Embracing the People Factor for Merger & Acquisition Success

Mergers and acquisitions (M&As) are more than financial transactions – they test leadership, culture and workforce resilience. According to the Travelers 2025 Special Report, which surveyed more than 800 risk and insurance professionals, 87% of business leaders consider their M&A transactions successful, but only 35% rate them as extremely successful.¹ While this marks significant progress from the high failure rates reported more than two decades ago, M&As still present real risks, especially the ones CFOs and risk professionals must navigate.²

Culture, communication and collaboration

Post-M&As, their top concerns include:

• Workforce productivity
• Employee morale
• Employee retention
• Internal communications

Cultural misalignment is the leading cause of post-merger disruption, with up to 70% of deals falling short of expected synergies due to people-related challenges, according to the survey.³ This article examines why morale and retention are at greater risk and how organizations, particularly private equity (PE)-backed firms, can benefit by balancing financial efficiency with workforce engagement.

The overlooked risk in M&As: People and culture

M&A transactions are primarily driven by four key factors: technology, talent, growth and financials. While the focus is often on expanding market share, improving operational efficiencies and acquiring intellectual property and/or key personnel, it is important not to overlook the people and culture risks of integration.

Pre-M&A enthusiasm tends to center on financial and strategic opportunities, yet post-M&A data tells a different story. Nearly 70% of employees and 74% of leaders report significant stress and uncertainty after a merger, acquisition or PE deal.⁴ This disconnect underscores a common pitfall: underestimating the challenges of integrating different workforces, leadership teams and work cultures.

Merging people: Aligning talent and leadership

Bringing two workforces together is rarely seamless. Employees must navigate new leadership structures, reporting lines and operational processes – all while managing career uncertainty.

For example, a large corporation acquiring a startup may see cultural clashes as employees from the startup struggle to adjust to a more structured environment. If leadership ignores these cultural differences and risks associated with employee engagement and morale, key talent may leave, eroding the innovation that made the acquisition attractive​.

Merging culture: Aligning values and ways of working

Employees who feel a shared sense of purpose may embrace change more readily​.⁵ However, clashing work styles, decision-making speeds and communication norms may slow alignment.

A smooth workforce integration – rooted in cultural alignment – helps retain key talent, minimize friction and lay the foundation for long-term success. To achieve this, prioritize open communication, address cultural differences early and provide leadership training to ensure that all teams are aligned. Focusing on these elements can help ensure that the transition is not just financially viable but also operationally sustainable.

Company size matters: Its impact on workers through mergers and acquisitions

The level of complexity, the likelihood of cultural friction and the strategies needed to help ensure a successful transition can depend on a variety of factors, including company size, risk management practices and ownership structure. For example, while midsized businesses, large corporations and PE-backed firms may each experience integration challenges, the workforce risks they face may differ.

Midsized businesses (fewer than 500 employees): Culture feels personal

For midsized companies, M&As aren’t just about balance sheets – they’re deeply personal. Employees often have strong relationships with leadership and a close-knit team dynamic, making integration emotionally and operationally complex.

Key challenges:

• Culture clashes: When midsized companies are acquired by larger organizations with more structured policies and procedures, differences in workplace norms and processes may create friction, particularly in areas like performance management, decision-making and employee expectations.
• Leadership turnover: Midsized companies are more likely to experience leadership changes post-M&As, creating uncertainty for employees.⁶
• Layoffs hit harder: Smaller teams need to redistribute responsibilities after layoffs, potentially overwhelming remaining employees.

Opportunities for success:

• Transparent communications: Employees thrive on direct, open conversations, as well as a clear and shared understanding of where new leadership plans to take the company.
• Personalize transition plans: One-size-fits-all approaches alienate employees, whereas tailored career development plans foster retention.
• Preserve core values: Keeping key elements of the acquired company’s culture reassures employees and helps maintain engagement.

Larger corporations (500+ employees): Systems take priority over culture

For large enterprises, technology consolidation consideration often takes precedence over cultural integration, leaving employees feeling disconnected.

Key challenges:

• Process over people: IT systems mergers and compliance updates may often overshadow employee engagement.
• Formal change management, weak connection: HR policies are structured but impersonal.
• Financial targets deprioritize culture: Leadership focuses on performance metrics at the expense of workforce morale.

Opportunities for success:

• Balance efficiency with engagement: Alongside IT and legal considerations, prioritize cultural integration.
• Structure retention programs: Retention bonuses, career development and clear role expectations help reduce uncertainty and instill confidence.
• Frequent, transparent communications: Town halls, Q&A sessions and internal newsletters bring employees along and keep them informed and engaged.

PE-backed firms: Balancing financial gains and workforce stability

PE-backed M&A transactions often prioritize rapid value creation, streamlining operations and cost efficiencies. However, this approach can lead to workforce stress, leadership turnover and cultural instability.

Key challenges:

• Short-term cost focus vs. long-term engagement.
• Culture shifts create disengagement.

Opportunities for success:

• Leadership continuity planning ensures stability.
• Strategic, proactive risk management helps prevent reactionary workforce disruptions.
• Early investments in cultural integration help mitigate retention risks.

M&A success relies on clear employee communication and alignment on culture and leadership

Successful workforce integration is a critical factor in achieving post-M&A goals, yet cultural misalignment remains a persistent challenge.

Start aligning early: Cultural clashes undermine productivity

Cultural fit plays a key role in successful mergers. Taking proactive steps to assess and align cultures early can lead to smoother integration.

Solutions:

• Assess cultural compatibility pre-merger to identify shared values and differences.
• Establish a dedicated integration team to oversee cultural alignment.
• Use employee feedback loops to surface integration challenges and adjust strategies.

Address employee anxiety and uncertainty

Organizational change ranks among the top workplace stressors, leading to disengagement, higher attrition and resistance to change.

Solutions:

• Overcommunicate early and often – employees fear uncertainty, not change.
• Provide structured transition support – career clarity, training and coaching are key.
• Equip managers with change management skills to address concerns effectively.

Leadership ambiguity fuels disengagement

Employees need clarity on reporting structures and decision-making authority.

Solutions:

• Announce leadership decisions early to prevent speculation.
• Clarify reporting lines and decision-making authority.
• Foster visible leadership – executives should be present and approachable.

Retain key talent and institutional knowledge

There’s meaningful disruption as a result of a merger, especially when there’s an acquisition versus a merger, often due to:⁷

• Unclear career progression
• Loss of cultural identity
• Distrust from poor communication

Aligning risk management and culture boosts employee confidence in organizational change

Fifty-six percent of companies report significant changes to risk protocols post-M&As, but organizations that align risk and culture early experience higher workforce confidence.⁸

Key risk considerations:

• Changes in insurance coverage and risk mitigation practices should be clearly communicated.
• Regulatory shifts and compliance updates can create workforce uncertainty.
• Enterprise-wide risk assessments enhance security when paired with effective communication.

When companies integrate risk management into their workforce strategy, they are proactively addressing potential risks that could affect employees, such as changes to roles, culture or safety procedures. This proactive approach helps employees feel more secure during times of transition.

The winning M&A workforce strategy

Companies that proactively manage culture, communication and risk alongside financial objectives can capture the full value of their M&A transactions.

Key takeaways:

• Productivity gains depend on structured workforce transitions.
• Morale and retention are fragile – leadership, role and career clarity are critical.
• Risk and culture must be aligned for long-term workforce stability.

Is your organization prepared for the workforce complexities of M&As?

Discover more about key M&A trends and risks.

 Read the full report   

Contact your Travelers representative to learn how our tailored business insurance solutions can support your company’s smooth transition throughout M&As.

Sources
^{1, 4, 6, 7, 8}Travelers M&As Study, 2025 
^2,3https://hbr.org/2024/05/a-better-approach-to-mergers-and-acquisitions
⁵https://www.forbes.com/councils/forbeshumanresourcescouncil/2024/01/29/how-to-foster-a-shared-purpose-after-a-merger-or-acquisition