Culture is crucial to mergers and acquisitions (M&A) success. A misalignment of culture creates clashes of behaviors, values, and procedures. If the cultural differences between two companies fail to be addressed, a failed merger may be the result. Culture impacts leadership, company values, and customer retention throughout the M&A process.
5 Ways Culture Impacts Mergers and Acquisitions Success
1. Communication Styles
Often, communication styles at a company go unsaid. For example, everyone at Company A knows that it’s rude to send company emails after hours. However, everyone at Company B believes that staying on top of your inbox is a sign of respect. The clash here is inevitable.
Differences in communication styles, management structures, and decision-making processes can lead to integration challenges. It’s difficult for a merged company to become one when teams are constantly misunderstanding each other.
2. Company Values
It can be difficult to create a unified vision for a company if its values aren’t in alignment. Cultural differences can influence the alignment of values, which can make it difficult to create a unified vision. This can create conflicts in decision-making.
For example, one company may prioritize a laid-back culture where vacation days are taken frequently. Output is measured over a wide time period and discussed in quarterly one-on-ones with management. The other company may sharply evaluate daily productivity and expect employees to address drops in output, advocating for themselves before management notices. These conflicting expectations lead to conflict and employee retention issues, which we’ll discuss more below.
Management styles differ from company to company. A failure to align management styles can lead to conflict. It can also lead to a lack of direction for the team.
4. Custom Retention
Today’s customers are loyal to brands, which means they’re loyal to the culture of the company. If a merger leads to a change in culture, it may impact customer loyalty. Mismatched company cultures create brand confusion.
5. Employee Retention
A major shift in culture often leads to employee turnover. This happens when employees feel disconnected from the company. It can also happen when expectations for their role have changed or if they no longer feel valued by management.
This can result in a loss of talent and historical knowledge of the organizations and can hinder merger success. A high employee retention rate is one sign of a successful M&A.
Consider the cultural fit of the two companies before the merger happens. This can include assessing company values, procedures, and priorities. Identify areas of alignment and potential conflict in these areas. Establish clear communication channels for how conflicts will be resolved.
Respond to the challenges that come up in the short term. Use those challenges as ways to learn what your long-term issues will be. If possible, define what eventual M&A success looks for at your merged company. This will give you a goal to aim for and can be used to inform short and long-term choices.
Every successful merged company looks different, but they face many of the same struggles. We’ve seen this time and again at Project Genetics. Contact an expert at Project Genetics today to get help keeping your M&A on track.