Why recruiting and knowledge transfer belong on the agenda early
In M&A transactions, a great deal is examined very carefully: financial metrics, customer structure, market position, contracts, legal risks and tax matters. Without this transparency, neither a robust valuation nor a reliable transaction structure can be developed.
The question of whether the company can actually deliver the planned investment case in terms of people and organization often receives far less attention.
Especially in the Mittelstand, company value is frequently closely tied to people: to managing directors who shape customer relationships, to technical experts whose experiential knowledge is not fully documented, to managers who provide informal guidance, and to employees who know how things actually work in practice.
These factors are not “soft.” They are value-relevant. If they are considered too late, risks emerge after closing at exactly the point where value creation was supposed to begin.
This is where HR due diligence comes in. It supplements classic transaction review with the question of implementation capability: Is the company able to deliver the planned investment case stably, quickly and sustainably under new ownership?
In our experience, two topics deserve particular attention here: recruiting and knowledge transfer.
Recruiting: growth requires the ability to fill roles
Many investment cases rely on growth. New locations are to be opened, sales structures expanded, processes professionalized, or new business areas developed. This development is often modeled cleanly in the business plan.
However, one question frequently remains open: who is actually going to deliver this development operationally?
After closing, it often becomes clear that this question was not adequately answered. Key roles are unfilled. The second management level is professionally strong but not yet sufficiently equipped for the next stage of development. Recruiting processes are too slow, role profiles are unclear, and candidates hesitate because prospects and cultural signals are not communicated convincingly after the transaction.
A people issue then quickly becomes an operational risk: growth initiatives are delayed, existing managers are additionally burdened, and necessary professionalization steps cannot be implemented at the planned pace.
HR due diligence makes these connections visible before closing. It examines not only how many employees are in place, but which roles are truly critical for future development:
Which functions are critical to the success of the planned development?
Which positions must be stably filled within the first 100 days?
Which vacancies or succession risks already exist today?
How capable is the recruiting process?
How attractive does the company appear to relevant target groups?
The benefit lies in timely preparation. Even before closing, role profiles can be sharpened, search priorities defined, decision paths clarified, and external recruiting capacity planned. This means recruiting doesn’t become a repair measure once operational pressure is already high, but instead becomes part of integration planning.
Knowledge transfer: securing company value before it is lost
Alongside recruiting, our experience shows that knowledge transfer in transactions is also frequently underestimated – yet it is precisely here that one of the biggest hidden value levers lies.
In many mid-sized companies, critical knowledge is not fully documented. It resides in the minds of individual people. These are the people who know which customers need special attention, which suppliers are reliable, which technical particularities must be observed, which internal channels work, and where risks lie that are not visible in reporting.
This knowledge is part of the company’s value. It has built up over years and cannot be replaced at short notice.
It becomes problematic when this knowledge remains tied to a few key individuals. If they leave after closing or mentally disengage, the company loses not just experience. It loses speed, decision-making confidence, customer trust and operational stability.
Classic due diligence often examines whether documents, processes and contracts are in place. That is necessary, but not sufficient. What matters is which knowledge is truly critical to business operations and how it can be transferred.
For investors, it is therefore relevant to understand which individuals critical knowledge is tied to and how significant the resulting dependency is. HR due diligence identifies critical knowledge holders, ranks knowledge areas by relevance, and assesses where dependencies exist. The focus is on those bodies of knowledge that are essential for continuity, customer retention and further company development.
In practice, this means: creating knowledge maps, structuring handover conversations, planning tandem phases, setting up mentoring or shadowing models, and clearly defining responsibilities for the transfer. Equally important is the perspective of those taking over: whoever takes on the role must know where hidden knowledge lies and which questions need to be asked.
Knowledge transfer is not a topic for the moment a key person is already leaving. By then it is usually too late. The process must begin in good time – ideally prepared as early as the HR due diligence stage and carried through into post-merger integration.
From analysis to concrete implementation
In our view, HR due diligence delivers its greatest value when the findings translate directly into concrete measures for the period before and after closing.
If recruiting emerges as a potential bottleneck, search profiles, prioritized roles and decision paths can be prepared early. If critical knowledge is tied to individual people, a concrete transfer plan is needed. If risks exist around key individuals, retention measures and personal conversations must be set up in good time.
This turns HR due diligence into an instrument of transaction security. It shows where people-related or organizational risks could jeopardize the investment case – and which measures are needed to counteract them.
This perspective is especially important for mid-sized targets. Responsibilities have often grown organically, knowledge is tied to individuals, recruiting works through personal networks, and leadership is often strongly shaped by individual personalities.
This is not a weakness in itself. It is part of the reality of the Mittelstand. What matters is understanding this reality early and incorporating it professionally into transaction and integration planning.
Conclusion
Recruiting and knowledge transfer deserve early attention in any professional HR due diligence.
Recruiting answers whether the right people are on board in time to deliver growth and integration. Knowledge transfer shows whether existing company value can be preserved and made transferable.
For investors, this creates a clear advantage: they gain a more realistic picture of whether a company is not only economically attractive, but also sustainable and integration-ready in terms of its people.
