A new report from RGP suggests that many mergers and acquisitions underperform because companies prioritize financial integration over the "human systems" that determine a deal's long-term success.

Why it matters: The research points to a significant disconnect in how M&A deals are structured and executed. In an economy where acquisitions are increasingly driven by the need to acquire talent and innovation, overlooking cultural integration and employee retention can erode the very value a company sought to purchase.

Driving the news: The report, titled "The Human Value Gap in M&A," argues that traditional M&A playbooks are outdated. It introduces the concept of a "Human Value Gap"—the space between recognizing the importance of people in a deal and the lack of a structured approach to manage it.

  • "For decades, M&A has been managed as a financial exercise, and the human capital aspects of M&A have been deprioritized," said Daniel Boyer, RGP's Head of M&A.
  • "What this research validates is that deal value is rarely lost in the spreadsheet; it's lost in the organization," Boyer added.

Zoom in: The findings suggest that while financial engineering gets a deal started, successful integration depends on effectively managing people and culture.

  • The report identifies leadership alignment, talent retention, and cultural integration as the primary drivers of sustained performance post-acquisition.
  • It notes that familiar challenges like overestimated synergies, cultural misalignment, and integration fatigue continue to plague deals.

Between the lines: The timeline for realizing value from different aspects of a deal can vary dramatically, creating a potential trap for leadership focused on short-term financial metrics.

  • "While financial and operational synergies are often captured within 18–36 months, true value realization... depends on cultural alignment, which may take 5–7 years to fully embed," said a CHRO from a multinational pharmaceutical company who was interviewed for the report.
  • The CHRO added that metrics like employee engagement, leadership retention, and trust in new leadership are better leading indicators of long-term success than financial reports alone.

By the numbers: The report's conclusions are based on a survey of 120 CFOs and in-depth interviews with 15 CHROs from companies with over $500 million in annual revenue.

  • Respondents came from industries including Technology, Consumer Products, Financial Services, Private Equity, and Healthcare.
  • The majority of executives surveyed (83%) were based in the United States.

See the full The Human Value Gap in M&A report here:

SOURCE: RGP

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