M&A Buyer: Culture Assessment is Essential

Culture clash can be devastating to a potential merger, if mismanaged.  Unfortunately, many executives only consider the international aspects of a merger to affect culture risk.  In fact, culture may include major difference among regions, facility concentration, company size, or functional areas.

Let’s look at some examples of major culture variance:

  • Have you worked in the Northeast (e.g. Boston or New York city), and tried to work seamlessly with associates in the South East or perhaps the West Coast.  Not only may life’s priorities differ, but also dress codes and business conduct may vary significantly.  How did you adjust your performance based on these observed differences?
  • Have you noticed any difference in the manner in which business is conducted among the following functions?  Accounting/Finance; Manufacturing; Marketing; Sales Operations; Research & Development?  Accountants and engineers are often stereotyped as fairly rigid and process oriented, while sales and marketing are more flexible and adaptive.  Consider that during an acquisition, concentrations in key areas (such as a Manufacturing acquisition by a Marketing driven company) may make result with a challenging integration process.
  • And within a company, is it possible to have different cultures at various sites around the country?  I’ve noticed that in some companies, small-to-midsize operations in Middle America have their own cultures driven by the local leaders.  For example, a self-contained division with all functional areas represented, but whose primary function is manufacturing and distribution, will assume the manufacturing character.
  • Small and large company operations also may have distinct cultural traits that may stress a successful integration.  Spirited executives who have little patience for any administrative process that doesn’t directly contribute to cash flow, or serving the customer often drive small entrepreneurial companies.  These entrepreneurs are also accustomed to making the decisions directly, without constraint or reliance on administrative policies and procedures. Would a large, publicly traded company accept such controls?

And of course, international M&A potentially has each of the above challenges, in addition to those of differing native language, legal, social and work environments (consider the unions and work councils required in some countries).  Add potential extreme time zone challenges – perhaps as much as 13 hours - 15-30 hours transit times for personal visits to international locations, and you may encounter insurmountable M&A challenges.My advice to succeed in these integration challenges is to thoroughly understand the business environments of all companies and locations involved in the M&A transaction, jointly develop an integration plan with the formal (on the organization charts…) and informal (those that get the work done…) leaders in the organizations, and aggressively mange the integration plan. Personal attention by integration leadership will be critical to success – visit the business units personally to establish a relationship with the leadership.  A key part of any plan must include a communication’s strategy and plan, and listening to all sources of information related to the transaction (message boards; web-sites; blogs; suggestion sites; labor issues; customer and vendor feedback; sales and customer service input etc.). Understand that communication in the twenty-first century is instant, and broadcast worldwide without benefit of editing or verification.  

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