Private equity and culture

by Moris Beracha

It is a key that the new owners of any company - no matter the branch- focuse their attention on the strategies that promote change without resistance.

Moris Beracha.- It is a key that the new owners of any company – no matter the branch- focuse their attention on the strategies that promote change without resistance.

There is an aspect of which it is rarely spoken when dealing with issues related to mergers or acquisitions through financial alternatives such as private equity. This has to do with the culture existing in the different companies that decide to become one.

Certainly for a long time, there exists what is called cultural due diligence and that is implemented in some companies when they decide to opt for the alternative to boost a private equity operation in which another company acquires the majority shareholding.

When intended to carry out such a merger operation, it is necessary to take into account that there is a diversity that characterizes the work environment. It is not just a question of examining financial statements and establishing that the accounts are clear. A company is much more than its figures; it is actually its people and its corporate culture. Hence, those processes of integration of a part of the former directive or management with the new majority owners must always consider that it is a process of coexistence of two very different parts.

It is more than proven that the productivity of a company is highly related to the level of motivation of its main asset that is the employees. The creation of new ways of working must be carried out as an integral process and not as an imposition to avoid that the final product continues having the same or better quality.

Attorney Alberto Rebaza, considered by Chambers & Partners as one of Peru’s leading lawyers in the Mergers and Acquisitions (M & A) chapter, told in this regard the newspaper El Comercio de Lima that culture is the topic that generates more interest in a due diligence process, because the funds generally do not buy 100% of the companies, but rather become partners – majority or minority – of the founders, “who know not only how to lead the company successfully, but have consolidated a style of doing the things that sparked the fund’s interest.”

It is thus logical to understand that culture ends up being a strategic element that must be analyzed very well. Thus, the human resources or personnel management department is vital for the integration process to understand that there are certain coexistence codes, method of work, negotiations with workers and even management decision-making that must sometimes be designed cautiously to avoid damaging the corporate environment.

One of the world’s most prestigious businessmen, Jeff Bezos, the fifth richest man in the world according to Forbes magazine and founder of Amazon is constantly quoted when referring to the success of his ventures: “You may have more talent to start a business, but teamwork is what will lead you to success. A single person is not able to build a business alone, and it is teamwork that nurtures the company and gives it fresh and innovative ideas at all times.

Understanding that any process of change creates an environment of uncertainty and that it is precisely this emotion that is necessary to know how to manage not only requires managerial effort but also business leadership.

Hence it is a key that the new owners of any company – no matter the branch- focuse their attention to the strategies to promote change without resistance. It is part of growing up in an atmosphere of success, harmony and achieving the main objective of creating value in companies and producing important dividends.

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