The People Side of M&A: Why Culture Needs to Be Part of the Diligence and Evaluation Stage

At Rhizome HR, we’ve worked behind the curtain of deals, from founder-led acquisitions to private equity rollups. No matter how strong the financials, one pattern keeps surfacing: cultural misalignment is one of the top reasons deals fail to deliver their expected value.

Despite this, culture remains an afterthought in many diligence processes. It’s either deprioritized in favor of financial metrics or treated as too intangible to assess properly.

We believe that’s a costly mistake.

This first post in our five-part series on The People Side of M&A explores why culture belongs squarely in the evaluation phase and how overlooking it can jeopardize deal value.

The Real Cost of Cultural Misalignment

Ask any operator or investor who’s been through a tough integration, and you’ll hear familiar refrains.

“We didn’t realize how top-down their leadership really was.”

“Their teams resisted our change management playbook.”

“They said they were agile, but every decision took a committee.”

These aren’t abstract people problems. They’re real business risks.

When culture is misaligned, you often see:

• Leadership attrition within the first 6 to 12 months post-close, creating a vacuum in execution power

• Operational drag from conflicting norms around decision-making, collaboration, or speed

• Employee disengagement, reducing productivity and triggering a wave of quiet quitting or outright exits

• Missed synergies when acquired teams don’t adopt or align with the new operating model

  
  

In the most serious cases, the buyer ends up replacing large parts of the acquired leadership team just to restore momentum. It’s expensive, disruptive, and avoidable.

Why Culture Is Still Overlooked in Diligence

Culture tends to get labeled as “soft”, hard to define, harder to measure, and even harder to fix. Legal, financial, and operational diligence have established playbooks. Culture often doesn’t.

And most diligence processes are designed to confirm what buyers hope is true. When leadership teams are trying to close a deal, they often describe culture in aspirational terms rather than how it really functions. Unless you know what to ask, or how to read between the lines, it’s easy to miss what’s actually going on.

This isn’t about deception. It’s about pace, priorities, and a lack of clarity around who owns the cultural lens during diligence.

Culture is a Risk and an Opportunity

We coach our clients to treat culture as part of the risk assessment and value creation thesis.

That means asking the following questions:

• What are the unspoken rules that govern how this company makes decisions, solves problems, and communicates?

• Are those rules aligned with how we operate, or how we need them to operate post-close?

• If they’re different, can we close the gap with intentional change, or will it spark resistance?

Culture is also a window into adaptability. That matters in any integration, but especially in carve-outs, high-growth rollups, or any deal where leadership continuity isn’t guaranteed.

Culture Signals Can Be Found in Diligence

Culture may feel intangible, but the signals are there. You just need to know where to look and how to interpret them.

Some of the best indicators include:

• Leadership interviews that dig into values, decision-making styles, and views on accountability

• Any existing employee engagement surveys or pulse check data

• Public sentiment like Glassdoor reviews, not for the star rating, but for patterns in praise or critique

• Organizational design and span of control, which reveals dynamics around hierarchy or autonomy

• Internal artifacts like values decks, onboarding guides, and all-hands recordings, which show what’s taught, celebrated, and reinforced

This doesn’t have to be a massive lift. You’re not building a full report, you’re building a working hypothesis about the company’s operating culture and its potential fit.

The Competitive Advantage of Cultural Awareness

Operators and investors know that integration is where the real value gets created or lost. But if you wait until after close to start paying attention to culture, you’re already behind.

Including culture in diligence lets you:

• Plan for integration based on real signals instead of best guesses

• Customize onboarding and change strategies to meet the team where they are

• Show respect to retained leaders by understanding their environment and not imposing foreign norms

• Avoid post-close surprises that slow down execution or damage your internal brand

Culture isn’t a side conversation. It’s core to successful integration.

Final Thoughts

Culture is the infrastructure behind how work gets done. Just like you wouldn’t buy a building without inspecting its wiring, you shouldn’t buy a company without understanding its culture.

At Rhizome HR, we work with private equity, venture capital, and growth-stage leadership teams to make culture a clear and practical part of the deal lifecycle.

In the next post, we’ll explore exactly what to look for when evaluating culture during diligence and how to know which signals matter most.