We have previously reported on
human capital considerations in M&A transactions; in this
post we consider how corporate culture affects a deal's
possibility of success. While qualitative considerations often sit
on the backburner in the lead up to a deal, compatibility of
corporate cultures can be an important factor in determining
whether a merger or acquisition will be successful. According to a
survey by Bain & Co., executives have
indicated that the number one cause for a deal's failure to
achieve promised value is due to clashes in corporate culture.
Corporate culture is multifaceted and can include behavioural
norms and characteristics, the operating model of the company,
including the organization's structure and governance
mechanism, the method by which employees are incentivized and
rewarded, and the workflow process.
A proper, in-depth assessment of the compatibility of the
corporate cultures should be conducted before an M&A deal is
finalized. Depending on the stage of the transaction, different
methods can be used to assess the corporate culture of the two
businesses. At early stages, public information may provide a
general overview of a potential target's business strategy and
business model. At more advanced stages, methods for obtaining the
required information can include interviews with management,
customer and employee interviews and surveys regarding behaviours,
attitudes, and priorities.
Depending on differences in corporate culture, a transaction can
be structured in a way to take advantage of differences and
maximize synergies. Perhaps complete assimilation in an acquisition
is not the best approach; a better approach may be to allow the
target company to operate independently. Each transaction will be
unique, in some cases implementing structured strategies across
both companies will drive growth; in other cases, structure may
actually hinder growth by limiting the entrepreneurial spirit of
While traditional considerations in an M&A deal are
important, another factor companies need to consider when
structuring a transaction is cultural compatibility. In some cases
culture may trump strategy.
The author would like to thank Rayomond Dinshaw, articling
student, for his assistance in preparing this legal
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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