The importance of good HR practice in completing a sale
Due diligence often throws up a broad range of issues that can threaten to scupper a deal. One of the biggest culprits, surprisingly, is an issue most business owners possibly wouldn’t consider to be a factor in this situation: HR.
Whilst good HR practice may not be the determining factor in a deal successfully completing, a lack of it can most certainly cause a deal to fail.
Despite its importance, HR is rarely viewed as ‘enjoyable’ and, in fact, a dislike for certain rules, processes and guidelines can often be a major factor in business owners setting up for themselves.
In any business, the most important asset is its people and, beyond that, the processes and procedures to which they all abide. Too many business owners, particularly those occupying the lower-middle market neglect HR, maybe to concentrate on the day-to-day running and growth of the company, maybe as they see it as unnecessary. One thing is for sure; those who neglect this important aspect of their business often regret doing at the point of sale.
Acquirers consider businesses with strong HR procedures as more attractive, given the reduction in potential issues and uncertainties. That said, issues relating to HR only tend to surface at the due diligence stage of a transaction, a point where all involved have expended a great deal of time, effort and money. To reach the final stages of a deal only for a HR matter to derail the process can be hugely disheartening and expensive.
For this reason, when considering a sale, it’s always a good idea for business owners to get their ‘house in order’ at an early stage. Time invested at the beginning of the sale process to tidy up HR matters will, ultimately, be to the benefit of all concerned during the final stages.