M&A Integration: Bridging the Culture Divide

M&A Integration Insights

Corporate Finance & Restructuring

August 19, 2016

Bridge Culture

In recent years, issues related to corporate culture have surfaced as one of the biggest challenges during a merger and acquisition (“M&A”) integration. Yet organizations have done little to overcome obstacles to culture integration. During the 1980s and 90s, it was a widespread practice to impose the acquiring company’s culture on the target; after 2000 it was more common to leave the target’s culture intact. Neither approach is optimal in all situations. In this article, we will explore a better approach to M&A culture integration and the ingredients for its success.

Our Perspective on Culture

Financial Acquirer is Not Always the Cultural Acquirer. The company providing acquisition currency (the financial acquirer) should not necessarily impose their culture on the target. At times, an acquisition is driven by importing the target’s culture, or “way of doing things,” such as in situations when the target has innovative products/services or “know-how.” In these cases, the target becomes the cultural acquirer.

Culture Must Support the Business Strategy and Vice Versa. For instance, if a business strategy is built upon innovation, the culture must be aligned across all enablers (i.e. processes, systems, structure) and oriented toward instilling such an environment by encouraging and embracing creativity and invention.

Not an Overnight Process. Once similarities and differences in culture are identified, aspects of these cultures to be preserved and enhanced must be identified. Culture will need to be shaped gradually.

Culture is an Outcome, Not an Input. Organization culture is an outcome of good, or poor, integration. Relentless focus on business performance backed by the right processes, systems and incentives will create a sustainable culture. One does not have to change culture as a pre-condition to integration.

Culture is Not “Good” or “Bad” — It Just Is. An entrepreneurial culture is “loose” for some and “undisciplined” for others. Focusing on leveraging cultural strengths to improve business performance will ultimately create a stronger culture.

Sub-Cultures Matter. Culture can prevail differently in different parts of the organization. Sub-cultures exist based on function, demographic and/or geographic differences, but may be most pronounced in organizations with an aggressive acquisition history. To affect change, sub-cultures must be recognized and addressed separately yet kept in alignment with the broader organization.

Starts at The Top. Culture is a reflection of the behaviors and attitudes exhibited by the organization’s leaders, their adherence to the strategy and their decision making. From our experience, the higher up you go in the organization, the clearer the distinction of cultural differences.

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