AI-Powered Cultural M&A Diligence Analysis| Deloitte US has been saved
Authors: Kyle Forrest, Nathan Gagnon, Carrie Lace, and Ashley Vuu
Culture diligence is a vital aspect of pre-deal M&A work and GenAI has become a vital tool for performing that work accurately and efficiently. In this blog post, we explore a few uses cases for GenAI in culture diligence and how it can help leaders and deal teams alike to focus on nuanced decision making and spend less time processing data.
The role of GenAI for M&A
For M&A professionals, a focus on AI is not just centered on which organizations to target for acquisitions to accelerate an organization’s AI capabilities, but also on determining how M&A teams can best utilize GenAI to accelerate how work across the deal life cycle is executed.
Imagine a world where your internal employee-facing communications can be pre-built for a transaction or a world where diligence report creation is accelerated so that leaders can focus more on discussing the data, insights, and decision-making.
In the near future, we will be profiling specific use cases demonstrating how HR professionals and corporate development teams can leverage GenAI to accelerate deals. In this article in our series, we look at how GenAI can help address the culture impacts of mergers.
Prioritizing culture in M&A by leveraging GenAI
Numerous studies have demonstrated that the importance of culture in M&A cannot be understated. (For a quick primer, our colleagues Ami Rich and Matt Usdin have a short podcast that discusses the key components that need to be addressed to set up a transaction for success.)
As company culture diligence has become a more prevalent part of the diligence process, deal teams can often feel pressure to add culture analysis while completing diligence activities within an ever-compressing time frame. Completing a thorough company culture diligence that includes conducting external and internal research, identifying relevant insights, and delivering recommendations to the deal team can be challenging to accomplish within the time available. This is where the capabilities delivery by GenAI can come into play. GenAI can develop the initial company culture diligence report by summarizing and analyzing data sets from public sources such as Glassdoor, LinkedIn, and Zippia; or, if available, internal data sets such as engagement survey results. This GenAI-generated report would provide suggested focus areas to explore via qualitative research such as management interviews. This reduces the time a person spends on data gathering and summarization and instead allows more time for refining insights and person-to-person research.
Let’s use a deal scenario to help illustrate this.
Deal scenario
Let’s say you’re on the deal team at Naturally Clean, a company that makes all-natural soaps. You have been asked to examine an acquisition of The Soapery, another all-natural soap company. You can leverage GenAI capabilities to accelerate cultural M&A diligence analysis to help inform the decision to buy the company and complete the integration planning process.
Insight No. 1: Using publicly available data
The deal team starts by applying GenAI to analyze employee reviews on Glassdoor and Indeed to compare and contrast Naturally Clean and The Soapery’s cultures. This includes assessing items like the company’s values, work environment, and opportunities for growth. Once the summary analysis of each company’s culture has been created, GenAI can predict the likelihood of cultural challenges based on the similarities and differences, which allows the Naturally Clean deal team to adjust the integration timeline accordingly.
In this example, when the Naturally Clean team scrubs Glassdoor and Indeed for employee reviews of The Soapery, GenAI identifies a common complaint by The Soapery employees that The Soapery leadership team is inaccessible. Employees find it difficult to get a meeting with their manager and often feel like they are not being heard. The Naturally Clean team can incorporate this feedback into the integration approach to conduct regular site visits and have coffee chats with employees, offering the explicit message that the Naturally Clean leadership wants to hear directly from employees and incorporate employee input into the integration planning process.
Insight No. 2: Using internal data
Let’s say The Soapery has provided employee survey data. The Naturally Clean team can evaluate past employee survey responses to highlight potential differences between each organization’s culture.
In this example, GenAI informs the Naturally Clean team that a key takeaway from The Soapery’s employee survey data is that 80% of employees prefer the hybrid working model that requires working from the office two days a week. Conversely, Naturally Clean’s team knows that for their own organization more than 75% of all employees enjoy the company’s current work-from-home flexibility.
The Naturally Clean team can leverage this insight to have a focused leadership discussion on how best to navigate any potential changes within the policy and cultural difference. Using GenAI to surface this finding allows the team to quickly address these issues in the integration planning process.
Elevate your culture analysis
The example of Naturally Clean’s potential acquisition of The Soapery highlights one of many ways in which GenAI can accelerate summarizing, analyzing, and generating insights based on provided data that thus allows a deal team to focus its time and effort on decision-making, person-to-person research, and incorporating insights into the integration planning process.
In our upcoming articles, we’ll look at the other ways GenAI can augment different activities within the deal life cycle to the benefit of deal teams and HR professionals. Stay tuned!
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