Chapter 2 How these acquirers built their business case and the ROI question As noted, cultural investigations are now an accepted part But first, let’s get to the “elephant in the room” — and the of the M&A process, but it was not always so. These serial first question that finance professionals raise in reviewing acquirers had to build a business case to incorporate cultural any business case: “What is the direct return on investment work into their process, given the comprehensiveness of (ROI) from cultural work?” However none of these leading the proposed undertaking and the impact the work would companies could show a return in terms of pure numbers. have across the entire organization. It was not introducing a They could not find a direct mathematical line of sight superficial cultural conversation, supplementary to what other between culture work and financial returns, either within work was going on, but planting the culture as a central part the group’s review of their vast database of deals, or from of the process, and a priority discussion topic on any deal external research. Absent any ROI, the focus of the business agenda meetings. case must be grounded on the benefits of this work, over and above the cost of doing it, by showing how the output of the And they did this by: work supports specific transaction goals or mitigates risks. ƒ Doing the research to understand root problems and opportunities. ƒ Being clear on the goals and risks that the work would support and the costs and benefits of any analysis. Yes, this ROI question comes up, ƒ Presenting the case in terms their business leaders more than we’d like it to, and we’d like could relate to by using the company’s internal style and to have a good clean answer. But we terminology. don’t. Invariably it’s asked by leaders new to M&A and continuously by our finance function. It’s not a measure that can be meaningfully attributed It’s not working on culture, for culture’s to culture in deals. It’s the wrong sake. Some of our first attempts at question, the wrong road to go down. this business case took this rather It’s a bit like asking what the ROI is naïve approach. We knew culture was on one component that goes into our important, but we did not have much airplanes. We have to stay true to the substance behind the statement. We business case we have developed, but ‘crashed and burned’ in front of some the ROI question will never go away.” our leaders, when it was not explicitly Corporate development leader clear to them what this work would lead to, what it would impact.” Corporate development leader 4 willistowerswatson.com