By: Dan Chenoweth
Financial managers are sometimes “caught in the middle” of a merger, acquisition, or alliance (M/A/A). Suppose your management team has decided a potential M/A/A is a good strategic fit. It is now your turn to conduct financial due diligence to determine a reasonable market value. You must also project future combined results and track actual results against these projections after the company completes the deal.
As most business people know, many M/A/As fail to deliver expected results. However, most people don’t know those shortcomings often stem from corporate culture clashes. Companies often fail to address such problems until after the merger takes place, often too late to salvage the M/A/A. When projections aren’t met, blame often falls squarely on the financial manager’s shoulders. It is our job to explain why the numbers aren’t there!
“Culture clash” is usually an inherent aspect of the M/A/A process. The bottom line is simple: if the financial manager proactively assesses the risk cultural issues pose to the alliance’s success and helps develop countermeasures, there will be a higher probability the alliance succeeds. Additionally, you will enhance the entire due diligence process and accounting’s reputation.
Consider these issues during due diligence:
- What are both organizations’ cultures?
- How might a “culture clash” impact the deal?
- How can you assess corporate culture while simultaneously conducting financial due diligence?
No longer can a financial manager just look at a prospective M/A/A’s financial information without at least laying the framework for discussing the more intangible cultural issues that can mean the difference between success or failure. By taking a more holistic approach you will add even more value to the due diligence process and further enhance your personal credibility.
Learn more about this topic by attending NCACPA’s eight-hour seminar entitled, “Acquisitions to Grow the Business—Strategy, Structure, Integration, & Due Diligence,” led by Executive Education Inc. discussion leader Don Minges. Offered on November 25 in Morrisville, this course will enable attendees to identify potential acquisition candidates, understand company culture, value businesses and negotiate price, understand the keys to effective and efficient due diligence, and more.
Dan Chenoweth, MBA, CPA, helps clients take their strategy to the bottom line through rigorous project management and change management techniques. He has held executive level positions in general management, accounting and finance in a number of industries including telecommunications, printing and publishing, heavy equipment manufacturing, and apparel manufacturing. Dan is an Executive Education, Inc. discussion leader, lives in Loveland, Colorado and is a former Colorado Society of CPAs board member.