An increase in corporate merger and acquisition (M&A) activity will follow the recent economic meltdown, just as predictably as night follows day.  Since most companies can't look to the economy for growth, inevitably some will seek growth instead through acquisition. 
 
Equally predictable is that relatively few of these mergers or acquisitions will ever realize their intended financial benefit.  There is considerable agreement on the processes and procedures for conducting financial due diligence, in which a potential buyer evaluates the financial assets and liabilities of a company.  However, there is no such agreement about how to undertake due diligence on the people side of the business.  

 

Perhaps more importantly, there seems to be little awareness that "human capital due diligence" is a process that can yield significant benefits.  This void in the due diligence process may well prove to be even more problematic in the upcoming wave of M&A activity than it has been in the past.  The depleted financial balance sheets of many companies mean that their human assets take on even greater relative importance than in previous years.
 
In short, getting the people side right in mergers and acquisitions will now be more crucial than ever.  It is far too important to be left simply to instinct or chance.
 
Our advice? A "human capital audit" should be undertaken either prior to or immediately after an acquisition.  This audit should be designed to proactively identify cultural incompatibilities, spot potentially dangerous weaknesses on the people side of the business, and uncover those essential strengths that are the key drivers of business results.