Canadian HR Strategy

17 Canada's low corporate taxes could make it a m&a haven – but culture clashes can quickly spell trouble for merged firms By Sabrina Nanji w ould you like fries with that?" e familiar question oen heard at fast food joints could soon be asked during your morning coffee run if the hotly debated deal between Canadian coffee icon Tim Hortons and U.S.- based Burger King comes to fruition. In late August, both companies an- nounced a $12-billion merger (led by private equity firm 3G Capital in Bra- zil) that was approved unanimously across both boards of direc- tors, but has yet to be approved by its shareholders. At the end of October, the deal was approved by the Competition Bureau. ough both companies have said they would operate inde- pendently of one another (you likely won't be able to order a Whopper with your Double Double), Burger King and Tim Hortons would both be owned by an Ontario-based parent company — whilst maintaining headquarters in Miami and Oakville, Ont., respectively. Should the two marry, they would form the world's third-largest fast food company. News of the forthcoming union spawned a ripple ef- fect, and could set a precedent for other U.S. companies (which face one of the highest corporate tax rate sys- tems around) to look to Canada's friendly tax climate for growth and development opportunities. But most research points to a low success rate for mergers and acquisitions. e rate for cross-border and international mergers is just as bleak, with cul- ture clashes and operational streamlining cited as the most minatory hurdles. So how can a company beat the odds? hr critical in mergers HR plays a vital role in ensuring a smooth transition — a focus too oen brushed aside by businesses, according to Martine Sohier, a mergers and acquisitions expert at Toronto-based HR consulting firm Towers Watson. "Culture, in a way, is something to be addressed early on and it affects everything an organization does, so you need to understand your own culture first and you need to understand the culture differences of the company that you are acquiring in order for a job to be successful." And for this — the earlier, the better. Big or small, when a merger is announced, it is not uncommon for employees to check out, for fear of the unknown. "You have an increase in lack of engagement aer a deal is announced — there are a lot of uncertainties, people just don't know," she said. Both internal and external productivity (think customer en- gagement) could hit a snag when two companies join, and there could be a culture clash if the inner workings do not match up. "You want to look at those differences and be mindful of how you integrate and to which extent you want to have alignment, ultimately, in what you're aer so that you can work on your lead- ership and bring the two together, to ensure there is a common vision that is clearly communicated to all employees," she said. As such, structuring personnel, whether they sit on the board of directors or in the trenches, can help manage expectations, mit- igate potential for friction and dispel an us-versus-them culture. internal communications It can take years before employees feel as though they are part of one unit, said Christian Gauthier, a partner specializing in merg- ers and acquisitions at Bennett Jones law firm in Toronto. erefore, it is essential that all employees know about a merger at least at the same time as the rest of the world. Internal communications should put a positive spin on any mergers and should focus on reassuring staffers not to worry or panic, lest a mass exodus ensue. "Management gets paid enough to live with the uncertainty. It's really just to your core people that are operating your business that that matters," Gauthier said. For the higher-ups, egos and emotional attachment can quickly become a powder keg. For instance, bigger companies typically have professional managers on their executive teams, who have not built the busi- ness so much as they have been running it, whereas to smaller entrepreneurs, the firm is their baby and one they have grown from infancy. In the latter scenario, emotional attachment and succession play their parts. "You can't really predict emotional behaviour because, profes- sionals, they just want to maximize the value for their sharehold- ers, and there are not those other layers of consideration, about ego and emotional attachment to the business," Gauthier said. In the case of Burger King and Tim Hortons, the companies have already structured their executive regime — Burger King's current chief executive, Daniel Schwartz, will helm the new PHoto: CHRIS HeLGRen (ReUteRS)

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