The decision to engage in a business merger goes far beyond vertical integration or capitalizing on market synergies. There are many opportunities inherent in combining the resources, assets, talent, market share, and intellectual property of organizations. However, the success of a business merger often falls on one critical factor that too many organizations don’t account for: culture.
Cultural Integration Is Critical
Culture plays a fundamental role in the success of mergers and acquisitions because it represents the core values of each company. While many of these values might be similar, how they’re embodied by management, employees, and the brand can differ significantly and the recognition of this can be the key to success or failure.
Building bridges to close culture gaps needs to be a core objective in any merger and acquisition plan. Without a focus on integrating cultures, even the most well-orchestrated M&A activity can become a rocky road with frustrated teams.
Even Balanced Business Mergers Don’t Feel Equal
Is there such a thing as a merger of equals? Even companies with similar balance sheets and market capitalizations often fall into rank and file as “winners” or “losers” in a merger. Company B takes Company A’s name or becomes its subsidiary. The branding of Company Y is dissolved and replaced with the colors, logos, and language of Company Z. Change is inevitable.
Even in a merger of equals, strategic moves are chalked up as wins or losses for one company or the other, and employees take note. There’s a natural propensity to believe that culture — especially a well-loved, long-held culture — will also dissolve within the merger. Can we still wear sports jerseys on Friday? Will the remote work policy change? Will my team stay the same, and where does my seniority rank after the merger? There are an infinite number of questions that, if not answered, can quickly devolve into fears or frustration.
It's important to note that cultural uncertainty isn’t only prevalent on the “losing” side of a merger. Any change affecting culture is one that’s likely to be met with trepidation. Even the perceived "winners" can be frustrated when they believe the other side isn't embracing the change or changing quickly enough. While many merger and acquisition strategies seek to create synergy through compromise, cultural changes need to be approached with tact to ensure that compromise isn’t seen as loss.
Creating a Cultural Integration Plan Before Your Business Merger
One of the biggest reasons mergers fail on expected value is because there’s an initial culture clash — and not enough attention to cultural differences. Companies fight to preserve their culture for fear that it’ll fade into the merger. Instead, it’s vital to facilitate the idea of a new, shared culture: one that incorporates the best-loved elements from both companies into a cohesive set of values that apply to both sides. It all starts with a plan.
- Identify the core values of both organizations and seek to bring them together seamlessly. This often means conducting employee interviews and soliciting feedback, which offers the additional benefit of earning trust through stakeholder involvement.
- Create a cultural integration plan that encapsulates the most important values from both organizations. Bring them together in a resilient, new (or modified) culture that invites shared ownership from both organizations — rather than one folded into another.
- Designate cultural ambassadors and create accountability during the transition. Giving employees ownership of new cultural standards fosters a sense of pride and a willingness to adopt them — not only together, but as part of a new, larger team.
- Engrain new culture standards into all aspects of the organization: from the branding to internal decision-making processes. The embodiment of a shared set of core values and cultural standards is what truly makes them real after a merger.
- Track and monitor key metrics that show the adoption and inclusion of new values and standards within the merged organization. Use metrics as a way to foster discussions about culture, as opposed to a tool for assessing culpability.
- The most important thing any two organizations can do to prevent tension is to pre-plan for a merger. Waiting until after a merger to address cultural differences or integration speed bumps means taking a reactive stance (as opposed to a proactive one). Pre-planning can head off morale slumps, talent exodus, integration inefficiencies, and other problems impacting the success of the broader merger.
How Aspirant Can Help
If your organization is readying for a merger or acquisition, consider the potential cultural concerns that could drive a wedge between merger goals and outcomes. A M&A consultant can add invaluable perspective to this process. Use the form below to schedule a casual discussion about how we can help support your team in building out a cultural integration plan.
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