Beyond cost-cutting: How strategic M&A wins with human capital 

The current competitive and uncertain M&A landscape means that success hinges on more than just financials and cost-cutting demands, putting human capital front and centre. Mercer's dedicated M&A advisers help clients unlock full deal value by navigating complexities, minimising risks and elevating the workforce's role in every step of the transaction.

We're proud to announce Mercer has earned a prestigious award, proving once again that the right expertise can make or break a deal. Presented by The Consulting Report and based on input including client recommendations, the award is

JB: M&A deals are changing. Where cost-cutting once dominated, today's environment demands a broader focus: realising both cost and revenue synergies — with human capital at the core.

Most M&A deal teams know the process to drive cost synergies: streamline operations, eliminate redundancies and consolidate vendors. These steps are familiar, relatively straightforward and have long been part of the standard playbook.

But today's deals face new pressures. With growing market uncertainty and continued high cost of capital, expectations are higher — simply cutting costs isn't enough. Delivering on the investment thesis now depends on realising revenue synergies — and in many deals, that's a complex, people-driven challenge. Success requires identifying critical human capital deal thesis alignment areas during thesis formulation, setting clear Day One business continuity needs and aligning the workforce with the overall thesis post-close.

The reality is that delivering on the promised deal transaction is hard, requiring leadership alignment around the people requirements on Day One and in post-close value creation. While business leaders more frequently acknowledge the importance of these human capital factors in deals, there is a disconnect between their words and actions once the deal process commences. This is evidenced by our recent research with transaction advisers, where we found that 91% of acquirers recognise human capital as critical to deal performance. Yet, only 46%  consider them when targeting and formulating the deal thesis. This disconnect needlessly introduces risks into successful deal execution and value achievement. 

JB: Our private equity clients have historically sought a return within four to seven years — a timeline that extends when corporate buyers are involved. In the past, clients could achieve success by pulling just one or two key levers. Today, delivering the desired return demands a comprehensive approach across multiple fronts.

This comprehensive approach includes the full spectrum of human capital. Utilising Mercer's Value Creation Process and Matrix, we bring clarity, minimise risk and maximise the chances of success by proactively aligning our human capital value levers with the deal thesis. These levers include organisational design and governance, leadership alignment, talent strategy, culture alignment, change management, and HR delivery models. We prioritise these levers at three key process milestones: due diligence, Day One and post-close. The final view of the matrix is to understand the team's capacity and capabilities to deliver the required work at each milestone.

Consider these case studies for how we have put the matrix into application:

• Financial services: A private equity client pursuing a buy-and-build strategy engaged Mercer to perform HR due diligence on a private wealth management firm with 75 employees and no formal HR function despite aggressive expansion goals. Mercer assessed workforce structure, total rewards, talent management and culture, providing pre- and post-close support to align people strategies with the deal thesis. Key outputs included immediate readout recommendations for the HR service delivery model and infrastructure, and onboarding support for the new VP of HR, helping the client build HR capabilities critical to scaling operations and driving growth.

• Chemicals: Mercer supported a multinational chemical company's divestiture of a 4,500-employee business across 30 countries in an aggressive timeline to align with a broader transformation strategy. Managing global HR due diligence, organisation design, separation planning and Day One readiness activities, Mercer enabled the client to achieve a clean break at close within an accelerated timeline. Services included organisational design, HRIS and rewards separation, labour relations support and employee communications, leading to a smooth transition, 250+ new benefit plans and a fully operational, standalone entity delivered to the buyer by year-end.

JB: While there's plenty of buzz around AI, widespread, consistent adoption in the M&A lifecycle remains limited. Our recent research with transaction advisers revealed that only 2%–5% of corporate acquirers regularly use AI to manage human capital risks or support key deal activities. However, about one in five leaders are actively exploring AI's potential.

At Mercer, we're piloting AI tools in numerous areas to help accelerate and streamline how we support clients. For example, we are in the process of launching our LenAI Deal Insights tool for application during due diligence. Still, AI in M&A is far from mainstream. While it holds promise, AI won't replace critical thinking, hands-on experience or the nuanced judgement required for complex transactions and managing the related people risks.