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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.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.
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.
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.
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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