Mercer’s first annual research report on people risks in M&A transactions provides an in-depth view of the human capital issues buyers and sellers are facing in the marketplace.

Findings are based on 847 unique data points, drawn from three distinct data sets, which include survey responses from 323 M&A professionals, 78 interviews with corporate and private equity clients, and analysis of nearly 450 transactions (of which almost 60% were cross-border deals) during 2015.

In addition, this report identifies practical solutions and strategies organizations are deploying to effectively hedge these risks and drive deal value.

The report notes that worldwide M&A totaled $4.7 trillion in 2015, a 42% increase over 2014 levels.  Overall, 2015 was the strongest year for deal making on record to that time.

Among the broad trends identified by Mercer was that, more than ever, the challenge of managing talent — especially in the face of organizational transition — is what most concerns M&A professionals.  In noting this trend, the report highlights its strategic, financial and operational aspects.

The report next reviews people-related value drivers for both buyers and sellers with respect to “People Risks” in M&A transactions.

For buyers, these include: Assess leadership team and key employee capabilities; Develop effective retention strategies; Have a clear culture, communications, and change management plan; Evaluate HR service, delivery, and design needs; Enlist experienced resources to speed the transition process and make it more efficient; Adopt an enterprise or global view to effectively manage benefits; and Understand the market competitiveness of rewards, and leverage your total reward programs to attract and retain the right talent.

For sellers, these include: Identify critical employee groups and consider a retention program; Leverage experienced sell-side advisors and separation specialists (including SMO resources); Consider providing a sensible, appropriately priced (cost-plus) transition services agreement (TSA); and Document a clear talent management/ staffing plan.

Applying the above principles throughout a transaction will help organizations — whether they’re buying or selling — mitigate risk and maximize return on exit.

The report also presents an extensive overview of its research methodology and a breakdown of the firms, industries and executives studied or interviewed. 

The mean number of employees of firms surveyed was more than 18,000 people; and the mean annual revenue for firms surveyed was nearly $5 billion. 

Of deals analyzed about a quarter (26.2%) were in the Consumer Discretionary sector; and about another quarter (23.8%) were in the Industrial sector.