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New alliances: alternatives to the M&A route
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Insights from David Olsson: Importance of Cultural Integration
In this article published by The CFO, David Olsson, a faculty member of the Institute of Mergers, Acquisitions, and Alliances (IMAA), explores the crucial role of culture in mergers and acquisitions (M&A). Olsson highlights that while companies globally invest over $2 trillion annually in M&A, a significant number of deals—up to 70%—fail to meet their expected value, primarily due to a lack of cultural integration. He underscores that successful M&A transactions require more than just financial and operational alignment; cultural cohesion between merging entities is key to ensuring long-term success.
Olsson emphasizes the importance of addressing cultural issues early in the M&A process, from due diligence through post-merger integration. He also explains that companies should assess the compatibility of corporate cultures to avoid clashes that could hinder the realization of synergies and value. Moreover, Olsson advocates for leadership to play a proactive role in fostering a shared cultural vision, aligning values, and ensuring the combined entity functions as a cohesive whole.
This comprehensive approach to M&A, which includes cultural assessment alongside financial and operational planning, can significantly reduce the risk of failure and improve the chances of a successful integration.
Read the full article written by David Olsson in The CFO about the importance of cultural integration in the success of mergers and acquisitions process here: https://the-cfo.io/2018/04/16/new-alliances-alternatives-ma-route/
Growth through M&A is a popular route for many companies, be it for acquiring new talent, technologies, processes or plant, market or territory penetration, or disruption. But M&A is not the only possible route to growth.
Growth through M&A is a popular route for many companies, be it for acquiring new talent, technologies, processes or plant, market or territory penetration, or disruption. But M&A is not the only possible route to growth.
M&A represents a significant risk, not only financially but also reputationally. A lack of ability to realise deal benefits can put boards off all but bolt-on acquisitions.
There are other forms of business alliances that can deliver significant benefits:
- Partnerships: where a legal arrangement is created to support parties who cooperate or collaborate
- Joint ventures: where two companies agree to create and run a business entity with its own executive team. In this case, the two partners do business together usually acting as joint suppliers into the newly formed business
- Strategic alliances: where two businesses looking for a win-win situation can mutually leverage their capabilities to create a profitable outcome for both.
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“Even though a lack of cultural cohesion and alignment is often cited as the primary reason transactions fail, prominent examples strongly suggest that even the most high-profile acquirers are guilty of paying little attention to how culture may impact the success of a transaction.”
Inattention
Integration
Evolution of cognition
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