Cultural Due Diligence for Mergers & Acquisitions

Mergers and acquisitions can be an exciting time for organizations, characterized by high levels of information gathering and often, change. Below are two diagrams that outline a sample integration process for organizations experiencing an M&A event. First, overall integration and its major challenges are considered. Then, cultural integration is illustrated in the next diagram, alongside key areas of cultural due diligence to consider before integrating. A focus on cultural integration can help facilitate a smoother transition process for all.

If you are considering an M&A event, have you also considered the 9 key areas of cultural integration?

Major Challenges:

• Integration of People
  • Intangibles can make acquired companies’ employees feel they are not fully part of the company
• Integration of Strategic Roadmaps
  • Organization Structure and Career Paths
  • Power transition (top executives or duplicate functions)
  • Product Development Roadmaps (transfer of decision making authority)
• Changing and Integrating Culture

9 Key Areas to Consider in Cultural Due Diligence:

1. Strategic Direction: Mission, Vision, and Value proposition.  How does the company express this mission?  To the public?  To its employees?
2. Key Measures: How are key measurements categorized?  Communicated to employees? Stakeholders? How are the results managed?  How are they linked to incentives?
3. Structures: How is the company organized?  Functional or Matrix?  How do people access resources?  Flat or Hierarchical?
4. Planning and Control Systems: What formal systems are in place? How are planning, budgeting, goal setting done? What is the decision-making process in the organization (collaborative, delegative, or hierarchical)? To what extent are policies, rules, and procedures developed and applied?
5. Employee Engagement:How are teams used in the organization? Is work done with accountability at the individual or team level? What is the recognition for work? How is employee performance measured? What is the employee social culture?
6. History:What major events created and affected the current organization? What perceptions and obstacles will most employees bring forward?  Managers?
7. Communication and Transfer of Information: How readily is information disseminated throughout the organization? What is routinely communicated?  Held back? To what extent do employees and managers have access to information?
8. Leadership & Management Styles: Are managers selected primarily for coaching or command and control? What type of supervisor-subordinate relationships represent the norm? What areas of competence are most predictive of success?
9. Human Capital: How is HR positioned within the organization? How are benefits administered?  What level of customer service is employed? What is the general orientation of the company to its employees?  Does it demonstrate that they are a valued resource?

Have you done your cultural due diligence?

CMA can help. Contact us for more information on M&A services.