Acquisition Due Diligence for an International Construction Company
Business Case
The CEO of an international construction company wanted more insight into the people and culture of an acquisition company as part of the due diligence process.
The CEO had to complete the due diligence process for a large acquisition that would double the size of the organization and expand the geographic footprint, positioning them for future growth. Given the size of the acquisition, it was a high risk, high gain opportunity. The CEO wanted more insight into the people and culture since a lack of cultural fit is the reason that most acquisitions fail.
In prior smaller acquisitions, the company had conducted numerous joint-venture projects with a potential acquisition as a way to get to know them, but that was not possible in this case.
The CEO wanted an in-depth assessment of high-level executives to understand who was critical to keep. This on-site assessment process required the executives to complete an interview, multiple questionnaires and job simulations in the first 30 days of the due diligence process. The on-site interaction allowed CMA to provide insight regarding the executive team and culture, as well as other critical business issues.
CMA conducted the executive assessments, prepared individual and aggregate talent profiles and provided a description of the culture, in addition to identifying three potential integration issues.
CMA discovered problems with one division; consequently that division was left out of the offer. CMA also identified potential concerns with another division; this insight resulted in the company agreeing to a lower potential liability. We also helped the company make decisions about how to structure the leadership team. Finally, CMA helped identify members of the parent company’s leadership team that had the skill to lead the newly acquired organization and bridge the cultural differences.
Outcome
As a result of the engagement, the company was able to negotiate a more favorable purchase price. The data provided by CMA helped the company decrease the acquisition purchase price by multiple millions of dollars, or what equated to 200 times CMA’s fees.
