Due Diligence failures
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Why do we see conflicts and issues during Post Merger Integration even after a thorough due diligence is being conducted by experts?
Usually from my experience is if there is no guidance or structure from the ‘Post Close’ Integration owner and also no Project Manager to keep ‘Post Close’ Integration running smoothly. Post Close integration should have a ‘task list’ of items for each discipline that needs to be performed for a suscceful integration. Note
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: not all task may not pertain to the acquisition business, depending on the term sheet and what was agreed on in the final ‘Pro Forma’.
In my opinion, it all depends as to how effectively & carefully the take-aways from the HR due diligence are actioned out post-merger or acquisition. The conflicts & issues may arise due to any of the following reasons:
1. The underlying assumptions happen to be at significant variance (could be due to oversight or totally unexpected adverse development) with the actual situation post-merger or acquisiton. In other words, the HR due diligence probably under-estimated the post-merger conflict areas.
2. The process ownership in actioning out the post-merger activities falling short of what’s needed.
As these conflicts are all people-centric, the key to avoid or minimise them will be having ‘seasoned’ PMI leaders.
In my view, if the decision to merge with or acquire other company did not have a solid base upfront, i.e. it was purely driven from financial perspective but culture or strategy was not taken into consideration or not much elaborated, then thorough due diligence will not save the deal as the focus of DD is different; is to check that there are no potential ongoing claims (with customers/suppliers), patent infringement etc..
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