The importance of Cultural Fit in a business sale

During the process of selling a business, usually at the stage where the seller is in exploratory discussions with the shortlist of potential buyers, one of the considerations is how the two parties assess the cultural fit of the two businesses.  At this stage it’s usually confined to how well the buyer and seller get on.

Once things move on and a firm expression of interest is made, both parties will be examining cultural fit in much greater detail; almost a form of “soft” due diligence. Cultural fit is an important factor in an acquisition for small and large organisations.

It is a determining factor in choosing the right buyer and can sit above deal values.

In privately owned companies cultural fit will be closely linked to the departing owner’s personality and vision.  As an acquisition is likely to result in a change of vision and/or strategy, both sides need to ensure they understand, and are comfortable with, the effects of any changes.

Cultural fit is linked closely to the people factor. Merged teams need to be able to work together, and managers need to understand the culture of the newly formed teams in order to motivate and retain key staff.

I remember clearly a transaction I headed up a few years where this issue came up with one of the short-listed buyers. Our clients had met the operational directors and teams and there was a really good fit between them – so we were all confident the cultural fit and synergy between the two businesses was likely to be excellent. However, it all went horribly wrong when our clients met the CEO of the potential acquirer. As a result of that meeting, and the attitude of that individual, our clients decided not to proceed with that potential buyer.

A positive outcome of that decision was that the inability of the two businesses to work together was discovered early on in the process, before our clients entered into exclusivity and due diligence.

Culture clash is one of the main reasons completed deals fail. It can result in failure to achieve the synergies that both parties believed existed and had planned for and, consequently, the transaction would not deliver the expected financial return.

Assessing the cultural fit isn’t always easy and should always be part of the pre due diligence stage of a transaction. Understanding the cultural differences and how to bridge them can mean the difference between success and failure.

To find out more about what’s involved in selling  a business and how to prepare, please contact us for a confidential discussion at


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