Cultural due diligence will become important in dealmaking: Report

In the new environment, acquirers will be undertaking significant additional due diligence to assess the effects of the crisis on the seller’s business, the report said.

"There will be a premium on forward-looking information as well as qualitative factors around changes in business practices. Culture – people’s beliefs and behaviours – will be fundamental in successfully navigating these changes, including: people’s attitudes towards the new work from home environment; shifts in values, often towards more people-centric approaches; building agile and purpose-led cultures that can respond effectively to change," the report added.

According to the survey conducted by Culturelytics and Venture Intelligence, 95% of investors said they would find it very helpful to conduct ‘cultural due diligence’ prior to a deal, adding a culture assessment to financial, legal and commercial due diligence. "Specifically, they would like to see a tool that measures the likely impact of culture on the financial targets for the merger," the report said.

Nearly 67% of investors would prioritise investing in an organisation with an excellent team, as they believe that the right team of people can always make the best of an available strategy and is the key to successful integration of two organisations, the survey found.

Around 72% said culture plays a significant role in successful integration in all or almost all deals. About 44% said culture plays its most significant role in successful integration within the first 100 days following the completion of a merger or acquisition.

"In other words, culture should be an integral part of the strategy for a merger or acquisition from the outset, not just an afterthought," the report added.