Challenge

When the corporate telephony company Avaya was formed just over five years ago, 95% of its people were based in the US, with the remainder in the Pacific and Europe.

The company embarked on a strategy of external growth, beginning with a number of acquisitions in the US. Subsequently, further acquisitions were made in Europe to meet a corporate goal of growing Avaya’s European business to 30% of its activities.

The objective: to become number one in its business segment, competing with Siemens and Alcatel in the European region. A major step towards achieving this goal was the purchase of the German company, Tenovis, a leading European provider of enterprise communications systems and services, in a $1 billion deal involving more than 5,000 people worldwide.

In the US, Avaya’s HR people had struggled to be included in the deal team and the process of post-acquisition HR integration has been painful. Learning from this experience, they made sure that, this time, they were involved right from the pre-due diligence stage and that they received the necessary support to respond to business needs. For them, the pressure was now on to make a significant contribution to the smooth completion of the deal.

Solution

Getting the right transaction price

As pre-due diligence work was starting in London. Avaya’s HR leaders asked Hewitt to help. Despite only having access to limited information, our team managed to identify some issues with pension liabilities equivalent to up to 35% of the total deal price. We alerted HR and helped them to define the problem and take the message to the deal team. With our support, HR had the confidence to tie this information in to the financial model for the deal swiftly and discuss the technical issues essential to overcoming the problem.

Hewitt then worked in partnership with the HR team to resolve the issue during an extensive due diligence exercise. At the same time we were able to use the data to start considering post-merger integration issues that the company would face so that they could discuss their implications with the seller.

Avaya’s Chief Financial Officer asked the HR team, assisted by Hewitt, to present its findings. Hewitt helped produce a report for this purpose.

Accelerating transition while maintaining people performance

We then advised on post-merger integration, offering support on a number of areas from compensation and benefits integration to workforce restructuring, communication and cultural integration.

It was recognised at an early stage that Avaya needed to co-ordinate its communications approach. This was particularly important as Tenovis, which was previously owned by Bosch, had a very high profile in Germany and the bid was surrounded with a great deal of press speculation.

Hewitt was asked to work with the company’s two communications teams to create a consistent message, establishing a legally compliant process for communicating both internally and externally, to employees, works councils and the media, across nine different countries. This is a clear example of how we supported HR to maintain the people performance that underpins business results.

Transformation of the business and people models

We continued to work with Avaya for about a year, offering HR support across all nine countries, from corporate support to local delivery. Hewitt also helped HR to define, map and deliver the best support to the organisation throughout its transformation from a US-based company to a global business. In this way, Hewitt was able to support Avaya on its way towards achieving that transformation into a truly global business.

Results

A few days after the HR team, with Hewitt’s support, made its presentation to the Chief Financial Officer, Avaya decided to go ahead with the acquisition.

Hewitt’s project team members stayed close to the key stakeholders throughout the transaction, using its comprehensive range of HR skills to help them to position and manage the different issues and solutions on a daily basis.

Hewitt was able to bring value to this transaction in three key areas: helping Avaya to get the right transaction price, accelerating transition while maintaining people performance and ensuring Avaya achieved the expected deal synergies during the transformation phase.

This close partnership helped Avaya to ensure that the acquisition was handled strategically, from communication to alignment of the new company structure with corporate strategy.

Avaya

A world leader in secure and reliable Internet Protocol (IP) telephony systems and communications software applications and services, Avaya Inc. designs, builds and manages communications networks for more than 1 million businesses across the globe, including over 90% of the FORTUNE 500®. The company has about 60,000 employees worldwide.