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Navigating HR Challenges During Acquisition and Divestiture

05/02/2025

Mergers, acquisitions, and divestitures are complex business transformations that demand significant HR expertise. While financial, operational, and strategic considerations often take center stage, companies shouldn’t overlook HR’s pivotal role in ensuring a smooth transition.

Whether harmonizing HR functions across multiple entities or building new HR capabilities from the ground up, organizations face numerous challenges that require specialized knowledge and experience. This article will examine why companies should dedicate resources to HR from day one, and the common HR issues companies face during mergers. We’ll also review best practices and how a management group like PCG can solve many of these issues to save time and money.

Why Companies Need HR Expertise During M&A

Organizations undergoing acquisitions or divestitures often lack the internal HR expertise to navigate large-scale transformations. Some of the key reasons companies seek external HR support include:

  • Lack of a corporate center of excellence (COE): A divested entity may need to establish new HR functions from scratch.
  • HR system integrations: Merging disparate HR programs, policies, and technology systems can be overwhelming.
  • Data management complexities: Companies often struggle with data extraction, clean-up, and conversion when integrating HR systems.
  • International HR challenges: Global mergers introduce regulatory, cultural, and currency complexities in which many U.S. companies lack expertise.
  • Skill and capability gaps: Many organizations lack in-house expertise in change management, program governance, and stakeholder management.

 

Without a strategic HR approach, these challenges can create costly inefficiencies, disrupt operations, and delay the overall success of the transaction.

Key HR Focus Areas in Mergers and Divestitures

HR in M&A goes far beyond payroll and benefits administration. A successful transition requires expertise in multiple domains:

  • Technology & Data Management: Integrating different HR information systems, cleaning up data, and ensuring seamless conversions.
  • Recruiting & Staffing: Retaining talent and aligning talent acquisition strategies with the new organizational structure.
  • Change Management: Implementing continuous communication strategies to help employees navigate the transition.
  • Program Management & Governance: Establishing clear roles, ownership, and decision-making processes to mitigate potential issues and prevent transitional bottlenecks.
  • Compensation, Payroll & Benefits: Harmonizing compensation architecture, payroll systems, incentive programs, time tracking, and benefits administration.
  • Compliance & Global HR Considerations: Managing international regulatory requirements, employee retention, and cultural differences.

Transition Service Agreement (TSA) Exits and HR Optimization

A critical milestone in divestitures is meeting TSA exit deadlines before harmonizing HR functions. Many organizations underestimate the complexity of these transitions and find themselves scrambling to address issues they hadn’t anticipated. Successfully navigating TSA exits requires meticulous planning and execution so that all HR systems and functions are fully operational before the transition deadline.

Steps to a Successful TSA Exit:

  1. Assess Current HR Systems & Capabilities: Conduct an HR readiness assessment to identify gaps in HR technology, compliance, payroll, and benefits administration.
  2. Develop a TSA Exit Roadmap: Outline key milestones, dependencies, and deadlines to ensure a structured transition plan.
  3. Secure Data & System Access: Ensure the transitioning entity has access to critical HR data, including employee records, payroll, and compliance documents.
  4. Harmonize Payroll and Benefits Administration: Prevent disruptions in employee compensation, benefits eligibility, and tax reporting during the transition.
  5. Establish Clear Governance & Decision-Making: Define ownership, accountability, and escalation processes to manage unforeseen challenges.
  6. Communicate with Employees & Stakeholders: Provide transparent updates to employees, HR teams, and leadership to maintain engagement and minimize confusion.
  7. Perform a Post-TSA Audit: Validate that HR systems and operations are functioning efficiently and compliance requirements have been met.

Post-TSA HR Optimizations

Once HR functions are harmonized, the next step is to optimize them. Organizations should focus on:

  • Streamlining HR processes for scalability and efficiency.
  • Leveraging technology to automate and enhance HR operations.
  • Establishing governance structures to sustain long-term HR success.

 

Merging entities often results in a long road to efficient HR operations. Having the right strategy and execution team in place could mean the difference between leveraging synergies ahead of schedule and experiencing costly gridlock and TSA fines.

We Meet Companies Where They Are

No two mergers or divestitures are the same. At PCG, we recognize that HR transformations in M&A require a strategic, customized approach. Whether your organization needs help managing HR integrations, optimizing global HR functions, or navigating TSA exits, we have the experts to meet you where you are and provide the lift you need to succeed.

We offer a full suite of HR services, including:

  • HR strategy development and execution
  • HR technology and system integration
  • Data conversion and management
  • Talent acquisition and workforce planning
  • Change management and communication planning
  • Payroll and benefits harmonization
  • HR compliance and regulatory guidance
  • Organizational design and restructuring
  • HR governance and stakeholder management

 

Fill out the form below to learn more about our HR services. We’ll match you with the right experts to manage your transition.