Post Merger Challenges
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How harmful can cultural barriers be when it comes to realizing the combined value of an M&A post acquisition and in your opinion, what are the steps that can be taken to integrate the entities in cases when the target and acquirer have drastic differences in corporate cultures?
I think the most impactful thing an acquiring company can do is to actually do a thorough assessment of culture, identify where there are significant differences, and be very deliberate about decisions regarding those differences. It might be possible to work with leaders from the target company to find a middle ground that both companies will adopt, or maybe there are things where the one side simply has to adapt. In either case, there should be a clear plan to enable the change with strong communication and resources provided so no one feels like they have to figure it out on the fly, which will likely lead them to continue doing things the way they’re used to.
Such situation happened previously with FedEx when they tried to expand their operations from US to Europe (Italy) by acquiring an Italian freight company. Initially FedEx tried to force US culture on the Italian company (i.e. no lunch hours, long working hours, etc.), however FedEx understood early during this merger that they cannot just completely change the Italian company’s culture immediately and they decided to keep it as is and to hire an Italian branch manager to lead the operations within Italy.
I agree with the earlier comment on doing a thorough cultural assessment – identify the similarities that you can highlight and build further. Also identify the differences and understand how tied each group is to those elements, are they open to change or are they at the core of their very being. Plan for it to be a long term game, you won’t be able to change the critical elements overnight. Also understand what has to change in Year 1 and what’s negotiable for the parent organization, building out a strategic plan with a logical flow will help to make smaller steps to close the larger gaps in culture. You’ll always have some differences, I’m sure you see them by office or business unit today in your own organization. Best of luck!
I have found that having very clear and open conversations about culture is extremely important. Be upfront in saying that integration is most challenging because of cultural differences. Work with employees (not just management) in trying to identify the differences, find ways to respect the differences, celebrate the differences, and work in harmony. It is SO difficult!
Great topic, Srrah. I used to think that it just didn’t make sense for companies with different cultures to merge. Slowly, I’m realizing that even companies with similar cultures will face post merger challenges, and both need comprehensive integration plans that include change management from Day 1. Employees will want to know why they’re merging and what that means for them. A stronger focus on clearly articulating “what’s in it for them” might go a long way for any merger is my guess.
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