Research

How Intangible Assets Unlock M&A Value

A Korn Ferry survey shows that intangible factors like company culture are becoming more important in mergers and acquisitions.

February 04, 2025

More and more, merger-and-acquisition (M&A) practitioners in financial services are recognizing how important intangible assets are to success. While financial metrics still matter, factors like organizational culture, leadership, and human capital are now pivotal to M&A outcomes. This shift highlights a nuanced understanding of value creation and the need for deal teams to focus on these assets.

Korn Ferry surveyed executives and senior M&A leaders from top global financial services firms to explore improvements in due diligence and integration outcomes. The survey revealed that 36% see intangible assets—such as culture, leadership, and intellectual property—as key drivers of M&A activity, signaling a shift in how their value is measured and their impact on long-term success.

The Critical Role of Intangible Assets

Our survey found that deal teams often miss key intangible assets like culture and leadership. In fact, only a third use HR expertise, leading to gaps in evaluating cultural fit, leadership alignment, workforce standing, and organizational readiness. Focusing on the following areas can improve M&A success.

The Confidence Gap in Evaluating Intangible Assets

Many deal teams struggle to evaluate intangible assets effectively. Only 35.7% of respondents report integrating HR expertise into due diligence, revealing a significant gap in assessing human and organizational dimensions. This lack of confidence is particularly evident in evaluating cultural fit, leadership alignment, and organizational readiness. Deal teams often focus on traditional due diligence topics, overlooking critical human and organizational factors that impact deal value and integration success.

Cultural Fit: A Critical Yet Neglected Component

Survey participants emphasized that evaluating a target's leadership and culture is as crucial as financial assessments. However, cultural assessments are often overlooked, especially by private equity firms. Corporate organizations tend to prioritize cultural integration but struggle with effective execution. The survey highlights that cultural alignment in M&A is as vital as financial due diligence, yet it remains a major challenge for many companies.

Operational and Organizational Readiness

Over half (54%) of respondents now prioritize evaluating operating model fit and organizational readiness during due diligence, recognizing their importance for deal viability, value creation, and successful integration. However, HR's involvement is still limited. Including HR professionals in deal teams can offer crucial insights into workforce dynamics, change readiness, and leadership alignment, which are key to identifying integration risks and ensuring smooth post-merger execution.

Workforce Analytics: A Rising Priority

Our survey shows that workforce analytics are becoming more important in M&A due diligence. Most respondents (77%) value employee engagement scores, and 69% focus on both productivity/performance metrics and turnover rates/employee tenure. These metrics give insights into the target company's workforce, including employee sentiment and organizational culture. This trend matches the improved data quality available to assess an organization’s intangible assets, especially its workforce, which is crucial for post-merger success.

Addressing Challenges in M&A Integration

Our survey identified four main challenges in M&A integration: establishing a shared culture, building a strong leadership team, executing timely plans and tracking value effectively, and sharing clear and transparent timelines.

These challenges show the need for thorough due diligence that includes cultural and organizational factors, not just financial metrics. Identifying potential issues early helps mitigate risks and informs decisions about proceeding with the deal. Addressing these factors proactively can lead to better integration planning and outcomes or help avoid problematic transactions.

Essential Leadership Capabilities for M&A Success

Our survey highlighted five critical leadership capabilities for successful M&A integration: cultivating trust, managing ambiguity, taking decisive action, engaging collaboratively, and developing strategic vision.

Leaders who excel in these areas are better equipped to guide their organizations through the complex post-merger integration process and align diverse organizational cultures. Companies should prioritize developing and selecting leaders with these competencies to drive M&A success and maximize value creation.

5 Ways to Maximize Value in M&A

To tackle these challenges and capitalize on opportunities presented by intangible assets in M&A, we recommend the following:

  1. Implement frameworks to assess intangible assets like leadership alignment, cultural fit, employee engagement, and change readiness.
  2. Use data-driven insights to evaluate key personnel dependencies, organizational structure, and integration challenges, complementing financial analysis for a holistic view.
  3. Develop methodologies to assess cultural compatibility and integration risks, giving them equal weight to financial and operational considerations to prevent cultural clashes.
  4. Include HR professionals in deal teams for insights into workforce dynamics, change readiness, and leadership alignment, crucial for assessing transactions and ensuring smooth post-merger execution.
  5. Invest in developing leadership skills that are essential for M&A integration, such as managing ambiguity, building trust, and strategic thinking, to guide organizations through M&A complexities.

As M&A in financial services evolves, recognizing the importance of intangible assets from due diligence onward is crucial. Expanding frameworks to include cultural, leadership, and organizational assessments can reduce risks, improve integration, and unlock greater value. Balancing tangible and intangible assets will be key to navigating modern M&A complexities and achieving long-term success.

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