83% of M&As Fail - The Culprit is Culture

The process of merging, being acquired or acquiring a company comes with stacks of papers assessing the company’s value: assets, financial health, and potential for market-share growth are among the many statistics measured in one's initial valuation. 

The process rigorously examines objectives & strategies for implementation of the merging of 2 distinct corporate entities; yet in the end,

83% of mergers fail.

Why? Because culture is not given it’s proper weight. 

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If you value culture first, preserving and caring for it, you’ll create value.  If you discount it… you’ll destroy both the acquiring and acquired entities. 

 

The fundamental premise of any merger is that the merging entities will be more valuable together than they are separately. The vast majority of leaders get something very wrong along the way. Strategically, it's crucial to look at the following 3 points:

  1. Clearly define the specific value that will be created from the merger. Beyond financial, what value will the 2 companies create together that they cannot attain alone?
  2. Fully integrate the two businesses. Look to new problems the merged entity can solve for others.
  3. Ensure cultural compatibility. This often requires a strategic plan to loosen the reigns and allow for innovation and ownership in the management level positions.

Instead of only trying to maximize profits, look at ways to maximize synergy, innovation and creativity.  The people in the organization will be the determinants as to whether the cultures merge seamlessly.  If the cultures merge effectively, what is created will be better and broader with more appeal that=n what each company offered alone.  If the cultural merger fails, then the companies can destroy each other... and you with them.

Hire a change consultant to help the CEOs learn to loosen the reigns and empower management to take more ownership of initiatives and create cross departmental culture initiatives.  Inspiring people to feel they are determining their own and the company’s success creates an agile motivated workforce across the organization. 

The key to a successful merger

Define value creation and fully integrate that into both businesses. These days, a robust corporate culture is among the top reasons employees stay at their companies.  The change that overtakes an organization during M&As is no small matter.  Having a guide to help you through the rocky waters can protect your investment and create space for your newly larger entity to thrive. 

Be the 17%. Make clear choices about the new, combined entity’s behaviors, relationships, attitudes, values and environment. Then insist on embracing those choices for everyone, from the CEO down to the mailroom and watch your business flourish. 

For more information about our strategic 6 month, 1 & 3 year M & A plans, reach out to us:

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