How Overseeing Talent Can Protect Your M&A Deal

By Julie van Waveren


Talent Oversight Strategy Mergers & Acquisitions

One of the most positive things to come out of the pandemic period is that the employee experience and the employee agenda have become front and center as leading enablers of business resilience and business performance. This will continue to be true in the coming months with recession and further inflation on the horizon, as businesses adapt their strategies to grow and compete effectively going forward.

According to Mercer’s Global Talent Trends 2022 study, 89 percent of C-suite executives believe a loss of talent has impacted their organizations, and a further 66 percent think they’re facing a labor market shortage. Although there will be a dial-down in volume hiring in the coming months, a continuation, if not an intensification, of the search for several specific talent skill sets will exist in all organizations no matter the industry as the economy continues to turn.

This duality of talent issues is only magnified in merger and acquisition (M&A) deals as organizations are being more challenged in the balancing act of better identifying skills, retaining skills, and framing acquisition strategies around critical skills.

Skills Will Accelerate the Value or Erosion of Deals

The right leadership team, the right skill sets, and the right understanding of organizational goals are what drive deal value. Yet these issues are frequently neglected in putting a deal together. And, in many cases, they are viewed as items that will “get figured out” or be dealt with after day one.

With most M&A deals failing due to a lack of attention to the people dimension, leading companies are using data and artificial intelligence (AI) to change the game, having visibility way before closing a deal into risks and people implications that will impact business.

Here are three critical questions that boards should ask management during any M&A activity to avoid deal failure:

  1. How are we assessing skills-related impacts in the deal hypothesis? Thirty percent of human resources leaders indicated that finding or acquiring skills through deals is the most impactful way to quickly address their organizations’ current skill gaps, reinforcing their strategy to buy skills rather than build or borrow them. A good understanding of what skills a potential acquisition could bring is just as important as understanding the product portfolio or customer base. Yet, this is often neglected by business leaders. Having a process to capture a view of talent and skills is a key input to the deal thesis. Executives should be focused on understanding what the company may and may not be getting broadly in the workforce in terms of skills, have a comprehensive look at retention across the organization, and create a plan to deploy skills early on in the post-close phase.

  2. Do we have a proactive plan to address talent and skills risks early on? In pre–COVID-19 times, it was common to hear business leaders refer to the talent portion of deals as “soft.” But that mind-set changed as the reality of the global labor and skill shortage is impacting organizations’ ability to execute growth strategies successfully. Savvy and strategic leaders are aggressively looking for ways to get more talent insights across the deal phases to make more accurate, informed, and targeted workforce and talent decisions and investments. Rigor of thought and execution to accelerate people-related decisions post-close around staffing, selection, retention, building internal capabilities, and more will be a key differentiator in driving value at a faster pace and with the right level of flexibility and transformation that businesses will need to adapt to the new market environment.

  3. How effectively do we understand skills across the organization in a deal? A skills view in deals is not just a “nice-to-have,” but getting skills right in deals is challenging. However, there are ways in which leaders can exert control over considerations such as the skills needed in the workforce to deliver on the deal and growth thesis and what the workforce needs to do more or less of, or differently. Companies may wish to partner with advisors to combine expert skills-based consulting and talent intelligence platforms to link real-time intelligence with analytics to make a significant difference in M&A deals. Talent insight solutions can leverage AI to evaluate skills pre- and post-close for risks, implications, and integration matching, as well as staffing needs. Such insights empower leaders to better understand skills and provide knowledge to build execution strategies throughout the deal lifecycle.

Continued high valuations and condensed deal timeframes will require access to early insights into the skills, risks, and advantages of talent to deliver on the anticipated deal return on investment.

Effective business and growth strategies in the current environment will only be possible to achieve by de-risking the talent and skills component in deals and looking for ways to be much more targeted in identifying, retaining, and acquiring critical skills through a merger or acquisition.

Julie van Waveren
Julie van Waveren is a partner in the US M&A Advisory Services practice at Mercer.