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Does a fish rot from the head?: an exploration of consideration of culture at the due diligence phase of a cross border merger or acquisition
thesisposted on 2022-03-29, 00:06 authored by Roderick Alexander Smith
In 2014, Mergers and Acquisitions (M and A’s) were valued globally, at US$3.5 trillion. Of those, more than a third were cross border transactions. The failure rate of M and A’s is high. Depending on the criteria used to measure this, failure rates have being estimated as being from 40% to as high as 90%. This presents a sizeable issue for the management of the M and A market. In recent years, research has attributed this high failure rate to a lack of consideration of culture prior to the merger taking place. This is the case in terms of corporate culture and workplace culture. International transactions also include an element of national culture. With the increase in size and number of cross border M and A’s, consideration of culture at the stage of due diligence is important if possible failure is to be mitigated. This thesis will report on an exploratory study focussing specifically on if and how considerations of culture are integrated into due diligence. A recent cross border merger between two companies, one based in Australia and the other based in Asia has been analysed. Data was drawn from semi-structured exploratory interviews conducted with select members of the due diligence team. These were used to assess the team’s practices, attitude and views to the consideration of corporate culture. The data was analysed in relation to the central themes that emerged across the different interviews, as well as identifying areas of divergence. The results are presented as a combination of conventional qualitative data analysis, coupled with the use of art based methods. The results have enhanced the understanding of how culture plays out as a part of due diligence as its depth can be appreciated through both analytical and impressionistic accounts. In conclusion it is evident that the practical role and purpose of due diligence and the team performing this task has diverged from the theoretical views of scholars of what due diligence actually is and what it is done for. Aspects of culture are considered poorly and in some respects not at all, at the due diligence phase of mergers and acquisitions, based on the data in this thesis.