Culture is a critical but often forgotten aspect of M&A integration (also known as post-merger integration). As much thought should go into cultural integration as the financial and legal aspects of a merger – ignore it at your peril.
Without giving company culture the attention it deserves, major organizational problems are almost a given. What is culture? Think of it as the ingrained aspects of an organization, such as leadership and communication styles, and company-wide behaviors, mindsets and social structures.2
At one end, you might have an established company with a traditional approach that prioritizes rigid processes and maintaining the status quo. On the other, the target company could be a fledgling start-up with an agile approach, out-of-the-box ways of doing things, and pioneering team members.
In jarring cultures like these, post-merger integration issues can easily arise. Add to this poor communication between leaders and employees, the departure of important personnel, underutilized talent, lack of motivation, and growing disharmony between the two parties and problems inevitably emerge.
Not only can cultural discord create friction, it can also sabotage the value of the deal. Naturally, any M&A agreement is undertaken to boost a company’s value – either through increased scale or cost savings – but when people aren’t properly considered, obstacles to successful post-merger integration arise and business output can drop.
Organizational culture directly affects the employee experience. As a result, the customer experience, business relationships and shareholder value are all impacted.3
Put simply, when there’s cultural friction, an M&A’s potential value decreases or disappears entirely, becoming one of the 70-90% of deals that fail.
Often, these challenges only arise after the deal is done. That’s why it’s essential to consider the cultural alignments and disparities of each organization well in advance. Organizations can then engage the right leadership, dedicated integration teams and advisory services to provide counsel on merging the two companies more effectively – and mitigate the risk of failure.
Beyond the initial cultural assessment, leaders and companies need to take steps to ensure a seamless and efficient M&A integration journey both during the M&A process and afterward. This is not to say there won’t be hiccups on the way to successful integration, but knowing what problems could arise and having an effective integration plan in place can empower leaders to pre-empt and identify problems before they do real damage.