Merger &Acquisition Overview
Mergers and acquisitions (M&As) are a significant activity for many organizations. Yet most mergers are not successful, primarily because the “merger of two organizations is actually a merger of individuals and groups.” Buono and Bowditch, authors of The Human Side of Mergers and Acquisitions: Managing Collisions Between People, Cultures, and Organizations.
Unfortunately, few M&As make any effort to integrate different cultures and workforces, even though M&A activities bring about significant change involving employees, organizational entities, systems, shareholders, customers, and many other stakeholders.
Honor is their Due
The traditional M&A approach has included financial and legal evaluations of the acquisition target with little attention paid to the people and culture. Successful M&A strategies acknowledge and honor the importance of organizational culture as a critical element in the long-term integration success.
Cultural compatibility can have significant impact on the ultimate success of M&A activity. A number of credible cultural assessment tools, such as culture surveys and facilitated focus groups, are available and should be utilized. As Dr. Edgar Schein points out, the challenge of assessing an organization’s culture “is more a matter of surfacing assumptions, which will be recognizable once they have been uncovered.” Identifying cultural compatibility on such core values as corporate ethics and quality are important considerations in the assessment of the M&A. The impact of not assessing the degree of cultural similarity might have significant consequences for the combined firm, as cultural tensions and clashes between merging organizations are a common cause of combination related difficulties (Buono and Bowditch).
Placing Cultural Due Diligence on the M&A Agenda
Conducting culture due diligence allows the acquiring company to assess cultural compatibility with the target firm. Cultural compatibility and all of its ramifications need to be understood completely to ensure a successful M&A. The literature on M&A activity used familial metaphors to describe mergers and acquisitions. This is powerful language that further emphasized the significance of organizational members’ experience as a result of an M&A. One internal M&A expert encouraged companies to be capable of articulating the key facets of cultural compatibility to the acquiring company. Identifying the “must haves” of cultural compatibility is like assessing marital compatibility; some compatibility issues are negotiable, while others could be considered “knockouts.”
Executives who worked on a high-profile computer-technology merger participated in cultural due diligence activities. They made the results from their culture surveys available as the selection process for executives of the combined firm began, and the survey results became a component of the selection process. They also introduced “fast-start” workshops to welcome the thousands of new employees to the acquiring company, and articulated the approach to working together.