Due Diligence during Covid – Face-to-face vs virtual

This topic contains 13 replies, has 14 voices, and was last updated by  Ameera Alhawaj 1 month, 2 weeks ago.

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    While a lot of due diligence requires objective information (e.g. documents, financial analyses etc), cultural/HR type of “soft” due diligence is important to in trying to suss out the potential challenges in these areas.

    Would you think Covid, and the limit on face-to-face interactions, have an adverse impact on the cultural due diligence aspect of things?
    While it is still possible to interact with people “face-to-face” via Zoom and other virtual channels, but there still seems to be a gap when you cannot meet people in-person.


    Peter Sakaitis

    I do think that face to face interactions and discussions do add the “human element” to a deal.
    We are in the process of assessing a target and have never stepped foot inside their facility. This pandemic certainly has remove some of the elements of a true DD



    I think that there is definitely an impact because face-to-face video calls can’t replace real life human interactions for 100%, building trustworthy relationships is more difficult this way.


    Ceri Barton

    I agree with previous comments on the negative impact of Covid on in person interactions and relationship building. I would add that Covid related travel restrictions have also hampered the ability to get a ‘feel’ for a target’s culture and working environment by visiting the offices/operating sites of key (non-executive) teams, having informal introductions and just observing the general atmosphere.


    Samantha Maraj

    I think that the lack of face-to-face meetings have definitely impacted the ability to properly understand certain aspects of a company’s operations, mainly its culture. The lack of in-person interaction and observaction, e.g. of team meetings and body language can certainly lead to the overlooking of pertinent information specifically for post merger integration.


    VishnuVardhan A

    DD is about assessing compliance weather its tax, legal, IPR, HR, or commercial.
    due diligence needs objectivity and rationale, while post merger integration needs all the human element it requires.
    “substance over form” not “form over substance”


    William Venus

    I agree the lack of face to face meetings has a definite impact on the ability to assess culture and talent. We are human at the end of the day and the ability to see an asset, its people and leadership operate day to day in person in different venue’s (in and outside the office) is tremendously valuable to the overall quantitative due diligence process.


    Pawankumar Sharda

    My experience is that Due Diligence before finalizing & announcing the deal is confidential and in most cases is done in a closed-door room. Frequent meetings beforehand with many employees/middle management may alarm the target company’s staff and may create an anxiety moment. So Virtual meetings & DD with the key personnel involved in the M&A work out best to avoid any presumed red flag among the employees. I agree, 100% of virtual meetings may not be as productive and build trust as they would have been in the case of in-person meetings.

    As far as Cultural/ HR Soft DD is concerned, most of the Cultural DD is post-integration/post public announcement of the deal. The acquirer should during HR audit very well understand the overall cultural key points of the target company. There may be few cultural challenges however that won’t be a make or break situation. The Acquirer may have to adopt some of the target practices or eventually change/modify its practice. Nothing 100% can be achieved even in face-to-face interactions. It’s an evolving process till both sides settle down.


    Patryk Kania

    We have had to do our DD part virtual part F2F. I must admit, some law and accounting firms had very strict rules and would not allow for F2F, which made it very difficult for us as the client to interact part F2F part virtual.


    Dmitry Govorov

    i agree covid is a major issue – in many cases some data can be shared by seller only “on spot”


    Raid Almutairi

    Of course. Covid19 and travel ban and regulations have impacted the DD process. Especially, conducting site visits is becoming difficult and a challenge which delay the DD completion process. In return, overall transaction timeline is impacted.


    Mohammad Alageeli

    I think we will see more virtual DD in the future especially with improvement of the technology. Companies might practice the virtual DD to reduce the cost of the expenses.


    Video-calls are a substitute for FtF meetings. They are not a substitute for “coffee” breaks or lunches, and at times, those may be helpful to get additional information that would not be communicated so openly during a face-to-face.


    Ameera Alhawaj

    COVID-19 and the new restrictions as well as arrangements of employees and managers working from home has an adverse effect on cultural due diligence in mergers and acquisitions. This is given that the acquisition teams will experience high levels of difficulty in comprehending the inner workings of the target organization. This is given that they will not have the person-to-person interactions with the managerial and employee teams in the target firm. The net effect will be the reduced ability to assess the cultural compatibility between the target and acquiring firms. While the face-to-face interviews may aid in reducing this difficulty, it does not the risks of failing to comprehend the cultural risk as well as the potential rewards that can possess a material impact in the deal price at the end of the merger and acquisition process.

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