M&A’s human-value gap

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Hold on to your wallets: A recent report raised concerns that the human aspect of mergers and acquisitions is being left by the wayside.

M&A offers opportunities to rapidly grow revenue, but in a March research report, professional services firm RGP found what it called “The Human Value Gap in M&A.”

The report was based on a survey of 120 CFOs across technology, consumer products and retail, financial services, private equity, and healthcare, most at companies with more than $500 million in annual revenue. The research also included in-depth interviews with 15 CHROs from global enterprises.

A key finding: Intangible assets like culture, talent, and knowledge were noted as critical to a deal’s success by a large majority—81%—of the CFO respondents, but only 18% said they felt their organization protected these things effectively.

The value of human capital has long been a topic of discussion among CFOs, but with the rise of AI and other rapidly advancing technologies in the last several years, firms like RGP are raising similar warnings for M&A deals: that people are just as vital to a deal as the highly quantifiable assets on a balance sheet.

The priority that’s often placed on financial integration in the deal process, RGP wrote in a release about the study, can result in an “underinvest[ment] in the human systems that ultimately determine deal success.”

If people are ignored in the M&A process, it could result in “blind spots” that contribute to “a growing disconnect between how deals are evaluated and how value is realized,” RGP added.

“Cultural integration resists compression. It operates in cycles of behavior, belief, and institutional adaptation. Our findings indicate that while financial synergies may surface within 18 to 36 months, true cultural integration can take 5 to 7 years; often extending well beyond the horizon of conventional post-merger tracking,” the report said.

Deloitte published a report last year that argued HR plays a critical role in every M&A deal, noting that “securing key talent, aligning corporate cultures, and implementing regulatory compliance frameworks early in the process is essential.”

Deloitte’s report encouraged dealmakers to think about HR “as a strategic enabler” in the process, one that moves beyond compliance and into ensuring people understand—and are aligned with—the process, and feel supported throughout it.

RGP advised that integration models span “both organizational structure and the deeper dimensions of human behavior to unlock where the true value of culture and talent lies.”