Mergers are like marriages. They are the bringing together of two individuals. If you wouldn’t marry someone for the ‘operational efficiencies’ they offer in the running of a household, then why would you combine two companies with unique cultures and identities for that reason? – Simon Sinek, author and speaker
Mergers and acquisitions are a standard of the modern business landscape. 2021 boasted record-setting levels of M&A activity, with the UK’s total deal value estimated at £332.1bn.
Although the occurrence of a merger or an acquisition will be heavily influenced by external factors such as political situations, socio-economic climates, market trends, etc., its success often comes down to one key internal impact:
The cultures of the companies involved.
The same can be said for businesses undergoing departmental mergers, or partnerships or moves within centralised and decentralised organisational structures. They often mirror a larger-scale acquisition, facing the same challenges; merging people, history, strategy, goals, communications style, working styles, etc,.
One of the biggest challenges for any organisational expansion – be it through an acquisition or an internal restructure – is ensuring you have a cultural fit amongst all parties involved. In fact, McKinsey & Company state that 25 percent of executives cite a lack of cultural cohesion and alignment as the primary reason integration and merger efforts fail.
Culture is essentially what drives a company; It structures employee attitudes and behaviours, inspires senior and management approaches. It’s how your work gets done.
To successfully and efficiently integrate, there must be a significant understanding of how each merging party operates in the day-to-day. This insight requires a more holistic type of data, with the answers mostly found in the experience and feedback of employees:
The aim of this type of questioning is to generate an honest evaluation of how the employees within each company or department achieve their work. It also helps to identify the cultural gaps that could be problematic down the road: What are the similarities? What are the opportunities? Where could both cultures amplify the value of this new structure? What differences could cause friction?
“These [cultural] problems can linger on for years after the merger has been completed…failing to successfully integrate the cultures is a very serious thing.” – Professor Glenn Carroll, Stanford Graduate School of Business
The internal transition from one company (or one department) to another can take a real toll on employees. Working to minimise the insecurity and discomfort that can come from mergers or acquisitions should always be high on a leader’s priority list. Too much internal disruption will have an impact on operations.
Thorough communication with employees is key. Everyone should be informed about any changes: what the changes will be and why they will be implemented. Articulating the desired culture and values of a newly-integrated organisation will work to help people feel confident in new ways of doing business.
To underestimate the impact that culture can have on the success of a merger or acquisition process would be extremely remiss. While it may appear that two organisations or two departments are perfectly compatible, you need to ensure you are considering cultural alignment as early in the process as possible. Clashes in culture may not change the decision to merge, but it could change how you merge.
In 2018, we were brought into to support an executive leadership team following their buyout by a larger, global brand. All staff were being retained, and the plan was very much to grow the business. From the outset, there was a clear culture clash: A large, slow corporate machine had bought a smaller, agile and quickly-growing company. The differences in how each organisation operated were palpable. Staff on both sides of the merger became defensive about their workplace methodology; they reported feeling criticised or threatened by the imposed changes.
Fortunately, we were able to guide them through the adjustment. Now, a few years later, some of the staff who were originally a part of the smaller company now hold senior positions in the large corporate organisation. Their ability and hard work were rewarded. This merger was a success in the long term, but it relied on staff involved being supported to embrace the new approach.
When we work with clients who are navigating mergers and acquisitions, or internal restructures, we focus on adaptability. Organisations should always be prepared to re-evaluate their original integration strategy. Cultural harmony isn’t something that can be created overnight. It’s success often lies in the flexibility and adaptability of business leaders to align their people with their strategic priorities.
A merger of any kind often provides an exciting opportunity to develop a business. Having a strong and healthy organisational culture at the forefront can guarantee a company’s continued growth and success.
You can read more about building a positive workplace culture here.
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