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To unlock value in deals, understand and invest in these three overlooked elements

The impact of culture, purpose and digital acumen in M&A

Call it the holy grail, a white whale or whatever relentless pursuit you want. Creating significant, measurable value through mergers and acquisitions remains difficult in far too many transactions. Yet M&A isn’t going anywhere. In our 2021 CEO survey, a majority of CEOs told us their companies are pursuing deals. And the numbers bear that out, with record M&A volume and value since mid-2020, after the first stages of the COVID-19 pandemic.

While the appetite for deals remains strong, unlocking value beyond the obvious efficiencies isn’t easy. To strengthen your position — not only as a buyer but as a seller — consider factors beyond the typical due diligence, valuation formulas and integration metrics. Maximizing value for stakeholders requires a better understanding of three often overlooked elements: culture, purpose and digital acumen.

These can be difficult to quantify, but they increasingly impact how companies come together in a deal and how well they can succeed moving forward. PwC has created a brief assessment with critical questions to help you understand how your company approaches each of these important elements.


The culture conversation

What’s at stake

In our 2021 Global Culture Survey, 73% of company C-suite executives and board members said they “walk the talk” on culture, purpose and values. But only 46% of employees below management level agreed. That disconnect is even more challenging when you’re trying to integrate with another company and align cultures. Maybe that’s why, in another survey, 65% of acquirers said cultural issues hampered the creation of value in their last deal.

What to do

Be honest about how well you can accurately assess and understand both your company’s culture and another’s — and the specific elements of each — well before the deal closes. Start with considering different dimensions such as collaboration and teamwork, autonomy, adaptability, innovation, work experience and management. In addition to fostering candid conversations within workforces, you can examine these dimensions through employee surveys and with social listening tools to get a clearer picture of culture.


Power in purpose

What’s at stake

Culture is tied to a company’s purpose, which is built on values and ultimately helps motivate people to come to work and help bring that purpose to life. Your company’s environmental, social and governance (ESG) efforts can demonstrate this connection clearly, with the respective ESG commitments of a buyer and a seller often a proxy for cultural fit. Our 2021 CEO survey found that more than a third of US executives said their companies are adopting new ESG disclosure standards and enhancing reviews of their disclosures. And ESG is increasingly important in gaining support from outside stakeholders. In our Consumer Intelligence Series survey on ESG, over 75% of consumers and employees said they’re more likely to purchase from or work for a company that stands up for ESG principles. 

What to do

Understanding the ESG profile of a company you might buy is critical. Not only should you determine what it prioritizes and how it communicates those priorities, but you should know of any potential landmines that could increase risk, reduce value and create other complications. If your company has been vocal about reducing its carbon footprint, for instance, buying a business that has largely ignored the issue could create conflict during integration and beyond.  


Defining digital

What’s at stake

Companies in many industries have invested in digital transformation, so digital understandably should factor into M&A decisions as buyers consider acquisitions to boost their digital capabilities. Your digital acumen can also affect the deal process itself. According to our 2020 M&A Integration Survey, nearly nine out of ten companies now use digital tools during integration. A digital divide between organizations can create challenges — from due diligence and valuation through integration. And this goes beyond simple software issues. The degree of digital skills among each workforce in a transaction can shape the level of integration and ultimately the speed of the combined company’s digital transformation.  

What to do

Digital transformation can both improve efficiency and enable employees, and retaining talent in tech-related transactions is often essential. Artificial intelligence, cloud, 3D printing, automation … these and other technologies are exciting. But it’s not just about which tech will speed your digital journey, but which one will help which groups of employees get the job done. Only 17% of respondents in our M&A integration survey said their companies gained full access to the desired technical talent in a deal. So it’s not just the technology you have. It’s the intersection of that technology and your human capital. Make sure you have the people necessary to operate successfully. 

Take the next step

Ultimately, these three elements are driven by people — what drives them to show up in a workplace, how they function once there and what skills they bring to the table. Understanding your people and knowing yourself as a company are significant steps in revealing what kind of dealmaker you are and making deals that can deliver value. 

What’s your dealmaking identity? 

Take our short quiz

Contact us

Colin Wittmer

Colin Wittmer

Deals Leader, PwC US

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