What is the number one issue that can derail your M&A deal?

Mergers and acquisitions are a common growth strategy for companies. During the due diligence period, most of the analysis revolves around the financials of the company, but a more subtle issue could be what derails the deal. What issue presents the biggest challenge to completing a deal? Corporate Culture.

Why Culture Matters

Culture may not seem like an obvious roadblock to a merger, but it can cause substantial concern for both companies. In a study published by Mercer, 85% of companies listed failure to address culture as a key barrier in failed M&A transactions. Additionally, a study by IntraLinks found 59% of respondents identify culture as the most important factor in determining the success of the deal.
Why does it matter so much? For starters, every company has its own culture, subcultures, values and ways of thinking. When two companies enter into a Mergers & Acquisition agreement, these cultures must come together, and that’s not always easy. If the cultures are substantially different, one of those cultures will win out, and the fear of change exacerbates the issue, leading to a chaotic transition.

Planning for Success

When considering the acquisition of a business, it’s smart to look closely at the corporate culture. Be proactive and work to address the cultural differences before the deal closes. At ELI, our clients have used our Civil Treatment program as a way to establish a baseline with the acquired company and to safeguard their own. By sending the leaders and managers through the training, the employees that are to be integrated can experience the new culture and understand the expectations. It’s critical to establish and clearly communicate the standards by which the new company should operate.
Of course, this starts by having the culture and standards mapped out for your own company. If standards are not defined, or your leaders are not held accountable, it will be difficult to hold the new company to these standards. Company culture is not something that can be fixed in a month or two. It takes time to build a healthy, dynamic culture. With that realization, smart companies begin working on their culture years ahead of a potential merger or acquisition.
Regardless of whether you are in the process of acquiring another company or not, it’s always a smart idea to be proactive about your company culture. After all, it’s one of your most valuable assets. When you commit to changing and directing the culture of your company, you’ll quickly see how it can be used as springboard for growth.
Learn more by downloading the “Culture in M&A: We know it’s important, so now what?” study from Mercer

Leave a Comment:

Your Comment: