Talent Assessment in M&A

Deep Dive

By Jeff Black and Kristin Murphy, Mercer

This article was first published by Mercer in its People Risks in M&A Transactions Research Report.

Talent decisions often involve more complexity than other integration decisions (e.g., products, markets, customers) yet may be made with less rigor, discipline, and data. For M&A leaders to be successful, they need to “raise their game” in talent assessment.

M&A transactions trigger the need to make challenging and sometimes emotional decisions about individuals — including long-term productive employees. For example, a merger often produces redundancies: Suddenly, there are two CFOs, two customer service vice presidents, and so on. Questions swirl about who should stay, who should go, and who should be placed in a different role.

Ultimately, the acquirer must determine whether incumbents from the target (the acquired company) are the best people to achieve the new organization’s objectives.

Driving A Holistic Talent Assessment Approach

Successful buyers develop a keen understanding of the following questions early in the talent selection process:

  • What skills and competencies do our leaders/ managers need in order to deliver on the new business objectives?
  • Does the candidate have a leadership/ management history of mature decision-making that produces results and is consistent with the new organization’s risk profile?
  • Does the individual possess skills essential to the business’s longer-term success?
  • Will the individual be able to work effectively in the new company culture?
  • Does this leader/manager have a track record of successfully developing talent?
  • How long might this candidate stay with the firm and remain motivated?

The more information about existing employees an acquirer has before closing a deal, the better, because it can make decisions sooner. But for many practical reasons — including insufficient time, data, and access to personnel — it is rare for the acquirer to have a comprehensive organizational structure established when the final papers are being signed. As a result, the lion’s share of talent assessment happens after closing.

Although formal employee evaluations may not be possible in a deal’s early stages, informal strategies can also yield an initial read on people’s strengths and potential risks. These include observing behavior during management presentations, reviewing CVs provided in the data room, and taking note of employee interactions during informal operational/functional meetings conducted as part of due diligence. Being intentional and diligent in these initial evaluations can inform a more formal structured assessment once the deal is approved.

Compiling a list of an employee’s leadership skills and behavioral attributes begins to tell the story of whether an employee will fit into the go-forward organization or confound the business intentions behind the deal. The formal process of determining someone’s suitability for the new organization typically comprises the following five steps:

Thorough, focused, and rigorous evaluations of leaders and key positions ensure that the acquirer’s talent decisions are optimized to meet the current and future needs of the new organization.

Mergers and acquisitions are full of risks and opportunities. To ensure that the acquirer’s talent decisions are optimized to meet the current and future needs of the new organization, it is essential to thoroughly evaluate key and critical talent with focus, rigor and honesty, beginning as soon as possible and continuing throughout the deal phases. The consequences of getting decisions about people wrong could be the difference between winning and losing in the marketplace – something no company should risk in today’s highly competitive and volatile economic environment.


Talent assessment in M&A