Mergers and Acquisitions: Why Culture Matters
Mergers and acquisitions as a growth strategy has become popular once again. Like any business deal, the long-term success takes hard work and a strategic approach to creating synergy between companies.
The Impact on the CompaniesIt is not uncommon that employees of an acquired company fear losing their jobs, complain about being in the dark, and feel demoralized regarding the future of their contributions to the company. Traditional integration of businesses focuses on consolidating resources, including assets (both physical and financial), brand names and employees. More progressive integration includes capturing core competencies like best practices, routines, knowledge bases and skills. Often ignored are the other assets including maintaining collaborative leadership, retaining talent, and cohering the cultures of the companies.
While a merger or acquisition (M&A) changes ownership, ideology, and practice of the company, the most critical change is often organizational culture as it can affect the long-term and short-term success of the deal. Some aspects that should be kept in mind when a merger or acquisition happens include:
1. Processes and procedures from each organization that create a specific cultural trait as to how employees and management approach work on a day-to-day basis;
2. Organizational myths, which serve an inspirational purpose or appropriately link the current work to the company's history and often increases the odds of talent "buying in" to the changes;
3. The mission and values of a company helps new employees effectively assimilate into the organization through an informal socialization process can help new managers bring in, and maintain, talent;
4. Maladies that exist within the companies should be addressed to ensure a healthy awareness of any dysfunctional behavior or processes results in changes to these deficits;
5. Customs and habitual practices, especially as they reflect the moral and ethical standards that the organizations follow should be integrated in a way that equalizes these mores and takes the best of each to move forward.
Successful AcquisitionsNot surprisingly, there is no magic formula to make a successful acquisition. Indeed, each deal requires its own particular strategic logic. Generally, however, there are several approaches that have a track record of successful merger or acquisition. These include improving the target company's performance, consolidating companies to remove excess capacity from within the specific industry, accelerating the market access for the buyer or target's products, acquiring skills or technologies more quickly or cheaply than they can be built, exploitating a business's industry-specific scalability (economies of scale), and picking a winning company early on and helping develop its business.
Whether the economy is contracting or expanding, mergers and acquisitions are an essential growth strategy for businesses. Those seeking to delve into mergers and acquisitions must be meticulous in several areas of a transaction from financing to regulatory approval to valuation and operational issues.