If we know that the majority of deals fail to meet the deal thesis and further that many fail due to people and cultural integration; why don’t more acquirers invest in cultural due diligence?
To be fair, I think that corporations are getting better at cultural due diligence (CDD) lately, though there is a long way to go. Following reasons come to my mind:
1. CDD is the most difficult of all the different due diligences. It takes an enormous amount of effort if one has to do justice and be confident about the outcome.
2. Since it is a relatively new field, the available frameworks have several limitations. Most of them do not provide objective scores or black & white answers.
3. Merging organizations are over-optimistic about the commonality in their cultures. For instance, every organization thinks they are customer focused, and that they are not bureaucratic. If one doesn’t get into the details, both in terms of the dimensions of culture and the depth in each of those dimensions, the cultures look more alike than they actually are.
4. If an acquirer finds the target suitable in all other parameters, they go ahead thinking that cultural issues can be “managed”. But they grossly underestimate the intensity of those conflicts as well as the need for timely interventions to manage such conflicts.
You must be logged in to reply to this topic.
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
Loading.. Please wait