Whenever two companies come together through the merger and acquisition (M&A) process, something many forget to consider are the difficulties that arise when two different company cultures come together. Oddly enough, even though it is this difference of cultures that often leads to M&A failure in delivering expected outcomes, surprisingly little attention is paid to the topic. I think there are two important lenses through which to view the topic. The first has to do with how you go about integrating diverse cultures, while the second is more about capitalizing on cultural diversity to leverage it into better performance for the new entity. But that’s getting ahead of myself. I need to cover some basics first.

Whether it’s a merger or an outright acquisition, bringing two organizations together to form one is a tough challenge. According to a 2011 survey by consulting firm Aon Hewitt, nearly 50% of M&A deals fail to achieve their stated objectives (source). Why do so many M&As fail to deliver the value people were expecting? There are lots of reasons, but the failure to integrate the two cultures in order to achieve optimal synergies is a prime suspect, being the second-most cited reason among the 123 organizations surveyed for the Aon Hewitt report, while another survey by Bain shows it as the number one cause of failure (source). And it probably is a driving force behind many of the other reasons cited. And yet most companies don’t even track cultural alignment as key metric in an M&A. Nearly 60% of them admitted to not having any particular approach to either assessing or integrating culture, and none of them could say their cultural integration efforts were effective (if there were any in the first place). It seems many companies have a vague sense that this important to the M&A, but once it’s in process it tends to drop off the radar screen because no one knows what to do about it.

What practices are most likely to make a big difference when facing an M&A cultural integration challenge? Here are three to try on:

 

Tackle it Head-On and Early

If you put it off, it will inevitably drop off the radar screen entirely, as has been shown by research. Companies facing this challenge need to put it front and center from the very beginning of the M&A process. This means spending significant amounts of time doing your due diligence on cultural integration from the time a deal is announced to the time it closes. And the work gets even more intense after that.

 

Move Beyond Assessing to Managing

Another key practice of companies who successfully navigate these tricky waters is not getting stuck in the cultural assessment stage. To be sure, accurately assessing different organizational cultures is fraught with difficulties, but you can’t let that bog you down (for more information on organizational culture assessments, see my previous articles on Assessing Your Organization’s Culture and Culture Assessments for Mergers and Acquisitions). What you’re managing (or leading) in reality is a change process, which means you should take some time to evaluate different change models and select one that’s a good fit for this major change project. The firms that fail in their M&A cultural integration efforts are those that never get beyond assessing the current state cultures and future desired states.

 

Robust Communication

Firms that are successful in M&A cultural integration are in constant communication with all stakeholders about what’s happening and why in the change management process. This is another effort that needs to begin early and extend throughout the life of the M&A process, both before and after the deal.

 

What many organizations fail to do is dig deeper than a superficial cultural assessment. Such superficial assessments can certainly identify the predominant cultural traits of both entities involved in the M&A, but what you really need to understand are the factors beneath the traits that drive culture. When you do that, you’ll have a much clearer picture of what needs to happen to make the M&A cultural integration successful.

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