m&asnapshot

Build value from acquisitions

Business Week analysis and other research indicates that about two-thirds of buying firms destroyed their own shareholders' wealth. Why do seemingly attractive acquisitions fail to not only earn expected benefits but also drain the acquiring firm of value? Certainly, the potential for improved services, collaboration, innovation and efficiencies looked very promising.

Culture tensions get in the way

During amalgamations, mergers and acquisitions, there is potential for 'culture shock' when feelings of personal safety, trustworthiness of others, fairness and social dynamics get damaged early in the transition period. Added to this may be 'culture tensions' from differences in use of power, the degree of formality and standardization of practices that signal that the way of working will dramatically change. New leaders may move into the organization, talent may depart but groups resist changes to the way things get done. Culture clash can emerge draining organizational adaptation, productivity and innovation. Here are some signs that 'culture clash' may be emerging.

• People point out differences in behaviors and practices and start to re-evaluate the way that things are accomplished

• Their own ways of getting things done start to be perceived as the 'best' way

• They worry that what is 'good' in their culture will be sublimated by the other organization's culture

• They defend their own way of doing things and at the same time attack or denigrate the 'way' of the other organization

• Resistance mounts. Top talent starts leaving.

Culture due diligence with the Culture Snapshot for M&A

Rather than waiting and wondering if such issues will emerge during amalgamations, mergers and acquisitions, we can help you establish a proactive approach to culture due diligence and transition to:

• Identify early in the process if the two organizations' cultures are sufficiently aligned to proceed to merger and/or acquisition

• Capitalize on culture strengths and manage culture tensions proactively

• Identify the cultural aspects that could be the source of clash and productivity drain that need paying attention to

• Assess the risks of culture differences during mergers and acquisitions

• Make informed decisions about the degree of integration of groups with different sub-cultures

• Use leaders behaviors as levers to shape a culture that supports the future needs of the new entity

• Maintain productivity and morale and retain talent

Assess 12 areas of potential culture clash

We have identified twelve aspects of culture with the most potential for synergy or clash. By understanding where synergy or friction points will occur early in the process, integration plans can be tailored to capitalize on shared strengths and manage reactions. The Culture Snapshot for M&A assesses such culture patterns as:

• Risk Tolerance

• Tolerance for Change & Ambiguity

• Reliance on Management Science vs. Intuition

• Control Orientation

• Short vs Long Term Orientation

• Open vs Closed Communications

• Consultative vs. Centralized Decisions and more

Dig into the ‘rules’ shaping practices and behaviors

We also use innovative approaches during mergers and acquisitions such as the use of organizational photography and story analysis workshops to dig deeply into practices and the implicit ‘rules’ that operate to shape behavior. These approaches open up new kinds of conversations that shift attention to the beliefs required for the future and enable the selection or development of best practice approaches that can be embraced by stakeholders. Used independently or in conjunction with the Culture Snapshot for M&A, these approaches help to connect people deeply during mergers and acquisitions around shared values, purpose and strategic intent.

Culture due diligence includes the acquiring organization’s readiness

Even before culture due diligence starts, the Culture Snapshot for M&A can provide you with a window into about your organization’s culture patterns and the potential impact they may have on retaining value in a merger and acquisition. Having deeper awareness of the way culture patterns, such as consultative versus centralized decision making, short versus long term thinking, risk tolerance and other factors operate can raise the ‘red flag’ early that culture clash may occur. Knowing the capacity of your own organization for change and the potential areas of culture clash can provide the key insights needed to help upcoming mergers and acquisitions deliver the anticipated benefits and not become those that drain value from both acquired and acquiring firms.

Want a summary of our culture surveys to help you decide where to go to next? Click here to view our CSF Culture Surveys at a Glance Reference Tool.

"We've observed many kisses, but very few miracles. Nevertheless, many management princesses remain serenely confident about the future potential of their kisses - even after their corporate backyeards are knee-deep in unresponsive toads." Warren Buffett