One of the changing dimensions of executing M&A is the engagement with human capital, including how the acquired teams are onboarded, how strategic and operational challenges are balanced, and how the acquired teams, jointly with the acquirer staff, ultimately deliver the intended deal value.
In 2021, Mercer released a research report entitled "Delivering the Deal: The Unrealized Potential of People in Deal Value Creation". One of the core findings was that human capital has a tremendous impact on the ultimate success or failure of delivering the value envisioned from a given acquisition. Since that time, a similar message has been expressed in subsequent research projects as well as by deal professionals in conferences and other discussions.
At the end of 2024, the Transaction Advisor Institute and Mercer’s M&A Advisory Services Business initiated a research series similarly focused on the connection of deal strategy/deal value delivery and human capital strategy. This research was designed to explore practices in three areas:
This paper focuses on the first of these three areas: strategic consideration.
Based on the nearly 1,200 transactions the Mercer’s M&A Advisory Services Business supports worldwide each year, Mercer has developed a clear view of the leading practices supporting proper strategic consideration of the human capital elements throughout the deal lifecycle.
Those key perspectives are:
When it comes to performance, leading companies assess human capital risks during targeting and diligence to identify key value areas, then focus on intentional planning to ensure business continuity on Day One mitigating performance disruption and, finally, they accelerate value creation over the medium to long term as they integrate and optimize organizational structure and leadership, talent, culture, rewards, and HR service delivery.
Mercer’s prior research shows that very few organizations adhere to these practices when executing acquisitions. Many corporate M&A professionals have shared war stories of transactions where the human capital considerations were not appropriately managed. The impact is compounded by this research’s finding that there is a profound disconnect between business leaders saying that the people elements are one of the top obstacles to deal value creation versus what actions those leaders take to strategically consider the people elements throughout the deal lifecycle when executing deals.
This research was undertaken to delve more deeply into these topics and explore the following:
Interviews were conducted with senior corporate development and HR leadership at serial acquirers and with human capital experts.
Mercer’s experience has shown that human capital elements - specifically leadership, organizational structure, talent, total rewards, culture & change, and HR delivery - can have a significant impact on overall value creation and, more specifically, intended synergy realization.
Most organizations have a clear view of the cost synergies expected from workforce and system overlap and frequently include those assumptions in both the deal thesis document and the financial model. However, more and more deals require the positive impact of human capital on maintaining revenue delivery, expanding it, and avoiding its erosion.
Core deal theses often now include revenue growth considerations (e.g., cross-selling new product portfolio) that must be enabled through human capital elements that can impact revenue synergy realization by creating new obstacles. An example is an untrained sales force or misaligned rewards and incentives, which, if done poorly, can derail synergy plans and, if done well, can accelerate revenue growth.
The following table, based on Mercer’s expertise in M&A, gives an example of what a strategic perspective on human capital vs. a poorly managed perspective can deliver during M&A.
Both the “poorly managed” and the “well done” extremes are grounded in real-life examples. Most deals are somewhere in this continuum, and acquirers continue to struggle with these topics.
Prior research has identified that considering and identifying the critical few human capital elements in acquisitions is not difficult. Still, it does need to be done with intention early in the deal process.
The research uncovered that there is a significant disconnect between how human capital elements are considered by those building deal theses vs. how acquirers generally talk about the importance of human capital in M&A.
Most corporate acquirers say both that human capital is critical to delivering value with M&A and that it’s a value creation driver (91%), yet fewer than half (46%) consider human capital attributes when targeting assets or developing deal theses. This disconnect starts pre-deal during the infancy of a deal and continues through the deal phase into post-merger integration. Regardless of how essential acquirers say human capital is to the M&A, human capital is not being considered strategically if it is not included in the strategic rationale for the deal.
Question: As deal theses are being formulated, we
Source: Survey of public and large private corporate acquirers by the Transaction Advisors Institute and Mercer (2024)
The research also uncovered that acquirers' practices differ widely within M&A-related planning and execution processes. Virtually all corporate acquirers (95%) assess human capital when deciding when to do a deal in some form or another. However, as part of that pre-deal activity, few (10%) include human capital attributes in their targeting strategy, and only some (30%) use human capital components when preparing initial deal theses. The others focus on human capital topics during or after diligence.
The vast majority of corporate acquirers (95%) consider human capital factors pre-deal, yet fewer than half (41% use them when targeting and formulating deal thesis).
Question: As targets are being considered, we assess strategic human capital criteria (like team skills, key employees, culture, retention rates, average tenure, and in-office/remote practices) during
Source: Survey of public and large private corporate acquirers by the Transaction Advisors Institute and Mercer (2024)
An assumption by the research team was that this practice would be roughly correlated by industry, with more people-focused industries (professional services, technology) thinking more about human capital and other types of industries less so - but the data did not confirm that assumption.
How a given company thinks about human capital appears to be more a function of something else (perhaps senior leadership’s background, organizational culture, past M&A experiences that didn’t go well?).
The research unearthed that there is an increased understanding that deal value is usually delivered over a period of years - and that the acquired human capital team is often critical to delivering that value.
Many corporate acquirers report they now tie human capital integration planning to the deal thesis planned outcomes. Priorities have shifted from the initial integration period to delivering the deal thesis over the appropriate timeframe.
Many corporate acquirers (73%) tie longer-term human capital integration plans to deal outcomes.
Question: During the initial integration phase, we develop a long-term (100+ days) human capital integration plan tied to deal outcomes
Source: Survey of public and large private corporate acquirers by the Transaction Advisors Institute and Mercer (2024)
Attention to culture is increasing, and synergy capture plans, timelines, and governance programs now extend far past the initial integration period. Most corporate acquirers have named owners for longer-term synergy capture milestones.
Most corporate acquirers (81%) have named owners for longer-term key synergy realization activities.
Question: Based on past M&A experience, we have learned to confirm ownership of key milestones for longer-term synergy realization activities
Source: Survey of public and large private corporate acquirers by the Transaction Advisors Institute and Mercer (2024)
The research found that more attention is being placed on the human capital-related elements in today’s acquisitions than in the past. Evidence shows that organizations spend significant time reviewing employment contracts, aligning titles and compensation programs, planning retention pools, monitoring sentiment, and tracking detailed human capital-related KPIs. But the vast majority of the hours spent during the period from diligence through to close is used on essential but tactical components relating to human capital and not the activities that lead to decreased risk of not delivering the deal thesis over the medium and longer term.
Setting priorities for this important period from the end of diligence through to signing and closing requires that acquirers balance the tactical work required during the initial onboarding and the strategic thinking required to set the stage for delivery of the intended deal value over the longer term.
The research exposed that companies can get stuck on tactical tasks at the expense of the strategic perspective on how the acquired human capital can and should be used to deliver the deal value.
Managing this balance is a critical aspect of a deal that acquirers must successfully navigate.
If not intentionally managed, avoidable issues can create headwinds to revenue creation and other intended deal synergies.
While the evidence shows the initial integration period is smoother than before, when things go wrong, events can derail the target team’s initial impression and cause all resources to focus on the tactical priorities. For example, if there is a problem executing payroll during the initial integration period or if the title and compensation mapping process comes as a surprise, longer-term synergy delivery is put at risk.
The research found that virtually all acquirers review human capital assumptions before signing, but it was not clear whether those assumptions were tactical or strategic.
Virtually all corporate acquirers (98%) review human capital assumptions pre-deal, with most reviewing during diligence (89%).
Question: We initially review human capital assumptions in the deal thesis
Source: Survey of public and large private corporate acquirers by the Transaction Advisors Institute and Mercer (2024)
In addition, most corporate acquirers assess culture in one form or another during diligence, but future research can explore if those culture elements were aligned to medium or longer-term synergy delivery by the acquired team.
Most corporate acquirers (80%) assess culture and the operating environment during due diligence, with most other during integration planning (18%).
Question: We initially conduct assessment of the culture/operating environment to understand similarities and differences between acquirer and target
Source: Survey of public and large private corporate acquirers by the Transaction Advisors Institute and Mercer (2024)
The common use of human capital integration KPIs to manage onboarding is encouraging. Still, future research will need to explore if those human capital-related KPIs are aligned to tactical onboarding activities or also include KPIs tracking longer-term revenue and cost synergies.
When organizations successfully maintain the strategic perspective and are intentional in the inclusion of the critical few human capital priorities in deal thesis creation and due diligence activities, it creates the opportunity to plan and manage the Day One people priorities before closing.
This focus also enables organizations to accelerate the strategic and operational integration of the critical human capital performance levers – organization structure, leadership, talent, total rewards, culture and change, and HR delivery.
Experience shows that it is when this level of integration is in place on Day One that companies are able to both ensure business continuity at close and accelerate value creation through cost and revenue synergy realization.
Best practice based on Mercer’s experience is to focus the diligence work (both preliminary and confirmatory) across three areas that should be closely aligned to the deal thesis:
1. Understanding of material operational and compliance risks
2. Day one operational execution priorities and risks
3. Mid-term strategic talent/workforce priorities
Maintaining this balance can decrease the risk of operational challenges derailing the strategic requirements when integration begins.
This research identified that while there have been improvements around the focus on human capital issues in acquisitions, it also clarifies that work remains around truly thinking about connecting these challenges to the deal thesis and integration strategy.
Mercer’s experience has shown that deal value is created when the human capital strategy is integrated into the deal thesis and the future business outcomes.
Acquirers generally acknowledge they have made mistakes that have impacted the outcomes of deals in the past and have taken steps to improve the human capital approaches in their M&A process.
They are trying new practices, exploring options, and tuning playbooks. Most report they have taken action to improve practices for future deals, and similarly, most corporate acquirers (91%) expect to deliver better results in the future.
The research found that the vast majority of acquirers have put significant attention into learning from past experiences that had suboptimal integration of acquired teams - and are learning to do it better in the future.
Most have codified past organization experiences to help future integration teams learn from the past and are confident they will deliver better results with human capital onboarding in future deals.
Most corporate acquirers (>90%) report their organizations have been learning and they expect to deliver improved results in the future.
Question: Thinking about how our organization learns and improves with regard to human capital during M&A, we
Source: Survey of public and large private corporate acquirers by the Transaction Advisors Institute and Mercer (2024)
What came through in the research, from both the survey data and the qualitative interviews, was that acquirers are not satisfied with how human capital has been managed in the past and want to do better.
The acquirers want to improve their ability to deliver deal value from acquired human capital.
The Institute found most corporate acquirers (77%) include human capital topics in post-mortems when learning about future improvements.
Most corporate acquirers (77%) include HR topics in their post mortems.
Question: Based on past M&A experience, we have learned to include specific HR topics in the post mortem
Source: Survey of public and large private corporate acquirers by the Transaction Advisors Institute and Mercer (2024)
The research revealed that a wide range of experiments are being funded, and new practices are being adopted. Examples include using previously acquired staff to help engage and onboard acquired staff, development of culture assessment tools to get ahead of potential challenges, attention to key employees early in the integration, including mentor/mentee relationships, named value creation/capture processes to keep the team focused on the long-term, getting into the detail earlier, and rethinking retention programs.
This research unearthed that corporate acquirers are taking active steps to improve how they can drive deal value from acquired human capital performance but that there is an opportunity to create more value.
Methodology
This report is based primarily on a survey fielded to the members of the Transaction Advisors Institute and Mercer clients active in M&A. The respondents were primarily senior corporate development and HR leadership working for public and large private corporate acquirers active in the US market, as well as other senior corporate leaders active in delivering value with M&A. Most of the companies represented have annual revenue of > $5 billion, operate in multiple regions, and are serial acquirers, often executing multiple deals per year. This project was executed using an online survey platform with a consistent survey design for all respondents. Data was fielded during Q4 2024 and results were compiled in Q1 2025. Respondent companies are active in multiple industries, including industrials, professional services, technology, software, chemicals, manufacturing, business services, and others. In addition to collecting information from senior M&A leadership, interviews were conducted with experts in the role of human capital in M&A and desk research was performed as a background for the analysis.
The following Mercer papers were used as background and foundational research for the findings in this paper:
The M&A Research Series
This paper is part of a series of M&A-related research exploring what’s new, what’s clever, what’s challenging, and how corporate M&A teams are responding.
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