M&A Leadership Diligence

Effective management is the key to success for every organization; it is critical to whether value from the acquisition will be captured or lost. Research shows that between 50% to 90% of acquisitions fail to meet expected returns, often due to misalignment of culture and leadership deficiencies. Surprisingly, acquiring companies often do little to objectively verify the quality, competency and culture of the management team. Carefully assessing a target company’s management team prior to an acquisition greatly enhances an acquirer's probability of realizing value and avoiding costly mistakes.

Private equity firms can enhance their due diligence process by including leadership and culture evaluations, which identify the skills and capabilities of the individuals and the culture of the leadership team.

The due diligence assessment process includes:

Objective, standardized assessments for cognitive abilities, including critical thinking and financial acumen.
Personality inventory measuring how one operates and is perceived in the workplace, including leadership, resilience, stress behaviors, and motivations.
Behavioral interview by a Ph.D. level psychologist

Results are provide both verbally and in writing for the acquiring firm.

Thoughtful PE firms extend the value of the formal pre-acquisition assessment by deploying it in various ways post close such as:

Feedback and coaching for the portfolio leadership,
Improving the portfolio company onboarding process,
Understanding how to adjust communication for effectiveness, and
Team-building tool for the portfolio company leadership itself.

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