Merger and Acquisition Risk

1. Merger and Acquisition Risk By Marcus Wagstaff

2. Why Merge? Growth Competitive Advantages Adding Customers Expansion

3. Employees and Culture Employees are valuable to the culture Know who are the key employees Retention Not always viewed as important Must Integrate Complications

4. Organizational Culture Channel of Communication Compensation Resistance to Change Corporate Values

5. Human Aspect Internal Environment Board of Directors Owners Physical Workplace Employees Culture

6. Employee and Culture Risk The chance that one of these two areas prohibits the proposed value of consolidation

7. Prudential�s Complications 1999 acquisition of Volpe Brown 12 key employees 7 of those 12 left Half of Volpe Brown�s 220 employees left

8. Cultural Due Diligence James Young, CFO of Union Pacific Due Diligence Cultural Due Diligence Raises awareness

9. Cultural Due Diligence 4 Ways Integrate cultural criteria in the merger Have due diligence teams that are focused on cultural aspects Add cultural criteria to data collection Use tools to evaluate �cultural fit�

10. Cultural Due Diligence Integrate cultural criteria early in the Merger The earlier, the better Statement of Ethics/Beliefs

11. Cultural Due Diligence Have due diligence teams that are focused on cultural aspects Broad backgrounds Educate

12. Cultural Due Diligence Add cultural criteria to data collection Requisites Meet with the company

13. Cultural Due Diligence Use tools to evaluate �cultural fit� Merging Cultures Evaluation Index (MCEI) Fill out a questionnaire Scores are tallied for individual managers Summary of each company�s managers Management must then decide what is important

14. Cultural Due Diligence British Study Every company did a financial and legal audit None attempted to identify cultural activity French and German Managers Culture caused problems Not important to senior management

15. Merger and Acquisition Risk Human aspect must be assessed before consolidation because it can cause tremendous problems Cultural Due Diligence is the answer!