Leadership due diligence
The Leadership Due Diligence is designed to support investors and decision-makers with critical insights into the Leadership structure and organizational culture of target companies. Typically, it is delivered as a separate work-stream in the Due Diligence process, enabling deal teams to understand who the real value drivers are, how to mitigate human capital risk factors, and how to plan retention as part of the value-creation strategy.
M&A executives we support recognize LDD as an essential part of the deal-thesis because of its direct impact on:
reason for loss of value – lack of Leadership alignment and loss of key talent
of deals fail due to not preempting people risks
of critical talent is lost within the first 2 years after the transaction
of dealmakers claim Culture is the most critical driver of value creation
The intensifying appetite for strategic market growth comes today under an increased pressure for higher business efficiencies and superior deal value.
Indisputably, the transaction impact only produces long-term value if combined leadership capability transforms into a competitive advantage for the merged organizations.
While dealmakers place financial impacts as a primary concern in M&A, human capital topics and organizational culture remain among the most underrated aspects of deal-theses.
However, identifying and addressing Leadership issues and cultural specifics early on in the process reduces the risks of an investment failing to live up to its strategic objectives.
With one in three deals derailing due to Management Team and organizational culture issues, ensuring leadership topics are on the priority list in Due Diligence is critical.
Investors who understand the ethos of leadership structures, their legacy and strategic value, are well equipped to design a robust integration plan and to anticipate risks while capitalizing on the synergies of merging cultures.
We support deal teams in the design of their value-creation blueprint by carrying out a 360o Leadership assessment. Our multi-layer methodology helps M&A professionals gain insights into human capital and cultural determinants, such as: ownership type & national characteristics, decision-making structure, collective and individual leadership track record, underlying values and beliefs and cultural sensitivity, behavioral patterns, transformational predisposition and risk aversion.
Through the information we derive from a series of direct interactions with the leaders in target companies we understand who the top performers, the internal champions and the customer relationship holders are. This becomes central to designing a long-term retention program in order to ensure business continuity.
In parallel, we map out critical areas of Leadership and Culture in/compatibility, thus enabling businesses to anticipate topics which can potentially complicate the integration of the acquired organization or jeopardize the intended investment impact.
In times of expansion, we accompany businesses from beginning to end to ensure they leverage a disciplined, analytical and prudent approach to designing and implementing an integration plan. Based on the outcomes of the Due Diligence phase, we co-create a clear roadmap of activities and a sequence of integration points with an allocation of resources, capabilities and responsibilities from each side of the business.
We help organizations navigate the complexities of the transition by advocating for full transparency and clarity of communication and by fostering commitment on both sides. We organize and moderate workshops where the merging management structures spend time together discussing the values of each business, how they could benefit from each other’s knowledge and experiences, where synergies could be achieved and where functions need to be kept separate or reassigned.
The activities culminate in a proposed organogram for the merged entities, ensuring “right person, right role” set-up, definition of talent integration plans, identification of functional areas where the existing C-suite will need reinforcement to enable corporate strategy.
We tailor our consultancy services to team up organizations across all phases of their strategic development blueprint, pre-DD and post-deal closure:
- Market Access: Our partners leverage our evidence-based insights to save time understanding markets and determining what opportunities for investment and challenges they present. We review topics such as regulations, socioeconomic environment, latest industry developments, technological innovations, investment trends, areas with projection for growth.
- Industry Intelligence and Target ID: We help widen the decision-making base by enabling organizations to truly understand who is who on the market and to create a shortlist of target companies, both in terms of business performance and leadership capacity. We map out all relevant businesses and their respective size, ownership structure, portfolio, as well as important developments with respect to the overall market situation.
- Leadership Benchmarking: When it comes to Leadership Benchmarking, we provide comparative evaluation of all relevant C-Suite executives and combine this with our extended knowledge to enable companies to align expectations and design a consistent approach to leadership-related issues.
- Talent Acquisition: Once a deal is through, our partnership continues with stronger focus on talent attraction and team composition whereby our core expertise in Executive Search becomes critical in resolving any emerging needs in the transformed organization.
Dimensions of Leadership Due Diligence
Executive Committee members assessed
leaders recommended to be retained
draft organograms proposed
areas of immediate synergies identified
Leadership Due Diligence
Client: Pan-European Healthcare Services Leader
Strategy: Portfolio Expansion and Diversification
Rationale: the client was in advanced discussions to acquire a top-three industry participant in one of their international geographies. The deal would allow the company to enter new market segments and would more than double their annual revenue.
Assignment: assess organizational and cultural fit with the client and with their existing platform in the country; evaluate the prospects for integrating and creating synergies across the two businesses; conduct a comparative analysis of leaders and identify the true “value drivers” that should be retained.
Process and key findings:: we carried out a thorough assessment of the seven members of the Executive Board and discovered an experienced, cohesive, very well balanced team that would fit well culturally and would bring significant professional and business value to the merged organization; we flagged the specific risk factors that could hamper the integration, and proposed solutions to mitigate them; we identified several areas that could produce immediate synergies in the post-close stages; four out of the seven leaders were recognized as critical to retain, which resulted in recommendations for alternative organograms and proposed structures for Management Incentive Plans.
of key executives retained
roles transformed and reassigned
Client: International Healthcare Conglomerate
Strategy: Market Growth and Diversification
Rationale: our client was in exclusive negotiations to acquire a highly reputable PE-owned business as part of their growth strategy. The acquisition would complement the market proposition of our client in terms of specific industry knowledge, strong brand recognition and substantial territorial coverage.
Assignment: conduct Leadership Due Diligence of the target company Senior Management and their fit with the client; identify the key revenue generators and assess their potential to transfer to a different ownership and governance structure, and their capacity to lead a multi-sector growth strategy; prepare a roadmap for integration and ensure contingencies to mitigate retention-related risks and cultural clash.
Process and key findings: the assessment of the five executive leaders within the target organization produced evidence on their functional capacity and leadership style, the impact they have triggered since joining the business, and their propensity to stay in the transformed structure; in addition to the LDD findings, we took into account the respective size of the to-be-merged organizations and presented two alternative integration roadmaps that entailed different governance structures and reassignment of roles; following the agreed milestones, all of the leaders from the acquired company were retained and we worked with the merging management teams by organizing a series of workshops and open discussions to support the selected integration trajectory and to ensure swift transition to the new environment.
growth scenarios developed
weeks for team composition
Client: Multinational Stock-listed Services Organization
Strategy: Market Entry
Rationale: the client was considering entering a new international territory through the acquisition of a niche private business. The foothold would give flexibility in implementing a growth strategy while building reputation as a provider of choice.
Assignment: provide extensive insight on the overall industry Leadership in the country; conduct a thorough analysis of target company leaders and their fit with the client; design Leadership Succession blueprint to underpin different development scenarios.
Process and key findings: we assessed over 300 senior executives from a wide variety of industry competitors, including CEO, CFO, COO, CHRO, and M&A leaders, and provided a robust framework of leadership competencies and compensation benchmarks per function; we carried out a multi-step assessment of the composition and the capabilities of the C-suite, their fit within our client’s culture & DNA and their potential to meet the ambitions for future growth in the market; we worked on three main development scenarios and presented a selection of best-in-class leaders who could replace the Senior Management of the target company accordingly; ultimately, our recommendation to keep the CEO in a moderate-growth scenario triggered a replacement of the CFO, CHRO and the COO. Through our Executive Search practice, we attracted the right leaders ensuring a successful team composition around the CEO.
Get In Touch
+ 44 208 936 7669
20-22 Wenlock Road London, N1 7GU