As anyone in business knows, even the best-laid acquisition plans sometimes go awry. Consider AT&T’s $85.4 billion acquisition of Time Warner in 2018, which was undone just about three years later.
A new report from consulting firm RGP aims to quantify what makes or breaks an acquisition. Titled “The Human Value Gap in M&A,” the report is based on data from a survey of 120 finance chiefs across several industries, including health care and retail. The title is a nod to the “the disconnect between the recognized importance of people-driven value and the lack of structured approaches to manage it,” the company said in a March 31 news release.
Among the key findings, researchers learned that just under two-thirds of respondents (59%) said their M&A deals exceed expectations within two years, while 37% said such deals met expectations in that timeframe.
Four percent said their M&A deals “fell short” of expectations, according to RGP.
What’s a reasonable timeframe to measure ROI from a new acquisition? Half of respondents said two to three years, while about a third (37%) said one to two years.
“This creates an important tension in how deal success is evaluated,” RGP said of those timeline expectations. “Financial models often measure outcomes within a relatively short horizon, typically focused on early indicators such as revenue growth, cost synergies, and cash flow improvements. But many of the deeper forces that ultimately determine whether a deal succeeds or fails unfold over a much longer timeline.”
Moreover, RGP officials said, respondents’ timeline expectations for ROI on M&A deals are too short. The firm’s findings indicated that “while financial synergies may surface within 18 to 36 months, true cultural integration can take 5 to 7 years.”
This period often extends “well beyond the horizon of conventional post-merger tracking,” the report said. “This temporal mismatch creates a persistent blind spot, where early indicators of long-term failure are either missed or misattributed.”
In an email to CFO.com, Daniel Boyer, senior vice president and head of M&A at RGP, said that researchers landed on that longer integration timeline through one-on-one conversations with 15 chief human resources officers at Fortune 100 firms. The five- to seven-year timeline, he said, reflects “the time it takes to change deeply embedded mindsets, not just org charts, processes and systems.”
“You can integrate operations quickly, but integrating how people engage, process, make decisions and collaborate together, which ultimately expands deal value realization, is a much slower process,” Boyer said.
RGP’s report goes on to suggest that business leaders need to take careful stock of non-financial metrics to ensure their transactions are successful.
“Boards need to review cultural health and alignment metrics just like they review financials, retention of critical talent, engagement scores, cultural adoption milestones, and leadership team alignment,” the report stated. “This requires deliberate design of roles, structures, and communication channels that maintain the creative energy of the acquired company rather than absorb it into rigid routines too quickly.”
Boyer suggested that boards and management teams start governance of human capital “during diligence and continue well beyond the deal’s closing.”
“This is when the real value is either protected or lost,” he said.
CFOs, in particular, would do well to “engage early and often” with their counterparts in HR to get a better understanding of how to integrate talent and culture between merged organizations, Boyer noted.
He added that governance of human capital should “shift from static, financial-only updates to a balanced integration scorecard that includes both quantitative and qualitative indicators of organizational health.”
“Leading indicators—such as drops in trust, slower decisions, or reduced collaboration—are especially valuable because they surface issues before attrition rises,” Boyer said. “Ultimately, culture becomes board-manageable when it’s assessed through observable behaviors, consistent metrics over time and direct exposure to how teams actually operate.”
Still, it’s worth noting that most respondents apparently recognized the importance of cultural metrics, with 81% of surveyed CFOs saying “intangible assets such as culture, talent, and knowledge are critical to deal success,” according to RGP.
And yet, just 18% think their organizations are “effective at protecting” such metrics.
The numbers seem to bear that out, with nearly three-quarters of respondents (74%) reporting “moderate to high leadership or critical talent turnover within the first year of an acquisition,” RGP’s survey revealed.
