Cultural Collateral: Why People Are Important For A Successful M&A Transaction
Global merger and acquisition volumes have been rebounding throughout 2024 with total deal counts rising 6% and transaction values up 23% through the first three quarters of the year, and projections for this year are even stronger. However, if the latest statistics on employee attrition following a major transaction are correct, roughly half (47%) of the employees of those acquired companies will be gone before the end of the year. Over the next three years, 75% of employees will have left.
Often, this is something in M&A that does not get discussed in conversations about operational synergies or strategic assets. The fact is the financial aspects of the deal are only part of the equation. While those metrics tend to get the lion’s share of attention when acquisitions are announced, culture and talent are the real X factors that determine how successfully two companies will work together once the deal has closed.
Alas, these people-centered variables are quite a bit harder to quantify, so many acquisition teams often fail to give them enough attention. However, for those who want to extract maximum value from the transaction — and avoid a costly revolving door of talent — the only solution is to give culture and talent compatibility an equal weight to financials when it comes to determining the success of a deal.
Refining the art and science of evaluating cultural compatibility — and convincing finance and deal teams that it needs to be front and center in any decision we make — has been my mission, and a key part of our acquisition playbook. From January 2023 to today, my company, Thomson Reuters, has made a series of acquisitions totaling $2.83 billion.
In my case, these acquisitions are part of my company’s strategic transformation from a holding company that owned a controlling interest in several different subsidiaries to an operating company with a more synchronized product portfolio and streamlined infrastructure.
What that meant was the company was no stranger to acquisitions, but the idea of fully integrating these acquisitions into a single, unified corporate structure — where shared purpose and strong culture are essential — was a new concept.
Here are a few things I learned along the way.
Develop key metrics to measure cultural collateral
For a concept like culture to really connect with finance teams and other business decision-makers, it needs to be quantified. In our case, that meant taking an inventory of how valuable acquired talent was to our business goals.
We found that approximately 13% of our overall workforce was made up of talent acquired through acquisitions; many of them senior leaders responsible for driving key businesses. Using that number as a baseline, we were able to help illustrate the business value of employee retention.
Find the ‘why’ behind company leadership
All acquisitions start with great products. But it’s often the details behind those products that shed light on a company’s culture.
By asking founders and senior leaders why they build their products, how they developed them and what kinds of challenges they’ve faced along the way, we learn an enormous amount about how these businesses tick and whether their purpose and values will align with ours.
This level of insight also helps the acquiring company learn from the incoming talent and best practices established at the acquired company. Ultimately, this deeper understanding of the underlying motivation behind individual products and solutions helps acquisitive companies build best-of-breed practices that evolve and grow over time.
Don’t ignore the elephant in the room
It’s important to evaluate culture before greenlighting a deal, but once the deal is announced, it is equally important to be sensitive to the existing culture of the acquired company and openly acknowledge the very real, and often very personal, concerns employees will have. At the end of the day, when the company you work for is acquired, the first question any of us will ask is: How will this affect me?
It is essential to address those questions out of the gate with open, transparent communications that provide real answers and opportunities for continual follow-up.
Plan, communicate, repeat
No one likes surprises — particularly when those surprises involve changes to a career they’ve spent their lives building. It is important for leaders of acquiring companies to clearly chart out their plans for each step of the integration process and beyond, communicate those plans to all employees, and listen and respond to their feedback along the way.
Predictability, credibility and accessibility are the keys to making talent feel secure, and that is essential when trying to build a long-term talent retention strategy.
Ultimately, when you think about M&A, it should be a no-brainer that culture is a key part of the equation. People are the fuel who make that growth possible and if you want an acquired company to continue being successful under new ownership, the people are essential.
Jason Williams, the chief talent officer for Thomson Reuters, is a commercially minded HR executive with a proven history of leading transformational change at high-growth companies. Williams has senior leadership experience across HR business partner functions and has demonstrated success partnering with boards of directors and institutional shareholders on human capital strategy and related topics.
Illustration: Dom Guzman
