PMI | Cultural conversion

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    Christian Münnich

    Would you rather aim to merge cultures or allow significant differences after an acquisition?


    Depends on the transaction thesis and the business models. Example – if the acquiring company is more a holding company and not an operating company, there can be more cultural difference. If the acquiring company is more an operating company, then the cultures need to be more integrated. Holding companies tend to allow acquired companies to continue to operate with a high degree of independence while rolling up results to the parent. Operating companies tend to centralize more services, so cultural integration is critical to improve lines of communication and centralized operational services.

    Other considerations are brand identity, awareness, and marketability. Let’s take the retail sector – Jewelry businesses. Years ago, Zales Jewelers in the 1980’s and 1990’s went on an acquisition binge, acquiring People’s Jewelers (Canada), Bailey Banks & Biddle, Piercing Pagoda, and Gordon’s Jewelers. Each was a niche in their client service level (low, middle, high end jewelry retail). In their respective markets, they were well known, had their own cultures, and there was value in retaining the brand identity. Add to that, Zales was not too far out of it’s own bankruptcy at the time of some of these acquisitions, so the Zales name, as well known as it was then, was still a bit tarnished.

    These brands had been staunch competitors and there was some pushback by employees that was alleviated by the understanding that they could retain their original cultures. The changes, however, still happened. Integration was very planned, purposeful, but slowly rolled out. Most people thought it was business as usual but when one looked back over a 3 – 5 year timeframe, the changes and cultural integration was very apparent.

    It was even more apparent with Sterling Jewelers (Kays, Osterman’s, Shaw’s, Jared the Galleria of Jewelry, etc.). So integrated did the acquired businesses become that if you put blinders on and looked only at the showcases, you would never be able to tell what store you were in. All display elements, jewelry styles/brands, and case designs were identical, only the store names (and sometimes the banner/wall colors) were different. Now, think to 2014 when Sterling acquired Zales. At that time, Sterling was the world’s largest jewelry retailer but Zales was the nation’s largest. Combined, they owned 16% of the fragmented global market on jewelry just after the acquisition. And both were bitter enemy combatants in the world of retail jewelry. Imagine the cultural integration headaches that caused!! Yet, they are still successful to this day despite the challenges of 2 global recessions, a global pandemic, and slews of social justice issues from sexual harassment suits to gender discrimination in hiring and promotion practices.

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