Merger integration going off the rails? Synergy targets evaporating?
Don’t leave culture out of your M&A integration plan
Don’t you love those initial M&A press releases and conference calls, with CEOs touting the benefits of a merger or acquisition? Cross-selling opportunities! Penetrating new markets! G&A cost synergies! Streamlining operations! That sweet sound of EBITDA margin expansion only a few years away…. You can just feel it.
Fast forward a year or two…. Suddenly no one wants to talk about it and the massaging begins….
Then, all of a sudden, we’re on a “journey”
We all know integrating systems, processes and IT can be challenging, but why is culture often cited as the reason M&A doesn’t deliver expected value? Because strategy, operating model and integration all roll up into culture. Or, better said, culture dictates how all these things are executed.
When cultures clash or create friction, how can companies perform at a high level?
How can we have business alignment if we can’t agree on what’s most important and how we show up as an organization?
In short, we can’t.
Decisions are delayed. Trust erodes. Everything slows down. New employees aren’t sure what the strategy means, so they keep on doing what they’ve been doing before. Just when you need people to be open-minded and collaborative, they can become defensive and territorial.
This is when organizations begin to lose time. Inaction seeps in and integration work becomes tactical. Rules of engagement are not broached. The “power” conversation (who has it, how will it be shared, what needs to change) never happens. As a result, those synergy targets begin to slip, or even disappear.
It doesn’t have to be this way.
If you want to:
- Go to market in an aligned way and harvest the benefits of cross-selling and entering new markets – I’m talkin’ sales…folks!
- Address execution gaps and pivot in a proactive way without blaming and losing goodwill
- Retain your best talent – competitors are frothing at the mouth to poach your top performers
- Get your integration DONE – on time, within budget…. Without leaving your people drained
You’ll have to focus on:
- Understanding and identifying culture differences with an open mind
- Identifying where specific behaviors and beliefs work against each other (remember, culture = mindset + behavior)
- Cultivating conversations to determine the best culture values/approach to drive the execution of Newco’s strategy
- Inviting both sides into these discussions and collectively deciding what is best for the business (not individual egos)
Execution, talent issues and achieving revenue/cost synergies will play out based on your culture. Integration is no different.
Incorporating culture integration into your overall M&A integration strategy sets your company up for success. You’ll get ahead of so many problems and can focus on growth, rather than being dragged down by cultural differences for years to come.
Better still, you’ll deliver on your synergy promises… and isn’t that a much more satisfying DCF/NPV to calculate, rather than one that takes 1-3 extra years to achieve?
Note: if your merger/acquisition(s) happened years ago, but you’re still feeling the pain of not dealing with culture integration, it’s not too late to bring those cultures into harmony! Drop me a note.
What’s your M&A “journey” story? Let me know at email@example.com