What an acquirer checks first in people diligence.
If you're an agency CEO considering a holding-company sale, here's the people-side checklist your acquirer is already running on you.
We've sat on both sides of agency M&A. The people-side diligence is faster, more aggressive, and more decisive than most sellers expect. By the time the financial diligence flags something, the people diligence has already shaped the price.
The four things they look at first
Concentration risk. How much of your revenue is dependent on one or two senior people. If your top creative director leaves, does the marquee account leave with them? Acquirers will check the org chart against the client list before they finish the first read of your P&L.
Comp parity. Are people in the same role being paid wildly different amounts. Are there pay decisions that can't be defended in writing. Acquirers run quick comp audits and any irregularity gets priced into the offer as deferred liability.
Classification. W-2 versus 1099, the borderline cases, the freelancers who look a lot like employees. This is the line that has actually killed acquisitions we've watched closely.
Retention risk. Stay incentives for the top 10 to 15 people. If there isn't a structure, the acquirer assumes 30%+ of senior departures post-close, and prices the offer accordingly.
Diligence isn't "the buyer asking nicely about your people." It's the buyer pricing the risk that your people don't stay.
What we'd do six months before a process
Tighten the org chart and document succession scenarios for the top five roles. Run a comp parity check and fix anything that can't be defended. Reclassify any 1099s that look like W-2s and absorb the cost now, not at close. Build a stay-package structure even if you don't deploy it yet.
Most of that costs less than the discount an acquirer will apply if they find the problems themselves. The arithmetic is rarely close.