The maxim that two heads are better than one has been used to further several things. From natural alliances such as marriages to artificial ones like Mergers & Acquisitions (M&A), this principle has continued to reign supreme. For ease of understanding, a Merger occurs when two separate entities come together to create a new entity, the marriage analogy is thus fitting in this regard. An Acquisition, on the other hand, presupposes that one of the entities take over the other. In its nature, an acquisition is more akin to a sale.
Before marriage, both parties must know each other to make sure that they are compatible. In the same vein, before any M&A can take place, parties must conduct what is termed M&A Due diligence.
M&A Due diligence is a fancy word that simply means investigation. Ideally, parties or entities considering M&A conduct due diligence to ascertain that they are a good fit. Even if the books check out, what about things which you wouldn’t find in the books? Something like Cultural Due Diligence?
What is Cultural Due Diligence?
Cultural due diligence has been described by some as studying what each entity claims to value and studying how these values are lived out in all levels of the entity. For example, if entity A which is undergoing M&A with entity B has had the practice of making decisions by putting it to a vote in which the majority prevails, an entity which has a distinct pattern of decision making based on rank, there be clashes because there is a divergence in principles and values. The scenario just depicted shows why M&A cultural due diligence is a must for entities looking to carry out M&A.
Covid And Cultural Due Diligence In M&A
Covid-19 has affected all spheres of human life. It has changed the way we do things. Before the pandemic, to get the cultural values of an entity to carry out M&A cultural due diligence, all you need do was waltz into the hallways of the entities involved. Even from the hallway, you could feel the different “vibes” of the entities. You could understand their way or manner of doing things; you could identify potential clash points so that you can mitigate them ahead of time.
But now, with Covid-19 and the attendant effects of working from home, it can be hard to tell what these clash points are. So, it begs the question: how do you conduct M&A Cultural Due Diligence even during Covid-19? Enter Content Intelligence to the rescue!
- Content Intelligence
Content Intelligence is the use of advanced technologies to pinpoint potential clash points which may assail a company even after a successful M&A. Admittedly, the use of Content Intelligence is novel but with the pandemic continuing to limit what acquisitions teams can do out in the field, it is a strategy that they must embrace as the new normal. Content Intelligence can be used to facilitate virtual meetings between the employees, stakeholders, and the managers of the entities carrying out M&A to enable integration teams to understand the concessional areas and risk factors with the ultimate goal being lasting post-merger success. Besides the above, Content Intelligence has been advanced during this Covid period and can now be used to capture data having to do with Due diligence and analyze the said data that even transaction teams found difficult to collect in the past.
- Conducting Appraisals
Conducting Appraisals or surveys is another way of assessing the potential cultural clashes. These appraisals may be carried out virtually and could include focus groups and interviews that can help the transaction teams pinpoint areas of agreement and distinctions that could create a challenge after the M&A is completed. Appraisals present an invaluable opportunity for major stakeholders of both companies to trash out potential risk factors whether they are legal, cultural, employee-related, or regulatory.
- Advancing Concessional Areas
The approach adopted by acquisition teams can determine the success or failure of a company post-M&A. A proven way to accomplish post- M&A success is to utilize the potential clashes in the cultural identities of these merging or acquired companies as opportunities to revamp the company’s corporate identity. Instead of viewing cultural differences as roadblocks, developing strategic messages to help cushion their effects and ultimately lead to compliance. These messages should focus on the difficulties and the opportunities the new organization is embattled with as this will ensure that their goals become fused in overcoming the challenges posed by the Corona Virus pandemic.
Implications of M&A Cultural Due Diligence during Covid
The first apparent implication is as to cost. It is expected that the cost of carrying out M&A will be affected. Secondly, it is to be expected that the structures of M&A agreements will change due to the largely unverifiable, unascertainable, and equivocal nature of due diligence carried out during this Covid period. For example, it is expected that there will be an increase in the demand for information and a considerable need for specificity in terms and conditions. Additionally, it is anticipated that a sort of laissez-faire or flexible approach will be adopted as a way to meet the unpredictable nature of issues in these Covid times.
Conclusion
The Covid-19 pandemic has made even mundane things we used to take for granted like pricing, negotiating, and carrying out M&A a challenge. But all is not lost due to the advent of Content Intelligence that ensures the use of advanced technologies and tools to carry out due diligence in a bid to carry out M&A transactions that are successful. And even though we didn’t think Content intelligence could ever be utilized in this manner, it would now seem as though it has come to stay and this might just revamp our whole idea of the corporate culture.
