When considering a merger or acquisition (M&A), some businesses often fall into familiar patterns—focusing on strategic alignment, conducting due diligence and creating a solid deal structure—without questioning whether the new partnership will be a good cultural fit.
However, an aligned culture is vital to a lasting partnership, and whilst more businesses are waking up to the benefits that considering culture from the start of M&A activity can bring, some still have a way to go.
But why is it important? Research has shown that 74 per cent of employees will leave a business that is not a good cultural fit, with 78 per cent highlighting a strong culture as a reason for joining an organisation.
Minds that matter
In industries such as professional services, where the retention of individuals who hold vast amounts of intellectual property and experience is vital, business leaders must ensure that culture is a core pillar of any merger or acquisition.
Not only this, but it is also the case that ensuring cultural alignment from the start will reduce post-M&A management time, as processes are able to run more smoothly from day one.
Business leaders and boards should view M&A activity similarly to any personal relationship. As in the dating world, great dates and trips out might be fine for a time, but the true mark of any relationship lies in the day-to-day interactions: how a couple gets on whilst loading the dishwasher, for example.
This is just as true in business and, to ensure a great cultural fit is achieved, business leaders should undertake practical tests where possible. This could include anything from reviewing remuneration and reward moderation together, to taking part in workshops designed to develop a certain aspect of the business. The crucial part is to work together on something relevant and real to see how aligned the businesses are in reality.
Collaborate to accumulate
Collaborating on a project will also ensure that misinterpretations of language can be solved face to face. For example, both businesses may hold ‘innovation’ as one of their core values but might interpret this in different ways. Ensuring that everyone is on the same page is vital to avoid misunderstandings down the line and achieve a more harmonious result.
So how can business leaders and boards ensure that two cultures merge successfully?
1. Be clear on what success means. This can look different, depending on the type of M&A activity taking place, and one size doesn’t often fit all. For example, integrating a single team is different from merging an entire business.
As with relationships, things often break down if one side is seen to be dominating the other and people are forced to change their behaviours. Often, finding genuine common ground in the middle will bring the best results.
2. Go slow to go fast. In any relationship, getting to know the other party is vital for long lasting success. Spend time on practical tests to dig into the other company’s values, understand how they are lived throughout the business, and how this aligns with your own.
It is far easier to merge cultures that already have some alignment, and it is important to be honest about the level of alignment that exists: could this become a deeper connection, or is it more likely to remain at surface level?
3. Be prepared to walk away. If alarm bells start to ring, listen. It can be almost impossible to fix culture gaps, and it may be that the best option for both businesses is to walk away. The old saying ‘Marry in haste, repent at leisure’ holds true here—a merger or acquisition formed on shaky foundations can cause more problems than it sets out to solve, so it is worth trusting your instincts.
Ensuring culture is a core part of any M&A activity from the beginning also relies on bringing the right people in at the right time. Business leaders should look to involve HR teams from the start and, where possible, involve a wider cross-section of employees from both sides.
This means that the process won’t just be a case of leadership teams speaking directly to one another, as a cultural fit at this level doesn’t always translate throughout the rest of the business. Bringing other team members together—while bearing confidentiality in mind—will provide a greater understanding of the potential culture match.
Ultimately, culture is more than words written on a website. It’s about how things will really feel and work when the shine of the new merger or acquisition has worn off.
By bringing in the right people from the start of the process, getting to know the other business by working on selected projects to gain lived experience and seeking professional advice where appropriate, M&A activity can bring a host of benefits and open up new opportunities for sustainable profitable growth.
Sarah Walker-Smith is CEO of legal and professional services group, Ampa