Mergers and acquisitions (M&A) promise a wealth of strategic growth opportunities, from rapid expansion, to enhanced competitive advantage and access to new markets, but not all integrations yield the results they set out to achieve.
A common cause of M&A malfunction is a misalignment between the two company cultures.
Businesses who find themselves in friction fail to make decisions and work together with the pace, efficiency, drive and enthusiasm required to seize the opportunity from the outset - meaning they are often unable to maximise value and reap the performance gains forecast.
Conversely companies who win at M&A go in with their cultural eyes open. Choosing to focus on it early, they take practical steps to identify and amplify the behaviours that will set them up to realise the most value over time.
Rubica is an organisational change consultancy, with over 20 years experience in shaping workplace cultures to encourage high performance and value creation. Here are our 5 top tips for growing an advantageous company culture throughout the M&A process.
You can also watch our video series on managing company culture during an M&A. Access it here.
Culture enables strategy. So, unless you believe in leaving what could be your biggest competitive advantage to chance, you must pay culture due attention from the outset.
It’s crucial to diagnose both company cultures early as part of the due diligence process. This work cannot be superficial if it is to be effective.
Invest time in gathering deep insights that dig deep below the surface and you will begin to reveal the underlying assumptions that constitute what people perceive as ‘normal’. Combining these with team observation will help provide a meaningful foundation for your culture work to begin.
Playing the long game is necessary, not just because of the role culture can play in undermining value creation, but because company culture is all about shaping and changing people’s behaviours.
New habits take time to master, and people need space to learn and practice new ways of doing things with and from each other before the ‘new’ can become the ‘norm’.
This is particularly true during the M&A process, which brings with it a host of other changes.
Although the cultural aspirations are likely to be enterprise-wide, starting with such a broad scope may well overwhelm your efforts and allow cultural tensions to bubble over, with a negative impact on value creation. Combat this by prioritising effort using two criteria:
These are the places where contradictions, tensions and opposing forces are most likely to occur and their impact amplified. e.g. planning processes, decision making structures, and interfaces between teams, such as between technical development and commercial/sales groups.
Or where would cultural differences most immediately be ‘felt’ on performance? e.g. if specific teams or functions such as customer services have very different behavioural norms, this is likely to be experienced as dissonance by the customer and impact on customer experience.
During the M&A process, your collective behaviour is as important as your expertise. It’s therefore essential you are extremely clear on which behaviours will help you create value, and which will hinder your success.
Both the behaviours you will now advocate and the ones you no longer tolerate should be well communicated, role modelled and reinforced by as many people as possible.
Explaining why certain behaviours are highly valued and valuable will also help people clearly understand how they can do well in the new organisation, boosting talent retention.
It’s critical to design systems, processes, measures and rewards which support and enable these positive behaviours.
If the mechanics of your business do not support your culture, or are designed without it in mind, they can erode or undermine it by sending mixed messages.
Businesses that go through integration often see mixed results. When confronted with a mixed bag of data, most of our attention usually goes straight to the areas that are struggling. This causes us to go into problem-solving mode.
We begin to ask ourselves and each other ‘What can we do to troubleshoot poor performance at the bottom of the pile?’
But what if we flip this behaviour on its head, and instead look for the places and moments in both organisations that embody excellence.
Obsessing over, what Dan and Chip Heath call ‘bright spots’ allows us to understand why success is possible within exemplary pockets. And capitalising on our newly combined strength can be as simple as cloning best practise throughout the business.
High performing teams and individuals often populate bright spots. At Rubica we call these people ‘beacons’ because they act as a guiding light to show others the way.
You can amplify beacon behaviour by connecting them with each other and as many people within the organisation as possible and providing platforms to broaden their visibility.
Consciously setting priorities and a framework for a new or merged culture is different to doing the whole process behind closed doors and then presenting the new organisation with a set of expected behaviours they are asked to ‘live’.
Finding opportunities to involve people in the process is also a cultural signal of what you want to create and sends a powerful message that everyone’s expertise is valued and respected.
This is especially critical if part of the desired culture is a sense of shared ownership and high accountability or if inclusion is deemed important. You need to practice what you preach – obvious but rare.
This doesn’t mean everyone will be involved in every decision, but it does mean offering people the chance to influence certain decisions that will add value.
Creating the right company culture through mergers and acquisitions (M&A) is about taking an intentional and practical approach to culture work.
Diagnosing the underlying assumptions that govern both businesses early is the most effective way to identify what matters while you have the time and opportunity reshape it.
Looking for cultural hot spots, risk areas, bright spots and beacons gives you a practical starting point that focuses on spreading positive behaviours which ladder up to your overall ambition to create maximum value.