Cultural Due Diligence in Mergers and Acquisitions
Cultural due diligence
1. Introduction
Why Cultural Due Diligence (CCD)
The implementation of effective cultural due diligence is well recognized in both the academic and business world. Through mergers and acquisitions, as well as any other business alliances, cultural due diligence has helped companies enter global markets, acquire capital, technology, branding, and country specific practices to help do business. It also reduces the risk and maximizes the profits in many ways (Cartwright & Cooper, 1992). Studies have shown the vast differences between companies that utilize cultural due diligence with those that do not. Profits, company production efficiencies, and employee satisfaction have all been improved with effective CDD. Spalner (2008) explains, a proper CDD help managers to make more effective decisions, allow better risk and reputation management, help in recovery planning and crisis management, help in implementation of strategy, communicating the corporate character, alignment of internal behaviors and external expectation (particularly the stakeholder) and improve the productivity. She also argues that understanding the culture help immensely attracting and retaining talented human resource.
Generically speaking, CDD suggests the ultimate objective of any business combination is to attain synergy, where both companies achieve higher results than that would have possible independently (taxonomy of managerial goals in M&A; Walter & Barney, 1990). This is through the cultural awareness of both social teams and managers working in the environment, under one set of common goals across all cultural boundaries.
Many studies have suggested that a large number of business mergers, acquisitions and Greenfield projects donʼt produce the anticipated result; particularly those that involve combining two units from different countries, (Krattenmaker, 1999). In an increasingly globalized business environment, which both facilitates and forces the
1. Introduction
Why Cultural Due Diligence (CCD)
The implementation of effective cultural due diligence is well recognized in both the academic and business world. Through mergers and acquisitions, as well as any other business alliances, cultural due diligence has helped companies enter global markets, acquire capital, technology, branding, and country specific practices to help do business. It also reduces the risk and maximizes the profits in many ways (Cartwright & Cooper, 1992). Studies have shown the vast differences between companies that utilize cultural due diligence with those that do not. Profits, company production efficiencies, and employee satisfaction have all been improved with effective CDD. Spalner (2008) explains, a proper CDD help managers to make more effective decisions, allow better risk and reputation management, help in recovery planning and crisis management, help in implementation of strategy, communicating the corporate character, alignment of internal behaviors and external expectation (particularly the stakeholder) and improve the productivity. She also argues that understanding the culture help immensely attracting and retaining talented human resource.
Generically speaking, CDD suggests the ultimate objective of any business combination is to attain synergy, where both companies achieve higher results than that would have possible independently (taxonomy of managerial goals in M&A; Walter & Barney, 1990). This is through the cultural awareness of both social teams and managers working in the environment, under one set of common goals across all cultural boundaries.
Many studies have suggested that a large number of business mergers, acquisitions and Greenfield projects donʼt produce the anticipated result; particularly those that involve combining two units from different countries, (Krattenmaker, 1999). In an increasingly globalized business environment, which both facilitates and forces the