Unlock additional value creation in M&A integration: PwC

M&A can serve as a pivotal inorganic growth strategy, enabling organizations to augment core offerings, enhance customer experiences, expand market reach and optimize cost structures. Establishing a well-defined deal thesis and running a thoughtful due-diligence process are the fundamental initial steps. However, many companies encounter challenges in translating strategic intent into tangible outcomes, a process that necessitates deep industry acumen and a nuanced understanding of how to operationalize strategic value creation.

Organizations that excel in M&A execution continue to evolve their approach based on what they’ve learned and innovations they make in their process. A rational value creation hypothesis that is grounded in tactics and practical in approach is the recipe for success. This includes continuous evolution in how to generate value faster with more predictability, integrating new value creation ideas into proven integration approaches and fine-tuning methodology from past learnings as well as evolving market dynamics.

Three areas where sustained value creation in M&A has consistently driven outsize returns include technology, tax and talent. While these aren’t new areas to M&A, new thinking has emerged to expand value creation and drive more sustained outcomes for acquirers.

Technology: Integrating artificial intelligence (AI) into transformational initiatives and overarching M&A strategies to enhance efficiency and decision-making as well as to differentiate their products and customer solutions.
Tax: Evaluating and mitigating tax implications in operating model (OpModel) design to ensure regulatory compliance and financial optimization.
Talent, leadership and culture: Unlocking sustainable value by retaining high-caliber talent, aligning leadership structures, and fostering a cohesive organizational culture.

A closer examination of these “three T’s” reveals their profound impact on M&A integration success, providing companies with a structured framework to drive superior value realization and long-term competitive advantage.

A closer look

Quickly evolving artificial intelligence tools can play a pivotal role in integrations by overhauling a company’s tech stack. Effective IT integration is important for financial performance, facilitating cost efficiencies and revenue growth essential for achieving synergy targets. M&A also serves as an opportunity to accelerate AI-fueled tech transformation. Many organizations often lack the foundational data and system architecture needed for AI deployment, and M&A can provide the impetus to “transform as they transact.”

Traditional tech integration involves data harmonization, consolidated reporting, CRM systems harmonization, ERP consolidation and infrastructure unification. AI and advancements like large language models (LLMs) and autonomous AI agents streamline integration timelines, unlocking deal value faster. For instance, a leading construction and engineering client we worked with improved procurement and cost management by using AI-driven software to create a unified data platform. Some use cases for enabling AI include:

Generative AI: Virtual assistants manage routine customer service tasks, freeing human agents for complex issues and reducing costs. In M&A integrations, conversational AI can unify customer service platforms, helping produce seamless interactions and improving satisfaction.
Agentic AI: Intelligent agents generate reports and insights from large datasets, supporting strategic planning and decision-making. Agentic AI can unlock revenue synergies by providing a single product view to identify cross-sell and upsell opportunities.

M&A can act as a catalyst to overcome AI implementation barriers, fostering unified IT infrastructures essential for AI success. We’ve seen many clients leverage AI-driven solutions to streamline integration, leading to faster realization of deal value and improved operational efficiency. As companies navigate M&A complexities, focusing on IT integration and AI adoption will be important for sustained growth, profitability and long-term success.

Tax efficiency is a frequently overlooked component in M&A integrations even though it can significantly affect a deal’s total shareholder returns. That’s partly because the tax environment is becoming more complex. Rules are changing rapidly in countries around the world and tax authorities are taking a more active stance. In our experience, incorporating tax strategies into M&A plans has the potential to increase profits by two to 10 percentage points.

Tax strategy can help companies unlock value in several key areas.

Operating model efficiency: M&A involves making operational decisions on many issues such as geographic footprint, transfer pricing arrangements, capital allocation and supply chain integration. Factoring in tax considerations can help improve the operating model, boosting value creation in the process.
Tax asset management: Effective management of capital gains and losses, net operating losses, tax basis and ownership changes can be crucial. Operating model decisions should factor in tax impacts to determine the right decisions on future OpModel changes, so value is captured from both an operational and tax perspective.
Credits and incentives: Governments frequently offer tax incentives that reduce liabilities and operational costs, such as R&D credits, workforce development incentives and environmental incentives. These benefits can be substantial, especially as companies look to transform, in instances where leveraged incentives can offset a significant percentage of modernization costs.
Indirect taxes: Value-added taxes, import tariffs and other indirect taxes can offer strategic advantages. To demonstrate how tax insights can influence strategic operating model decisions, a better understanding of regulations can help companies reconfigure their supply chains.
Regulatory adaptation: Planning to meet new regulations related to global tax policy, climate change, technological disruption and geopolitical shifts is a critical part of dealmaking strategy. Understanding the tax and regulatory nexus can reveal opportunities and guide operational restructuring.

What both PwC’s tax professionals and our clients see: Overlooking tax implications can hinder strategic success. Incorporating tax knowledge into your M&A operating model can help create incremental value, reduce costs and risks, and enhance shareholder returns.

Human capital is an often-underutilized asset that offers significant opportunities for value creation during integration.

Reducing or ignoring workforce needs can result in lost productivity and talent attrition, and keeping talent at the center involves a holistic change management and communication strategy. Here are a few key unlocks to look for.

Synchronizing leadership and culture: It takes time and effort to merge leadership teams with different working styles. Understanding each team’s culture—what drives their success, slows them down and their unwritten rules—drives clarity, speed and cohesion in operations, an area that often lags in integration. Meanwhile, developing visionary leaders who inspire trust is an effective tool for meeting value creation goals.
Facilitating powerhouse workforces and discretionary energy: Implementing the Good Job Score (GJS) as a key performance indicator helps leaders focus on job quality, unleash workers’ discretionary effort and understand how that effort changes during integration. High scores correlate with stronger financial performance and reduced turnover. PwC research shows that companies in the top 20% of GJSs outperform peers by four times earnings before interest and taxes and 1.5 times profit margin.
Tailoring total rewards — while identifying savings — through preference analytics: Surveying employee preferences enables investments in rewards such as benefits, skills and mentorship that align with what employees value. These strategies give leaders the opportunity to say, “We heard you, we listened and here’s how we are investing in you.” These strategies also provide tangible financial results. In projects we’ve worked on, we’ve seen preference analytics save between $500 and $3,000 per year per US employee by aligning rewards with what employees value.

Also consider broad-based equity ownership programs: Depending on the company’s financial situation and culture, broadening equity ownership can align employee interests with company goals. Designing a self-funding program that provides meaningful incentives for long-term financial rewards to employees, can help to unleash the discretionary energy of the workforce, driving company success. Thoughtfully designed and implemented, these programs foster an ownership mindset that improves company performance and employee engagement.

Companies adopting these human capital initiatives are building powerhouse workforces that help drive performance and improve costs — and they’re doing it with their workforce instead of to their workforce.

How clients have leveraged tech, tax and talent to create value

Accelerating technology integration
Starting early — sometimes even before a deal is struck — helps improve the chances of integration success. A national construction and engineering client, for instance, faced disruption due to obsolete tech infrastructure and cyber vulnerabilities. PwC helped develop a three-year transformation strategy to modernize data and AI capabilities and increase tech cost efficiency.

That work also helped executives identify key considerations in a future acquisition. With a solid tech foundation, the company is on track to integrate within 60 days.
Tax and over $500 million in future value creation
PwC assisted an industrial products company after its acquisition of a competitor, with a focus on enhancing its product portfolio and creating global synergies. The team eventually defined a more efficient operating model for sourcing raw materials, manufacturing locations, logistics footprint and addressing customer demands for new products.

A key decision involved developing the global footprint of the combined company. PwC worked with the client to select the most strategic jurisdiction for buying, manufacturing and selling products. By leveraging the global scale of manufacturing and logistics, and aligning tax with the business, the company is on pace to create more than $500 million in value over a 10-year span. Involving the tax team early in the process allowed for informed operating model decisions, confirming long-term value creation while effectively managing global tax implications that enhanced return on the investment.
Modernized rewards package led to recurring savings
On a recent 2,000-person acquisition for a company with relatively lean benefits, PwC identified $4.25 million in recurring savings. Preference analytics revealed that over 75% of the workforce would rather have a more modernized, yet lower cost, rewards package.

The portfolio company was struggling to attract and retain workers, especially among its lower paid employees. While the company was investing heavily in retirement benefits, preference analytics showed that the plan was not meeting goals around worker attraction or retention. The company redeployed its investment in lower cost but highly valued benefits such as mental health counseling, on-site wellness resources and health plan contributions. Collecting data allowed the company to build a business case for change to leadership, and employees appreciated being able to help shape the future of the rewards program.

The bottom line

The world continues to evolve at an accelerated pace. New thinking in established value creation areas such as tax, technology and talent create the potential for additional and sustained return on M&A investments. New ideation in M&A planning, in combination with practical and tactical M&A integration solutions, is how market-leading acquirers are executing M&A transactions. To learn more about how PwC can help you unlock new sources of value creation in your next M&A transaction, visit us at pwc.com.

Special thanks to the following PwC partners and specialists for contributing insights to this publication: Joseph Joy, Simon Singh, and Nisheet Bhalla for Technology; Christopher Gilbert, Brad Garrett, and Stephen Puzzo for Tax; and Carrie Duarte Steele and Myra D'Souza for Talent.