Would you consider acquiring a target solely based on the culture?
- This topic has 29 replies, 2 voices, and was last updated 1 year, 9 months ago by
.
-
Posts
-
You admire a company because of its culture, but the numbers aren’t great, would you consider making a bid because you want to analyze and adopt the culture?
Interesting question. I wouldn’t think that would be a desirable acquisition strategy, as you are acquiring the whole company, and ultimately you’re looking for something that will make you more successful as a company. Rather I’d look to learn from them, or companies with similar cultures in other ways. Or hire a management coach – ultimately cheaper!
Definitely no. In the corporate world, if the culture is great but may not create shareholder value, will it be a wise decision to acquire the company?
No – a great culture with failing business results is a) just a social gathering, and b) likely won’t last. Culture and results must not be mutually exclusive and need to go hand in hand to the benefit of both. I would not be keen to acquire a business with a great culture with poor results any more than I would a business with good results and a completely incompatible culture.
Absolutely not, even if I admire the culture, the numbers must support the culture. If I have the money to acquire a company with great culture and low performance, I rather implement the the elements of the culture that attracted me in my own company. I may hire a specialist consultant to evaluate and review my own company’s culture for potential enhancement.
No, while compatible company cultures can be very elemental to a successful deal, differing cultures can be a recipe for disaster. Purchasing a company just for the culture, in the hopes that you can change your culture seems like a doomed venture. In the end M&A is also a financial deal and must justify the costs. There are many other ways to change your corporate culture, without the pain, scrutiny and costs of an acquisition. If you think key people at the organization may be drivers of the culture – try recruiting them!
No, culture is only one aspect for a successful acquisition, although it can be argued as one of the most important things to consider.
The financial and strategic reasons must have equal or slightly more weight in the decision to create value for the shareholders.
The three prisms of strategic, financial, and cultural reasons for an acquisition must be considered to improve the chances for successful integration.It depends. I can’t imagine if numbers weren’t great that the culture could be great, for various reasons. However theoretically, culture could be the primary asset and treated like IP in certain situations like justin.tv that became Twitch.
Culture was the IP. This isn’t too odd nowadays in emerging tech, gaming and other ecosystems that rely heavily on the culture of the company leading the community. The culture permeates through to their customers. Yet, this will undoubtedly mean that KPIs will reflect this (high retention, low CAC, high LTV, etc).
And therefore, leads me back to the original response that I don’t think you’d find great culture with poor numbers, unless you specifically mean financial.
Of course not.
In order to increase the success rate of M&A deals, there are other factors that need to be looked at and analyzed including target company culture.
In addition to the cultural aspect, the M&A deal has to be strategically aligned with the acquiring firm. Also, the target company finical has to be reviewed and assessed.
Thanks
I believe a company culture is something you can admire and try to learn from, but thinking that you can adopt a culture because you acquire a company is probably being over-optimistic. By acquiring the company you are already starting to interfere with the conditions that make that company culture unique and trying to merge the two entities will always interfere with those conditions, I don’t see how that would not be the case.
If you truly admire a company for the culture I would consider a joint venture or another type of interaction, where you exchange workers (if there is a change for both parties to benefit from such a deal). It would also depend if you are competitors or in un-related businesses today. Regardless you would have to accept that culture is difficult to change unless you change the conditions in which that culture unfolds (as you would in an M&A, so you would have to be prepared to make significant changes and work with your own company and staff to guide the culture in the direction you desire.
M&A’s are expensive (they cost a lot of money and require a lot of attention and extra effort of your current workforce) and if there are no financial or strategical benefits to carry that weight I believe it could be one that will put great constraints on your current business.
You can admire and learn from the culture, from a distance.
Doesn’t necessary mean you got to pay for the entire organisation, to learn from it. You might as well buy 10% of the shareholdings and place a key employee to compile understanding and knowledge on how to transform your current organisation to the culture which you admire, which you can then implement the transformation as information comes in, at a much lower cost.
It would seem to be a risky proposition. Then again, depends on the acquiring company’s goals. Is there something about their culture that you believe will bring value to your company…nevermind the economic risks? Is the acquirer has value in that, and knows the risks financially, but believe it will bring broader value to their culture, product, etc…then I think it’s valid. A deal like this would seem to be few and far between though.
It is difficult to quantify the value of “culture” per se, so would be a hard battle to sell to executives, board and shareholders.
Ooooo… Reverse corporate DNA splicing to make the combined company perform better? Other than financial numbers, perhaps such an acquisition might make sense from a Sustainability or ESG / ESS perspective – say for example the acquiring company has been in the spotlight for poor labour practices or lacking in innovation (yet the target company is in a nascent stage, yet to commercialise/ramp up revenues), then the acquisition decision based on the cultural dimension might make sense.
- You must be logged in to reply to this topic.
