Soft Due Diligence to Improve Integration in Business Acquisitions: Midroc Electro in Sweden

Title: Soft Due Diligence to Improve Integration in Business Acquisitions Level: Master thesis in Business Administration Authors: Emma Sundberg & Robert Svensson Supervisor: Daniella Fjellström Examiner: Maria Fregidou-Malama Date: June 1st, 2017 Aim: The aim of this study is to create a deeper understanding of soft due diligence and its role in the integration process of acquisitions. Methodology: This research applies a qualitative research approach. Ten semi-structured interviews were conducted with participants from an electro engineering company in Sweden that performs business acquisitions and due diligence. Secondary data was obtained from relevant scientific peer reviewed articles, book, and websites. Findings & Conclusion: This study provides insight regarding the connection between soft due diligence and integration. To integrate target employees, it is essential that the soft due diligence assessment manages to provide with knowledge surrounding cultural and HR related issues. Some of the issues identified to influence the integration are: quality of soft due diligence assessment to minimize gap between target and acquiring firm, attitudes of employees, key personnel, organizational cultures, neglected risks and aptness between the target and acquiring firm. It is necessary to gather information about the factors mentioned above for the integration to proceed and for the acquisition to realize its purpose. Finally, if the strategic goal is to integrate an acquired company to achieve synergies and productiveness, the soft due diligence assessment is of major importance to find implications and to act on gathered knowledge. Theoretical contributions: This study is one of the first to apply the concept of soft due diligence to integration in acquisitions. The developed conceptual model reflects the influence of HR and cultural due diligence on the integration process. It also signifies the influence of potential risks in the integration emanating from neglected soft due diligence. Managerial implications: By conducting soft due diligence assessments the gap between target and acquiring firms could shrink, thus facilitating integration efforts. Managers should evaluate how they can make use of the main factors found influencing integration in their acquisitions. By using such factors, we found how critical aspects of how to successfully integrate retained personnel can be provided to managers and due diligence teams. Furthermore, managers can closely scrutinize the risk identified to emerge from substandard soft due diligence assessments, while being aware of how these can help managers to develop a deeper understanding for issues that can affect their integration efforts and facilitate the process by applying appropriate actions. Limitations: Since human and cultural related aspects are considered in this research, the findings related to the specific company with limited room for generalization and integration factors, may not concur with similar research. Furthermore, our research is based on a case study which in addition, limits the external validity. Therefore, there is a possibility of getting different answers with the same questions, thus limiting the application of this research to other companies. Suggestions for further research: Further research should focus on developing a strategic soft due diligence framework to gain in-depth understanding of the target company. In addition, it should be investigated if and how the motives behind an acquisition influence the soft due diligence assessment.