Cultural Due Diligence

Cultural Due Diligence (CDD)

What is it?

Cultural Due Diligence™ (CDD) was created to meet the growing need for a comprehensive "user friendly" process for not only assessing and analyzing organizational culture but for integrating (due to a merger or acquisition) and transforming cultures. It is a 4-phase integrative, structured and well thought out change process for creating sustainable cultural changes. The phases include:

The Dig – Assessing Cultural Congruence (in the case of a merger/acquisition this occurs for all entities involved)
Culture Connection – Developing the Change Plan
Transformation – Implementing the Plan
Sustaining the Gains – Creating metrics and ongoing processes and programs for sustaining cultural congruence

Most companies will engage in financial due diligence and legal due diligence to explore merger compatibility, or evaluate the feasibility of an internal change initiative such as restructuring or consolidation of operations. Not many are paying attention to cultural due diligence.

Consider this: Seventy-five percent of all mergers, acquisitions, and general corporate change initiatives fail within the first three years. One of the major culprits contributing to this failure rate is the lack of attention to organizational culture -- the Human System.

Listen to what a former Wall Street insider has to say about Cultural Due Diligence™…

Is culture a factor when it comes to business integration activities?

According to an independent study conducted by New York based law firm, Wachtell, Lipton Rosen & Katz on merger and acquisition activity in the banking industry, 4 of 7 common factors that affected M&A success were culturally related.

Why is it important?

Our experience shows that conducting an early and thorough assessment of organizational culture can help the acquiring company identify potential cultural roadblocks and address them before they become bottlenecks and diminish deal value.

Facts and statistics on the role of culture in M&A activity:

In addition to the study commissioned by New York based law firm, Wachtell, Lipton Rosen & Katz mentioned above. Other facts and statistics are:

2004 Chaos Report, produced by the Standish Group found that only 34% of information technology projects achieve desired results. The remaining 66% of projects were found to experience two common issues: 1.) Problem solving and/or data gathering at the onset of the project; and 2.) Lack of employee or team commitment to implementation - this was the most significant factor impacting success.
According to a Mergerstat report there has been 4,879 deals as of June 2006 at an estimated value of $616 billion dollars. Given these statistics, there is a possibility that 3,659 deals may not reach their expected ROI for a potential loss of $462 billion.

Organizations do a great job of conducting legal due diligence and financial due diligence. In fact, deals would not get done if not for these in-depth and significant processes. The missing link in M&A activity is “Cultural Due Diligence” where the human systems of both organizations are assessed, diagnosed and integrated.

In business today, the bottom line is that you can’t just focus on the traditional bottom line!

EMERGE International
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Huntington Beach, CA 92648
Phone (480) 595-9874
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