A majority of companies (54%), expect M&A deal activity to increase despite a record slow start for 2025, according to a survey of senior Human Resource professionals by WTW. With only 19% anticipating deal activity to decrease, this suggests a wave of deals forthcoming once markets stabilise.
HR teams state that they are under increasing pressure, however, with 65% feeling less than fully prepared to handle their deal portfolio. Respondents acknowledged significant challenges to execute HR due diligence (HRDD), which typically includes a thorough review of a target company's human resources, policies and practices to assess potential liabilities, synergies and risks related to the workforce.
Survey respondents viewed data completeness, quality and integrity as their top due- diligence challenges (66%). Escalating data demands as the time allowed to complete due diligence tightens reinforce the need for sellers to be prepared if they are to maximise deal value. Also, less than one in five survey respondents believe their HR teams have been properly included in preliminary negotiations.
Jim Plomer, Senior Director, Integrated Global Solutions – M&A, WTW, said: “Low deal volumes during the first half of 2025 suggest pent-up demand fuelling a new wave of deals when market stability improves. However, a majority of companies have expressed concern about their level of preparedness for future transactions, exacerbated by the possibility that timelines will need to be accelerated if the objective is to complete by year-end.
“The role of HR should already be in full swing even before M&A discussions take shape, looking at the culture, the people, their values and whether they will fit. Proactively assessing people-related challenges and opportunities is critical to enhancing deal value and easing integration.”
The survey also found that 78% of respondents identified key talent with unique or special skill sets below executive level as their highest due diligence priority. The leading metric for integration success was retention of non-executive talent (50%). This was 21% higher than leadership retention (29%). However, resource constraints are rising at a greater rate than culture and technology challenges, with 74% of non-US and 54% of US companies stating that aligning cultures remains the overall top challenge.
Meanwhile, 65% believe Gen AI will impact the deal-making process within the next two years. But full buy-in to the value proposition is not there yet, with most in “wait and see” mode rather than being early adopters. Beyond internet scrapes, the most promising emerging areas for using Generative AI are seen as legal analysis and employee communications, with usage significantly falling off beyond this. This suggests a compelling Gen AI use case still needs to be developed to advance adoption within M&A.
The use of virtual data rooms (VDRs) has advanced the means for sellers to post their digital data. But VDRs do not resolve fundamental data integrity issues and can arguably provide a mechanism to overwhelm buyers with mounds of data to disguise issues, compounded in many cases by a narrowing time window to effectively conduct HRDD.
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