Culture Matters After M&A

The number of mergers and acquisitions (M&A) was 62,000 worldwide in 2021 with a total value of $5.1 trillion

Yet, even with all the careful planning that goes into an M&A, 70%-90% of acquisitions are “abysmal failures.” These failures are a result of a variety of common inadequacies:

  • ineffective risk management,
  • unclear operational strategy, 
  • lack of communication between stakeholders,
  • poor project management, and
  • misalignment between company cultures.

Cultural alignment (or misalignment) will impact your results just as much as, if not more than, operational and strategic alignment will. How do I know? We see it a lot.

Our marketing firm routinely works with large companies whose workforce has been acqui-hired (hired through acquisition). Teams from multiple companies are brought together and expected just to work together with little or no understanding as to how they should work together from the cultural perspective.

Let’s back up for one moment. There are three types of culture combinations that typically happen in an M&A. Each has its place.

  1. Assimilation – a smaller company is expected to conform to the culture of the larger, acquiring company
  2. Correlation – the culture of each company remains largely independent, sharing best practices after the merger
  3. Co-creation – two (or more) organizations collaborate to define and align around an entirely new organizational culture

More often than not, what we see is the acquiring company assumes assimilation is happening but the other company assumes correlation is happening. The second environment we routinely see is that everyone assumes assimilation is happening but there is no apparent company culture in which to assimilate. The result: a decrease in overall productivity due to increased friction.

Perhaps an example will help illustrate the potential for friction when company culture is unclear. Let’s consider two cultures company together through M&A that are vastly different –  consensus-driven vs. fast, delegated decision making.

Imagine the culture of one company has always been consensus-driven where decisions were socialized for agreement before moving forward; whereas, in the other culture, the norm was to move fast and make decisions quickly based on delegated decision rights. Teams from the fast-moving culture become frustrated when it takes too long to make things happen and perceive discussion as red tape. While at the same time, teams from the consensus-driven company are frustrated when their voices aren’t heard before decisions are made that impact them. If left unchecked, these gaps could have widened to the point of failure.

So, just how do you determine what your company culture should be? And even more importantly, how do you get an acqui-hired team to embrace and embody this culture?

Liger has walked numerous companies through this process and has seen the alignment and reduced friction as a result. Whether you need a complete mission, vision, values (MVV) overall or a refresh to your cultural narrative, Liger is here.