Buyout firms planning an acquisition or preparing a portfolio company for exit must consider the impact of poor corporate culture, particularly on a potential IPO.

By David Berman, Chris Horton, Robbie McLaren, Anna Ngo, Nell Perks, Charlotte Collins, Catherine Campbell, Tom Evans, and David Walker

No institution, whatever its geography, industry, sector, or size, is above the negative impact of a poor culture. Culture-related issues at Uber, Sports Direct, Boeing, and others highlight the implications of getting things wrong, including financial loss, reputational issues, and damage to investor confidence.

Often defined as “the way that people within an organisation behave when no one is looking”, the focus on corporate culture has become more acute during the COVID-19 pandemic, as investors and consumers observe and judge companies based on their navigation of the crisis, particularly the treatment of employees and wider societal stakeholders. LP expectations on PE firms to adequately diligence and monitor portfolio company culture are also rising, and the global regulatory direction of travel is clear. In our view, buyout firms planning an acquisition, or preparing a portfolio company for exit must consider the impact that poor corporate culture may have, in particular on an IPO.