Economic instability is the top issue driving companies to review their M&A strategies, with technology and environmental, social and governance (ESG) issues emerging as key HR considerations, according to the results of our 2023 M&A Barometer survey.
We fielded our most recent M&A Barometer of serial acquirers spanning various industries and geographies in the spring, and 40 companies participated. Half of the respondents identified economic instability as the leading factor influencing their approach to M&A.
Our recent Quarterly Deal Performance Monitor, run in partnership with the M&A Research Centre at Bayes Business School, shows a shift toward a more cautious M&A environment as deal volume dropped 37% in the first half of the year.
Amid uncertainty, companies are approaching M&A more cautiously this year. For example, they are performing more robust due diligence. The median time to close deals in the first quarter was the slowest since 2008. Likewise, the M&A Barometer found 38% of respondents find that integrating M&A transactions today is significantly more challenging than it was three years ago (as deals are more often cross-sector and transformational).
Given the challenge of closing deals, nearly half of respondents identified joint ventures and partnerships as a priority for the next three years.
Other prevalent themes the M&A Barometer found include:
People strategy is crucial to success in the current deal environment. Seventy-five percent of M&A Barometer respondents cite talent retention as the most important factor driving integration success. We have found retention outcomes are closely tied to cultural alignment, leadership and satisfaction with company direction, rather than the purely monetary components of compensation.
Building a culture and diversity, equity and inclusion (DEI) strategy that meets customer, investor and employees' needs is a priority to drive business value and retain employees.
The M&A Barometer tells us that an emerging focus for acquirers is employee experience and finding ways beyond compensation to improve retention. Asking the following questions is a starting point to uncovering cultural risks and opportunities:
Fifty-eight percent of M&A Barometer respondents cite effective communication and change management as pivotal to successful integration outcomes. Deploying timely and relevant messaging is key. Data collected through employee listening tools empower organizations to execute fit-for-purpose change and manage the employee experience actively.
In terms of a significant area of opportunity to improve outcomes:
We encourage clients to be nimble in their priorities and approach based on what they learn through listening strategies. Cultural and market context should also inform decision making and approach. We recommend clients follow a three-step approach:
In a sign that organizations are prioritizing the people experience in M&A, 54% of M&A Barometer respondents are increasingly looking to incorporate formal change leadership training and support programs into their transaction playbook. Ultimately, successful serial acquirers are investing in building a culture conducive to retaining key talent and are prioritizing the employee experience in a competitive labor market.