Why Acquisitions Lose Their Best People in the First 90 Days
Quick answer: In lower-middle-market M&A deals, the destruction of value isn't financial mismodelling - it's the departure of the people who made the business worth buying in the first place, usually within 90 days of close. This is a specialist perspective on people risk in M&A: what every acquirer should know before Day One, and what good people due diligence looks like.
The deal closes and the lawyers go home. The people and the senior operators who manage the client relationships, the ones who hold the institutional knowledge, the ones who built the culture - start to wonder whether they made a mistake.
The statistic we all know but no-one talks about
70-90% of mergers fail to deliver their anticipated value. If you work in M&A, you will have heard this number but it’s lost it’s meaning. In most lower-middle-market deals, the main destruction of value is not the financial mismodelling, it’s the departure of the people who made the business worth buying in the first place.
The evidence of this is strong. Bain & Company’s landmark 2007 study of 40 M&A deals, published in Harvard Business Review by David Harding and Ted Rouse, found that in the successful deals, nearly 90% of acquirers had identified key people for retention during the due diligence stage. In the unsuccessful deals, only one-third did. What that means is the people aspect of due diligence is not pink and fluffy or soft, it’s one of the highest-correlation predictors of whether a deal delivers its return.
Why people-dependent businesses are structurally more fragile post-close
If you’re in a business where your assets are the people and not the plant or the patent - it’s exposed. In professional services, consulting, engineering, healthcare, creative industries and tech, the client relationships are personal. They follow individuals and not organizations. So when the senior engineer who has worked with a client for twelve years decides to leave three months after an acquisitiion, the client relationship doesn’t automatically transfer to the new parent. It may well follow them to their next employer.
In sectors where the talent market is tight (and in most knowledge-intensive industries, it is), the environment is fragile and your margins for people-related errors are narrow.
Why the first 90 days are different
The post-close period in any acquisition is a period of heightened individual risk assessment. Every employee - whether consciously or not - is answering a version of the same types of questions:
Do I trust the new leadership? Will I be treated fairly? Is my role secure? Do I want to work in this culture? Do I like what I’ve read about them?
These questions are typically answered through observation. Employees will be watching what the acquiring leadership team does in the first couple of weeks. They will watch to see whether promises made at the town hall are kept. They will listen to hear whether what you said in the private meeting room was followed through. They will watch whether the culture they joined is being replaced or respected.
The most talented are the ones with the most external options. These are the ones who make their decisions the fastest.
What traditional due diligence misses
Financial and legal due diligence is designed to verify: are the numbers real, and are the legal obligations manageable? It can’t answer the questions that determine whether the deal will deliver its return.
Harding and Rouse framed human due diligence around five foundational questions: who the cultural acquirer is, what kind of organization the combined entity wants to be, whether the cultures will mesh, who to retain, and how the rank-and-file will react. Those are the right questions for a mid or large capital integration. In the lower-middle market where the founder is still present, there are five slightly different and better questions to ask:
Who are the three people whose departure would materially change what you're buying and who you can’t afford to lose?
Are they planning to stay and under what conditions?
Is the management team capable of absorbing integration activities alongside delivering the day job? (Because there’s always the day job to do)
Do the two leadership cultures have the compatibility to work together under pressure?
Is the founder psychologically ready for what post-close actually feels like?
These aren’t soft and fluffy questions. They are questions with direct financial answers because a key person departure in the first 90 days will affect project continuity and momentum, team dynamics, institutional knowledge, client retention and the value the acquirer was anticipating from the deal.
There’s a pattern
A mid-market acquirer bought a specialist professional services business primarily for its client book. On paper the numbers were solid and in the first month post-close, the founder (who held roughly 40% of the client relationships) began to signal that the culture of the new parent company wasn't what he'd expected. Two senior sales leaders had already been approached by competitors and by month four, the founder had triggered his release clause and left. Roughly a third of the client revenue followed him within a year. The deal was formally "successful" - but the acquirer captured a fraction of the value they had modeled.
What good people due diligence looks like
It doesn’t require a survey of every employee and it doesn’t require months of cultural analysis. In the lower-middle market, it needs three things:
Structured diagnostic conversations with the target’s leadership team - designed to surface leadership philosophy, decision-making style, management maturity and change readiness.
A structured comparison of the two organizations across the dimensions most likely to create integration friction: governance, pace of execution, performance philosophy, reward expectations and trust levels between the teams.
A written risk assessment with specific, actionable recommendations - not a cultural description, but a risk briefing that tells the integration team exactly where to fous in the first 30, 60 and 90 days.
This is the deliverable most acquirers have perhaps never asked for or received nd the one that would change the most decisions if they had it before close.
The questions worth asking before every deal
If the three people most critical to this business’s value decide to leave within 90 days of close, what would happen to the revenue, the client relationships and the deal value.
If you know the answer, you have done your people due diligence. If you don’t, it is the most important question you haven’t asked.
That question is the one I’ve spent 20+ years answering from the insides of organizations - through M&A integrations at Saint-Gobain UK & Ireland and through TUPE transfers and structural changes in the public sector. Mercate People Partners is where I now bring the same discipline to M&A advisers, dealmakers and the businesses they’re integrating. The output is a structured, written organizational risk assessment that feeds into integration planning and protects deal value from day one.
If this is a risk you’re managing in a current or upcoming transaction, I’d welcome a conversation.
About the author
I’m Jo Spilsbury. Over 20+ leading people strategy through mergers, integrations and workforce change - most notably a 5,000 person merger of two organizations with fundamentally different cultures, governance structures and trust climates. That work has been from inside the businesses navigating change - at Saint-Gobain UK & ireland and in a 10,000 plus person public sector organization. Mercate People Partners is the practice through which I now bring that discipline externally, to M&A advisors, dealmakers and the businesses they’re integrating.
I work in the tradition of Harding and Rouse’s human due diligence framework, adapted for the specific dynamics of lower-middle-market deals where the founder is still present and the deal value is often tied to future performance.
Mercate People Partners | Leadership and Organizational Due Diligence
