Every merger begins with high hopes. No one goes into one of these deals thinking it’s going to tank. What’s often behind a failed deal isn’t bad numbers or intentions; it’s a cultural mismatch. Shared values are key to a successful merger. Most executives pay more attention to synergies and expenses than culture, which means that employees and stakeholders are often left working out cultural issues—and working them out poorly. Here’s what you need to know about how cultural fit can affect the M&A process:
Success is Unpredictable
Successful M&A isn’t about hammering one company into another. A merger is a learning opportunity that presents the chance to capitalize on what works best about both entities. An open-minded approach that embraces teamwork and learning is essential to making reliable cultural assessments and strategically integrating the businesses. It’s often wise for larger, older companies to integrate the younger, more vibrant culture of the businesses they acquire. Don’t stagnate because you’ve been around longer.
One-Size-Fits-All Models Fail
Each company presents its own unique cultural opportunities and challenges. It’s important to get to know a company’s staff, not just its leaders. Take middle managers to lunch and ask them about their departments. Learn what really makes a company tick—not what its executives say makes it tick. These discussions often reveal truths that high-level meetings can’t scratch.
Remember to Be Human
Emotional intelligence isn’t a weakness. It’s a strength. Be real and authentic, so you can share your own culture and learn about another company’s approach. Most businesses welcome this authentic, honest approach, and meet it with their own honesty. Human interactions can allay the fear and anxiety that so often surrounds an acquisition.
Look at People’s Behaviors—Not What They Say
Don’t ask someone what their core beliefs are. Wait until they show you. Negotiations put people in emotional, high-pressure situations that can reveal their true colors. Leaders who push hard for retention bonuses, for instance, deeply care about their people. Sometimes, though, you’ll see a leader behave in ways that undermine their stated values. Heed that warning. You’ll see more of the problem behavior following integration.
You Must Be Ready From the Start
Cultural integration begins well before closing. You need a plan early on. Otherwise you’ll waste time dealing with issues of cultural fit at the last minute. Company leadership must immediately model and reward the behaviors that are most reflective of their values. It must also address behaviors that are counterproductive—even when they’re part of an older model of doing things. Site visits can be helpful. Offer clear explanations for why things must change and why smooth integration is important. Ultimately, key stakeholders want to know what’s in it for them. Give them a clear answer.
Don’t rely on posters and training sessions. Actively work to create the climate you hope to achieve. The stories you tell can go a long way toward making that cultural environment a reality.
Everyone manages change differently. That’s as true in business as it is in life. Some see change as terrifying; others embrace the opportunity. Treat people as people who matter, and communicate in a way that answers their concerns. A little hand holding is par for the course during a merger—and will do much to prevent a catastrophic cultural failure.
About Carpenter Hawke
Carpenter Hawke was founded in 1991 to provide expert M&A advisory services to sellers of privately owned businesses. Carpenter Hawke has successfully advised a wide range of clients looking for unconflicted advice on the sale of their business. Personal integrity and professionalism govern our performance.
Our experience and knowledge of the appropriate steps enable Carpenter Hawke to provide strategy and plan formulation to suit the needs of each sell side client. New England based but we work, Locally and Globally!