LONDON — A new survey by Hewitt Associates, a global human resources consulting and outsourcing company, reveals corporate transaction activity is expected to increase in 2010, even though many acquiring companies around the world say they are falling short in meeting their deal objectives.

Hewitt's quarterly M&A pulse survey of 278 organisations around the world demonstrated that 72% expect to maintain or increase their deal activity over the next two years. Research from Capital IQ showed that global deal activity in 2009, including mergers and acquisitions (M&A), joint ventures, divestitures and IPOs/spin offs, totalled $2 trillion (USD).

Despite the expected increase in deal flow, the Hewitt global M&A survey highlights one common factor - the failure to address the human capital issues that increase the chance of achieving maximum value. Of the 69 European headquartered organisations that participated, over half (54%) said their past transactions did not achieve their intended financial and strategic objectives. Globally, almost two-thirds (62%) of companies indicated that leadership and key talent retention are critical to the success of a deal, while over half (57%) of these organisations reported that they have lost vital employees at the same rate or at an even higher rate than non-vital employees. These trends were mirrored in the European results with companies reporting similar experiences.

A previous Hewitt analysis in 2008 showed that the loss of vital employees can have a devastating impact on corporate transactions. Based on a sample of 96 companies representing more than $568 billion (USD) in total deal value over a two-year period, Hewitt's analysis found that more than $54 billion (USD) - or 10% - of a deal's value, depends on the rate at which vital employees leave an organisation during or immediately after corporate transactions.

Stephan Vamos, European leader of Hewitt's Corporate Transaction and Transformation practice said:

"As we examine the reasons why companies aren't achieving their M&A goals, it's not surprising that the inadequate management of leadership and talent issues is at the core. It is known that the loss of critical talent and leader capabilities can be enough to erase much of the value companies sought in the deal.  A lack of agreement among the post-transaction organisation's leadership can be as devastating. Put simply, poor human capital management can be a true deal-breaker."

To explore this point further, Hewitt compared the practices of companies that exceeded deal objectives (Overachievers) with those organisations that did not achieve their deal objectives (Underachievers). In its analysis, Hewitt found a clear link between deal success and proactive management of the leadership and key talent issues. Overachievers and Underachievers both say leadership and talent strategies are important to the success of a deal (69% versus 62%, respectively). However, less than a third (32%) of Underachievers report their leadership and key talent strategy in transactions as being effective, compared with 70% of Overachievers. Overachievers are also twice as likely to effectively identify and retain leaders (81% versus 42%) and assess critical talent (73% versus 35%).

Stephan Vamos added:

"Most companies have an infrastructure and the resources to retain, focus and develop their critical talent pool, yet many organisations fail to execute a rigorous and sustained approach to retaining leadership and key talent, permitting key people at all levels to walk out of the door or to be out of line with key deal objectives.

"As companies prepare for their next transactions, there is a real opportunity for a dramatic improvement in their chances of success. Having a formal strategy and game plan for leadership and key talent - and effectively executing it - is imperative for achieving better deal success and retaining a competitive edge during a tough economic cycle."

About Hewitt Associates
Hewitt Associates (NYSE: HEW) provides leading organisations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt works with companies to design, implement, communicate, and administer a wide range of human resources, retirement, investment management, health care, compensation, and talent management strategies. With a history of exceptional client service since 1940, Hewitt has offices in more than 33 countries and employs approximately 23,000 associates who are helping make the world a better place to work. For more information, please visitwww.hewitt.com.