Mergers, Acquisitions and Payroll
Mergers and acquisitions play a major role in all corporate industry across the globe-the role is usually a very public one with lots of online analysis and scrutiny along with no shortage of criticism. M&A activity can represent a major change in direction for a company that is being acquired as well as a major cultural shift for the employees who now find themselves with a new employer.
Regardless of whether the initiative that brings two companies together is a merger or an acquisition, things will very definitely change and this can be accompanied by a lot of uncertainty for specific business units who may be unsure about what is coming down the line and what is expected of them in terms of their contribution to the newly formed entity.
In this article, we will examine how merger and acquisition activity results in a process of change for a lot of departments, but in particular we will focus on the global payroll department as it is often simply assumed that payroll will continue as normal- but there are major implications if a business initiative results in several thousand extra employees to be paid on a monthly basis.
A new order
M&A activity means the establishment of a new order and potentially, a very significant change from an employee perspective in day to day activities. People come and go, particularly at board and leadership level, products or departments get changed or dropped, investment is fast tracked or placed on hold and a lot of employee communications go out across the board as everybody does their best to adjust to the new order. Already in 2020 we have seen major M&A activity, with Amazon acquiring the self-driving vehicle company Zoox and Microsoft announcing the acquisition of Softomotive ,a UK-based provider of robotic process automation software.
In the middle of all this rapid change, global payroll professionals quickly discover that they are required to pay a large number of new employees, located in various different countries and who have different payrun elements. Needless to say, this can present a major headache and a huge amount of work needs to happen before the next pay run which depending on when the merger happens could be in a matter of weeks, or even days.
There is little to be gained from questioning the merits of the merger or acquisition activity, and there is also very little time to spend on this kind of thinking if you are located in a global payroll department. It is best to accept the change as quickly as you can and then proceed to learning everything you can about the structure of the new entity, so that you can develop an effective process map to ensure everybody gets paid, accurately and on time.
Usually, mergers and acquisitions are subject to several months or even years of project management planning, so that when the actual event takes place, the transition is as seamless and painless as possible for all stakeholders involved. This might be the ideal scenario, but the reality of modern corporate activity, is that these deals sometimes take place quicker than expected and they are followed by rushed activity to get everything in order.
It is a very rare event, that a global payroll team in the new entity is fully prepared and ready for that very first pay run that covers all the new employees as a joint entity. One of the reasons why this is so rare, is that in all the discussions that take place at a high level, it is not always the case that the global payroll manager is included right from the start. This is often a crucial misstep and process error, and it can result in significant challenges to global payroll delivery. You might think it bizarre that somebody would forget something as important as having all employees paid on time, but there is a perception of global payroll being something that simply takes care of itself, and the department is often overlooked as stakeholders and project managers have a tendency to focus on products, go to market strategies and sales strategy alignment.
The result of this, is that a very obvious and crucial part of multinational business does not get enough attention and consideration in the early part of negotiations when merger and acquisition activity is being discussed. Every person who has ever been involved in a global payroll department will advise that this is a mistake, so a key takeaway for all M&A activity is not to forget to include the global payroll manager in discussions as early as possible.
Rapid scaling and the subsequent, opportunistic merger and acquisition activity can result in a new entity being formed relatively quickly in a manner that prevents everybody being prepared for it. Sometimes market conditions dictate that a rapid decision or change in direction is required- we have seen this happen in the past, particularly during periods of economic downturn or major turbulence such as a recession. During times like these, aggressive acquisition activity or opportunistic mergers can take place as leadership teams at organisations around the globe examine their options and decisions sometimes, are made out of necessity rather than choice.
The major names of global corporate business are well known for taking advantage of market downturns to invest heavily in partnerships or take the opportunity to take over other companies who are struggling at that time. This may make business sense and represent solid ambition and clever tactics, but it usually also means that a global payroll team suddenly finds itself with anything between 300 and 3,000 new employees to pay in a very short space of time. This presents a very significant global payroll data and logistical headache to any global payroll team.
In cases like this, the global payroll team find themselves in the unfavourable position of having to adapt very quickly to an environment that contains a lot of new things -new data in new formats, new technology, systems and platforms, new vendors and ICP partners, new processes and compliance requirements along with a new management team and global payroll colleagues. It is a case of adapting fast and the first three months of the new entity are likely to be very challenging, filled with logistical obstacles and additional data complexity.
To help them navigate these challenges, it would be very helpful if conversations took place at an early stage around aligning processes and developing process maps for the joint delivery of global payroll. Ensuring global payroll professionals are equipped with the latest technology is a step in the right direction -they need to be able to access data and procedures remotely in a cloud environment, switch tasks between colleagues and quickly onboard new local payroll vendors.
Platform integrations will prove to be crucial here, as there is an opportunity to hit the ground running with global payroll if tasks are performed on a single platform that has sufficient technology to enable data standardisation and the automation of repeat tasks. Agile and flexible cloud-based environments are the future of global payroll, as are innovative tools that help them deliver consolidated reporting.
Merger and acquisition activity usually results in increased activity: more people, more data and more processes. Visibility and control can become much harder, especially if there is a lack of preparation. A single dashboard view of activity on a fully integrated technology platform will be a huge help when it comes to maintaining control and visibility over a global payroll process that now has to cater for several new countries and payroll elements.
The Payslip platform is designed to provide this control and visibility over multi country payroll. It also helps to standardise the data and processes, while its innovative technology introduces automation where possible, so repeatable and time-consuming manual inputs are removed from the process. Reporting is consolidated at a global level and digital calendars help global payroll professionals, dispersed across a range of countries keep track of everything that needs to be done.
The Payslip platform helps the new entity to connect people, process, vendors and technology in a way that empowers the payroll professionals while also helping the leaders assess the success of the merger via comprehensive reporting and data analytics.
Using Payslip, we can manage all our payrolls across nine in-country vendors on one platform. When the global Covid-19 pandemic arose, it was not an issue from a payroll perspective, and critically getting everyone paid. The Payslip platform enabled continuity for our international payroll service including the fast and seamless implementation of the Payslip Employment Self Service during this time.
Payroll Manager, LogMeIn
With business and employee growth rates of above 50%, we rely on our vendors to deliver on time, every time. Payslip’s workflow automation, enables Phorest to manage our payroll provider process – data driven, real time and transparent. Payslip saves us time so we can focus on our business growth.
International Payroll Manager, Phorest