March 14, 2021 at 1:38 pm #118185
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.April 1, 2021 at 2:51 am #118653
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 DDApril 6, 2021 at 11:54 am #118738
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.April 19, 2021 at 9:00 pm #119275
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.April 24, 2021 at 6:39 pm #119352
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.April 29, 2021 at 11:56 am #119454
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”May 11, 2021 at 11:39 am #119648
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.May 22, 2021 at 12:25 am #119950
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.June 14, 2021 at 5:09 am #120523
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.August 12, 2021 at 11:02 am #121744
i agree covid is a major issue – in many cases some data can be shared by seller only “on spot”August 28, 2021 at 2:05 pm #122080
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.September 3, 2021 at 9:18 pm #122210
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.September 5, 2021 at 7:24 pm #122221
Laura Manganotti MillsParticipant
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.October 14, 2021 at 8:02 am #123104
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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