The importance of managing people-related risks to drive deal value

Overview

• People at the heart of deals success | Unlocking deal value: Why people strategy must be core in any transaction.
• Pre-deal due diligence | Before the deal closes, know your people risks that affect deal value and business continuity.
• Pre-deal negotiation | Don’t negotiate in a vacuum – Bring people strategy to the negotiation table.
• Post-deal – integrate and take control | You signed the deal. Now focus on keeping your team engaged and retained.
• Post-deal – transform and grow | The deal is closed. Integration stabilised. Now it’s time to transform and grow.

In the race to close deals, it’s easy to overlook the biggest risk – and opportunity: People

When companies undergo mergers, acquisitions, carve-outs, or restructurings they are engaging in much more than simply blending assets. These transformational events involve critical HR areas such as integrating leadership, alignment of reward systems, decision-making cultures, and organisational ways of working. If these elements clash – or are mishandled – the long-term success and profitability of the deal are at significant risk.

Research by PwC shows:

• Early HR involvement makes deals up to twice as likely to succeed
• 70% of deals without a clear synergy plan at signing lost significant value relative to the purchase price, and nearly 80% of buyers whose deal lost value didn’t have an integration plan in place
• Companies that manage culture actively are 70% more likely to achieve synergies, 65% of acquirers say cultural issues hampered deal value creation
• 82% of companies that reported significant value loss after their latest acquisition also lost 10% of key employees following the deal
• Retaining key employees after transactions has become more challenging with the success rate dropping from 56% to 41% in recent years
• Targeted talent retention scoping and planning can reduce critical staff turnover by up to 60% post-close

Key takeaway: People strategy is part of an ecosystem – it is an integral part of pursuing deal value. Over the next four sections, we will discuss how PwC’s People in Deals Practice provides support throughout the deal lifecycle, helping acquisitive corporations and Private Equity clients to mitigate risks and drive positive deal outcomes.

You wouldn't bake a cake without ensuring you have all the right ingredients – so why approach a transaction without assessing the people-related risks and understanding how they might affect business continuity and the value of the deal? Because missing just one ingredient could change everything. In M&A, early HR due diligence can be a game-changer. PwC research shows that early HR involvement makes deals up to twice as likely to succeed. HR due diligence is more than checking headcount. It’s about exposing hidden liabilities, understanding leadership risks, and identifying cost and synergy levers. 70% of deals that lost value had no synergy plan at signing – often due to a lack of early integration and people strategy.

Here's how we help you identify and mitigate people-related risks:

• Quantify people impact on deal price and deal success: We determine adjustments related to the Quality of Earnings (Income Statement) and Quality of Assets (Balance Sheet) that affect the transaction's financial proposition.
• Identify HR considerations that affect transaction value: Our team identifies critical HR aspects - like pension obligations, pay equity assessments, leadership alignment, and operational HR processes and systems - early in the transaction. This ensures they are properly addressed in transaction documentation, providing necessary protection and preventing potential losses in deal value.
• Insights into organisational culture, challenges, and opportunities: We offer early insights into workplace culture and other HR challenges and opportunities commonly seen that impact the realisation of a transaction value.

Why it matters: Our insights ensure that no surprises appear post-signing and you reflect in your bid the people risks (and cost) appropriately. Deals built on unidentified people assumptions don’t just disappoint – they diminish the deal value in the short and long term. When you understand people risks, you understand deal risks.

Before you agree to the terms, do you know what you’re signing your people up for?

The pre-deal negotiation phase is where deal terms are cemented – and where critical people risks are either managed or embedded into a transaction. Leadership alignment, employee protections, operational people decisions between sign and close, and future cultural direction are being shaped at the same time as legal and financial terms are being finalised. And here’s the catch: Those people factors often drive whether the deal succeeds or fails. PwC research shows that nearly 80% of buyers whose deal lost value didn’t have an integration plan in place at signing, and that companies that manage culture actively are 70% more likely to achieve synergies. In addition, 65% of acquirers say cultural issues hampered deal value creation.

Here's how we help you protect and create deal value before signing:

• Transaction documentation: We help to build a framework and strategy around key HR terms, review and comment on HR terms in the Sales and Purchase Agreement (SPA), helping you understand and mitigate liabilities tied to long-term employee benefits, treatment of any equity compensation plans, employment protections and recruitment approach, and transition services agreements (TSA), such as temporary support services provided by a seller to a buyer during the period after the transaction.
• HR planning and integration roadmap: We identify the critical HR decisions required for the deal type – whether mergers, acquisitions, carve-outs, integrations, sales, IPOs, or JVs. Using HR due diligence as a foundation, we develop a detailed HR project plan across all functional and cross-functional areas. At the same time, we begin shaping the HR integration roadmap, providing a clear line of sight from signing to Day 1 and beyond.
• Communication, culture, and change management: We help define the future leadership team and organisation structure, assess culture fit, and change impacts. We craft targeted communications and engagement strategies – to align internal and external stakeholders and keep employees connected to the deal vision.
• Financial alignment: We help tie financial implications back to the investment model developed in due diligence and manage the budget.

The bottom line: We make sure you’ve got the right people, focused on the right priorities, supported by the right terms, and aligned around a shared vision. That’s how people strategy creates deal certainty.

Signing the deal might be straightforward, but keeping the talent engaged and committed post-close? And if Day 1 arrives and employees still don’t know what’s changing – what message does that send about your transaction?

Closing a deal is a critical milestone, but not the finish line – and for your people, it’s an emotional one. It’s when uncertainty peaks, leadership credibility is tested, and the window to build trust is short – especially when navigating unions, legal jurisdictions, and rapidly changing environments. And PwC’s research data is clear: 82% of companies that lost deal value also lost over 10% of employees post-close, and companies with no clear employee retention plan during signing saw retention success drop from 56% to 41% in recent years.

Here’s how we help you enable a smooth Day 1:

• Talent retention and selection: By implementing targeted policies and retention programmes, you secure critical talent and ensure you have the right people in the right roles from Day 1.
• HR organisation and services: We activate the interim HR operating model and service delivery – covering processes, systems/technology, payroll, and policies harmonisation – so HR remains proactive driving the change management after deal signing. Having the core HR data harmonised and available for all downstream systems and processes is key for many other core business operations and for the overall deal success.
• Total rewards: We align Day 1 reward policies, identify gaps, and implement interim solutions to ensure employees feel supported and recognised – minimising attrition and uncertainty.
• Employee transfers: We manage workforce onboarding, communications, and legal aspects of employee transitions across borders and business units – navigating local laws, unions, and work councils to maintain compliance and stability.
• People cost optimisation: We help optimise people costs by refining organisational structures, implementing strategic resource planning for flexibility, and enhancing employee engagement, revealing opportunities for cost reduction and management by optimising people-related spend - often cited as a key source of value during deals.
• Change management: We assist in developing and implementing comprehensive change management plans, adjusted to different stakeholder groups and levels of change, that ensure a smooth transition by addressing employee concerns, fostering open communication, and promoting acceptance of new processes and structures.
• Culture alignment: We assess and help to harmonise organisational cultures post-signing, facilitating workshops and initiatives that help to understand current cultural gaps, align values, and create a cohesive company identity to drive future success and deal value.    

Why it matters: Employees don’t wait until the integration is complete to make decisions – they act based on what they see and feel on and before Day 1. Drive the messaging to the affected people and create excitement, engagement, and commitment for the transformed business. Get that moment right, and you protect your talent, your momentum, and your deal value.

Now that the dust has settled, and the business is one – how will you make your people strategy your transform and growth engine?

Once the initial integration work is complete, the real opportunity lies in transformation and growth. It’s the point where people strategy shifts from preserving value to unlocking it – through strong leadership, the right skills, and aligned reward and performance models. Research by PwC shows that talent retention planning can reduce post-close turnover by up to 60%. Savvy dealmakers identify key employees and ensure they are incentivised through equity-based, cash-retention payments and non-financial retention incentives to remain, recognising that effective talent management is essential for post-integration success. High-performing deals are those that embed leadership and culture alignment and reward people in ways that reflect the new business reality.

Here's how we help you enhance deal value post-closing:

• Workforce strategy: We assist you in optimising your workforce strategy by tailoring its shape, size, and profile to align with strategic goals, accelerating the pace of value creation through effective leadership with a value-creation mindset, and advancing diversity and inclusion initiatives. The support for your cultural alignment needs to start with your top leadership, who are incentivised for the right behaviours.
• Talent management: We help you develop a talent strategy designed to future-proof skills and critical capabilities post-integration – emphasising a fit-for-purpose leadership team, implementing approaches to succession planning, training and development, upskilling, and ensuring key employees are engaged and motivated.
• Reward and performance optimisation: We adapt performance management frameworks to reflect the priorities of the combined organisation – ensuring goals, metrics, and incentives are aligned to drive growth and deliver on the deal thesis.

The bottom line: Deals aren’t just about what you buy – they’re about what you build. With the right talent and reward foundations, transformation and growth become more than a plan – it becomes performance. Our goal? Help clients not just close the deal but grow from it.