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Private equity companies and family offices are facing similar problems as big and middle-sized ones: whether taking over or investing in a company, they both need the best and most suitable people in the driving seats. However, far too often the personal capabilities of specialists and executives are neglected during acquisitions and equity holdings. Or as a senior private equity professional put it in a joint study between Mercuri Urval and UCL : We spend too little time on people issues compared to the amount of time we spend on numbers."
More than fifty years ago, Håkan Eriksson founded Mercuri Urval. The Ph.D in Psychology not only strived for new insights into the behaviour of people as a theorist, but also applied his in-depth knowledge as a successful consultant and sales coach to sales organisations. Why did some sales people respond so well to sales training, boosting their results, whereas others did not benefit at all? His answer was to select people for certain training measures based on their personal abilities and potential, rather than indiscriminately provide them with trainings. The result was immediate. This science based approach to matching business outcomes with personal capabilities was also applied to selection and development assessments in all types of organisations and functions, and it is the guideline for the work of Mercuri Urval up until today. In essence, there are two requirements for this approach to work in practice:
As professional investors, most private equity companies aim at increasing a company's value within a clear investment horizon in order to exit the investment with a profit. Because they already think of the exit while acquiring a firm, private equity companies follow a different approach for search and selection of possible target companies than industrial enterprises. The post-deal strategy is also quite different: While industrial enterprises align the degree of integration with their business goals, private equity companies focus as new owners on the cooperation between their own management team, the managers sent into the acquired company and the existing executive team. Depending on the degree of participation, a replacement of the executive team is often necessary.
As Mercuri Urval consultants, we accompany human resources measures that follow Mergers & Acquisitions on a regular basis. Last year, the volume of such transactions exceeded globally more than 3,5 trillion US-dollars . According to a study of UCL, carried out in cooperation with Mercuri Urval, up to 75 percent of all Mergers & Acquisitions do not achieve the expectations of their investors. Our experience with the supervision of transactions conforms with results of the common research work „Managing Private Equity Buyouts – Cracking the Human Element". The failure of M&As is not provoked by financial or legal quarrels but rather by the so-called soft factors. These intangible assets include the specialists and executive staff.
When looking at our most successful clients and what we do together to secure their investment through a more people-centric approach, four areas materialise as most critical for success:
In a time of rapid technological change that is increasingly affected by political and economic insecurity, it is a major challenge to invest successfully. Private equity companies struggle more than ever to secure their investments. The main source for entrepreneurial prosperity is and remains the human being with its capacity for innovation, creativity and leadership in order to inspire teams and staff members to their best efforts. Securing the investment is in the end of the day a matter of putting the right people capabilities in play. No strategy will ever work without people. That is exactly the reason why the slogan of the authors is: "Connecting people to strategy!"
Dominic Pfau | Partner & Director (Team Leader)
Mobile: +49 172 67 26 093 | Office: +40 85 17 16 15
Dennis Tanke | Senior Consultant
Mobile: +49 170 97 40 364 | Office: +40 85 17 160
 University College London
 Reseacrh Gate. Private Equity Buyouts. 2012
 Statista Volumen der weltweiten M&A Deals von 1985 bis 2018 (in Milliarden US-Dollar). 2019