisition or

business change situation to determine a potential plan to mitigate risks and preserve value. • Build out plans to include due diligence, current plans or record, and potential HR work streams,

milestones, budgets and assumptions to get to the end state.

DISCUSSION

© 2012 HR Matters, Inc.. All rights reserved. The information herein is for informational purposes only and represents the current view of HR Matters as of the date of this

presentation. Because HR Matters must respond to changing market conditions, it should not be interpreted to be a commitment on the part of HR Matters, and HR Matters

cannot guarantee the accuracy of any information provided after the date of this presentation.

HR MATTERS MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Keeley Mooneyhan, SPHR Managing Director

HR Matters, Inc. Keeley@hrmatters-inc.com

415-606-6640

APPENDIX- HANDOUT

THE M&A TOOLKIT: PEOPLE STRATEGY FOR BUSINESS SUCCESS

Keeley Mooneyhan, SPHR Managing Director

HR Matters, Inc. NHRMA Conference 2012

Summary: HR M&A Toolkit Leader Engagement: Strategic Direction & HR Alignment • Work with Leadership team to define the business strategy including the product roadmap, desired

end state, guiding principles, and rules of engagement. • Define the people strategy to support the business objectives. Define what they can do/not do now. • Develop a coaching relationship, providing advice and guidance as business imperatives change or

accelerate.

HR Strategy to Support Business • Define corresponding people strategy for the business objectives • Document Value Drivers for each business and any acquisition objectives from a people perspective • Outline required resources to support the strategy

Organizational Details, Walking Deck • Capture the business strategy and corresponding people strategy • Document Value Drivers for each business and any acquisition objectives • Define which functions will be required to participate in a potential deal, who will lead each function

and whether or not the effort will require additional resources • Capture key learnings, historical data, and document plans of record

M&A Taxonomy • Familiarize team and leaders with terms that may have an impact on the people strategy. • Define additional terms for your organization

The Initial Plan and SWOT Analysis • Know the organization: identify organization strengths, weaknesses, opportunities, and threats. • Build a SWOT for every scenario when applying strategic goals and value drivers to any acquisition or

business change situation to determine a potential plan to mitigate risks and preserve value. • Build out plans to include due diligence, current plans or record, and potential HR work streams,

milestones, budgets and assumptions to get to the end state.

Leader Engagement

HR Leadership

and Engagement

Leadership Rhythm

Biz

Str

ate

gy

SWOT

Co

re H

R

HR Strategy: Key Strategy Steps

Define Objectives: What do we want to achieve

Define Strategy: How do we meet our objectives?

Tactics: What will we do?

Plan: What are our priorities, when, and who will do it?

Implementation: What is the Execution plan?

M&A Terminology List

M&A Milestones/Deal Process

Business Strategy

Negotiations

Letter of Intent

Confirmatory Due Diligence

Definitive Agreement

Deal Sign/Close

Integration

Structure

Stock

Asset

Joint Venture

Deal Terms/Legal Agreements

Letter of Intent (LOI)

Initial Agreements

Covenants

Conduct of Business

Non-disclosure Agreement

Regulatory Requirements (Public or Private Company)

Expiration/Non-binding Provisions

Definitive Agreement (DA)

Asset Purchase or Stock

Purchase Agreement (APA

or SPA)

Final financial, tax, and legal

details

Consideration

Escrow

Holdback

Earn-out

Carve-out

Retention Pool

Closing Conditions

Representation and Warranty

(Reps and Warranties)

Indemnification

Seller’s and Founder’s Non

Complete

Disclosure Schedule

Service Level Agreement

(SLA)

Transition Services

Agreement (TSA)

Employee Terms

Key and Named

Employees

Stock/Equity

Treatment

Change In Control

and Double Trigger

Section 280G

Non Solicits

Non Compete

Successor Liabilities

International

Considerations

Conduct SWOT Analysis

Positive

Negative

Internal

Strengths

Weaknesses

External

Opportunities

Threats

© 2012 HR Matters, Inc.. All rights reserved. The information herein is for informational purposes only and represents the current view of HR Matters as of the date of this

presentation. Because HR Matters must respond to changing market conditions, it should not be interpreted to be a commitment on the part of HR Matters, and HR Matters

cannot guarantee the accuracy of any information provided after the date of this presentation.

HR MATTERS MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

Keeley Mooneyhan, SPHR Director of M&A Practice

HR Matters, Inc. Keeley@hrmatters-inc.com

415-606-6640