The Point: For a successful mergers and acquisitions event to take place, there typically is an avalanche of financial figure reviews/due diligence (actual, forecast, and delta explanations from both buy-side and sell-side). But we asked ourselves here at Tip of the Spear Ventures, is there more to consider than meets the financial eye? What happens when one organization’s culture is in apparent direct conflict with that of the other organization? So in this post, we examine the mergers and acquisitions topic of avoiding culture clash along with 3 tips… Enjoy!
Mergers Create Value and Synergies (Don’t They?)
In today’s highly competitive new economy, where global industry heavyweights fight for market share, mergers and acquisitions (along with joint ventures) appear to be a logical outcome for those looking to be here to stay. Most markets across the globe (even in local communities) provide for three primary providers of products/services. Creating economies of scope and scale while establishing global brands. Or do they?
According to an M&A Harvard Business Review report, 70-90 percent of all mergers and acquisitions fail. So at some point after a merger or acquisition, somehow/someway these once promising “new” organizations that were great on paper failed in practice. So what went wrong?
Culture: The Dominant Barrier to M&A Success?
Blocking the success path for many of these mergers and acquisitions (don’t forget joint ventures too!) is what could be considered a dominant barrier with the name culture. Let’s define culture as the implicit values, beliefs and assumptions that influence behaviors of those employed in an organization. While you may not be able to see culture spelled out, you certainly can see it being played out in the daily interactions amongst an organization’s stakeholders.
So what can leaders at the helm of mergers and acquisitions do to minimize the impact disruptive company cultures can have on success? What follows are 3 tips to assist leaders of mergers and acquisitions in avoiding culture clash:
Tip #3 – Leave Your Egos at the Door
Aggressive and arrogant can be used to describe some company cultures, especially those doing the acquiring in M&A transactions. Typically thought of as “weak” and “gobbled-up” are organizations that get acquired. However, cooperation and promised synergies rarely materialize if both organizations cannot put aside their egos in order for the overall common good to take place.
Tip #2 – Recognize New Cultural Marketing Opportunities
Isn’t business funny, and the leader actions that take place in M&A? While some pretty bright people put together months worth of financial analysis, the marketing that represents the culture of the new entity is rarely recognized nor given consideration for change. On top of this lack of marketing recognition of the new brand, continuing on in a “if it worked then, it will work now” methodology has proven fatal. Recognize new cultural marketing opportunities as two become one.
Tip #1 – Failing + Failing Rarely = Success
When two failing organizations go through an M&A, rarely do we see success be the result. With the old adage of “desperate people do desperate acts” we see two failing organizations combining heading on purposeful path towards future failure. Examples prevail from button-down vs. khakis and engineering vs. sales based cultures not playing well with each other in mergers and acquisitions.
SUMMARY
The Mergers and Acquisitions landscape is a complicated one, full of financial due diligence playing itself out. However, the financial figures alone cannot help in avoiding culture clash. In this post we’ve explore M&A – Avoiding Culture Clash and provided 3 tips to help leaders achieve greater success.
Sam Palazzolo
