Culture impact trumps culture fit in mergers

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Culture impact trumps culture fit in mergers

M-and-A-planning-team

 
The most effective work on culture begins well before a deal is in full swing. With thoughtful preparation, a clear strategy and commitment to cultural alignment, organisations can improve their odds of achieving expected merger outcomes.
 
 M&A deal cycle overview
 

Most organisations start thinking about culture in earnest after a deal is signed or closed. Others, only when people start leaving the business – especially when people they want to keep start leaving in droves. All too late. To improve the chances of merger success, it is critical to have culture on the table well before diligence begins.

Being well versed on the cultural attributes of your own organisation, well ahead of considering acquisitions or other similar business combinations, provides a foundation for both deal and business success.

Before or early in the Assessment Stage… start by asking and answering:

  • “what culture is needed to meet our future business challenges?” and then
  • “how is this different from how we currently work together?” and then
  • “what do people need to do differently in the future?”.

Only after you understand where you stand culturally and determine where you need to head, is it possible to assess the culture of potential partners in terms of the impact their culture will have on yours. How else could you predict cultural impact, (i.e. whether a potential partner’s influence will take you closer to or pull you further away from your aspirational culture)?

And only after assessing cultural impact is it then relevant to consider cultural fit (i.e. if your people can actually get along and work together). Many, many organisations consider only the latter, to the detriment of business outcomes over time.

So, first things first:

  • Be clear on expected business outcomes and strategy
  • Establish a framework and common language for describing culture, so that business leaders can agree and communicate clearly about what culture is and how to create or change it
  • Determine the culture required to support business outcomes (start this work with top team and then agree what other input is required)
  • Understand own current culture (use cultural assessment that provides information in a way such that it can be acted on) and compare this with future required culture.

By taking this discipline you then will be in a position to evaluate potential partners in context.

Sensible practices for evaluating potential partners

Given the nature of deals, it is typical that access (to information and people) and competing priorities are the biggest limiting factors to undertaking a detailed cultural review of potential partners when a deal heats up. Still, it is possible to take a progressive and methodical approach that allows for capturing information as soon as it comes to hand and bringing it forward in a systematic way.

Best ways to stay at or ahead of deal pace when it comes to managing with culture:

  • Be clear on transaction strategy and supporting culture strategy
  • Based on the work done on your own culture, set criteria for cultural attributes you seek in a partner (and conversely cultural attributes to avoid)
  • Establish approach and checklist/tools for undertaking a “desktop” culture review of potential partners based on publicly available information
  • Establish approach for use by deal team and others involved in interactions with potential partners to observe, capture, debrief and assess behavioural clues given by representatives of potential partners and their advisors throughout the normal deal process
  • Teach, then coach deal team to use the tools; alternatively, join key meetings and interactions with the deal team to do this assessment on their behalf
  • Consider how you will deepen your understanding of a potential partner’s culture depending on expected level of access throughout the deal cycle.

In summary…

  • Being well versed on the culture of your own organisation before considering transactions provides a foundation for success
  • Ideally, work on culture begins before or at the beginning of the deal cycle
  • Having supporting processes, tools and people in place before things heat up is key
  • Progressive focus depends on capturing and bringing forward information from earlier stages
  • Ideally, genuine access restrictions (to information and people) due to legal and commercial requirements should be the only limiting factor

Are you clear on the current culture of your organisation and do you feel confident the cultural impact of your merger is going to be the one you are looking for?

Walking the Talk has partnered with Isely Associates International to develop a global M&A Executive Masterclass for leaders in high-growth organisations. If you want to know more, click here.

Download the Culture Masterclass for M&A Executives brochure with full information by clicking here.

See more M&A advice by clicking here.
 

Karen Isely

Karen Isely is the founder of our partner, Isely Associates International, a specialist consulting business focused on mergers, acquisitions, joint ventures, corporate restructures and other disruptive business transactions..
You can follow Isely Associates Intenational on Twitter @IselyAssociates
Or connect with her on LinkedIn

 

 

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