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When companies enter into a merger or acquisition deal, when they enter into a joint venture with another organisation from the organisational point of view there is a common element: little interest during the planning stage and the myth that “we will pick the best of both world after the deal is completed”.

 

Why is this wishful thinking?

In my experience when two (or more) cultures get together as a result of an M&A or a joint venture there are three case scenario:

1. One culture dominates on the other: this can be explicit or implicit. I worked for a client that routinely imposed their culture on the acquired targets “bulldozing” it in. The results were dramatic: resentment, high turnover, loss of key employees. If there is no buy in from the employees imposing a culture does not go that far.

It is even more subtle when the behaviour is “passive-aggressive”: on the surface the merger is of equal, but in fact the behaviour in the organisation(s) show that the employees are keeping on with their own old way pretending to adopt the “merged” culture way.

2. The cultures are separate: they maintain their own independency and “live” one next to the other. This causes a lot of frustration and clashes. I remember working for a client that call me as they acquired a feisty target and for the target to refuse considering adopting some positive elements of the acquirer.

The buyer did not carry out any cultural due diligence and the target’s obstruction was causing major issues, especially in term of performance and turnover, that were severely undermining the success of the deal.

3. The perfect marriage: this is what senior managers and executives think cane easily achieve after the deal is sealed. without carrying out a cultural due diligence before starting the negotiation, they state they will pick and choose the best of the players’ cultures and create a new, better, and improved one that will apply to everyone.

This result is very hard to achieve in reality. It is not unusual to choose the IT systems, Business Units’ Directors, etc on the basis on internal politic systems. If the CEO is from company A then the General Manager and the CFO have to be from company B.

More often than not in order to preserve the facade and to show that it is a “merger of equals” those strategic choices are not made on the basis of best practice, but on the basis of political choices.

 

What to do instead?

Carry out a cultural due diligence from the very early stages of the deal, even before you start the negotiation. The data gathered will be invaluable in determining if the deal has to go ahead or not. Even if the deal on paper is a financial success, problems with the cultural integration may lead to losses that are much higher than the gains.

Beware that the “pick and choose” approach is often a red herring and that internal politics play a major role in those decisions. Not always those choices are the best ones in terms of performance and results.

Question:”What’s the most common issue you have experienced when the executives have decided to go for the after deal ‘pick and choose the culture’ approach?”. Share your answer on LinkedIn

 

 

 

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