Why Diversity Audits are Essential in Mergers & Acquisitions
Bloomberg Law Released a whitepaper on why diversity audits are essential in mergers & acquisitions. Employee benefits and conversations around compliance have long been part of the discussion surrounding significant transactions. More recently, companies have been examining company culture. In the wake of movements like #MeToo and ‘A Seat At The Table,’ companies are adding culture, populations, and social justice to their target company audits. Racial and social justice is a priority in the modern-day workplace. Most companies have included diversity, equity, and inclusion (DEI) departments and initiatives that go beyond the rudimentary HR practices. Studies show a direct link between diversity and business success. Making sure communities are equally represented and respected throughout the organization is imperative. When companies merge, it is not just a financially tactical move. Company culture and values need to be taken into consideration just as well.
The Bloomberg Law piece outlines the following guide in surveying a company’s culture, programs, and overall successful employee integration.
Look for DEI Programs
Strong DEI programs can be markers of success. Look at everything the company has in place that could impact an inclusive environment, such as whether the company has a formal DEI strategy and whether that strategy is effective.
What Does the Company Say About Itself?
Try to get a sense for the culture based on how the company describes its central tenets and foundational principles. Check the company’s official social media posts: Do they reflect a diversity of voices and thought? Are they promoting their culture in addition to their business? Do the company’s actions reflect its stated values?
What Do Employees Say About the Company?
In the absence of a formal workplace-culture study where an outside and impartial counsel can ask focus groups and individual employees for specific examples of the culture, an acquirer can look at what the company’s employees have said about the company in public forums, exit interviews, and employee surveys (if any).
Look at the Data
With the increased public attention on diversity, more companies are releasing their own diversity numbers in response to public demand. Companies can look at the data on workforce demographic diversity through external surveys, awards, or on the public website. An acquirer can request information regarding salary and incentive payments to assess potential issues with pay equity. They can request a breakdown of who serves on leadership teams and management levels.
Don’t Forget to Look at Your Own Culture
Any large transaction can put both the acquirer and target in the spotlight, so it’s as important to assess your own workplace culture going into a transaction for potential reputational risk.
- looking internally at the company’s own demographic data and review whether its policies and practices are built to enhance and support DEI goals; and,
- collecting quantitative data through an anonymous survey designed to elicit employee experiences and perceptions regarding safety, respect, diversity, and inclusion in the workplace; and
- collecting qualitative data through focus groups and interviews, which provide the “why”behind the quantitative data.
The full paper can be found here:
https://www.morganlewis.com/-/media/files/publication/outside-publication/article/2022/why-diversity-audits-are-essential-in-mergers-acquisitions.pdf