In February, Moorhouse hosted a breakfast seminar to explore how the themes identified in our 2018/2019 Barometer on Change of agility, courage and talent impact organisations engaged in Mergers and Acquisitions.
In this article we build on a perspective identified from the discussion that culture and the management of change are critical success factors for an integration and don’t always get the focus they need. If sufficient attention isn’t paid to cultural differences, companies can destroy value and impact the success of the acquisition.
Culture is frequently overlooked during an integration
People and culture are key factors in achieving the full benefits of an integration. Where they are not managed effectively, organisations risk delay to integration or, even worse, a failure to achieve all the benefits. Studies have shown that culture is the root cause of failed integrations 30% of the time. A lack of buy-in and adherence to new processes and ways of working, as well as the loss of key talent, are examples of the impact. Despite this, research has shown that many acquirers continue to have no defined approach to culture when integrating an acquisition.
Critical success factors
It is recognised that culture has a major impact on the effectiveness of an integration. In a previous perspective by Moorhouse, we looked at how good organisations are at integrating different cultures. Three key factors were highlighted which, when implemented, can help set your integration up for success.
1. Undertake an assessment of both people and culture
A people and cultural assessment should be conducted pre-deal to develop an understanding of ways of working, company values, beliefs and behaviours for all employees. Identifying key differences and gaps between the two companies through this can enable effective action planning when the deal is signed. Undertaking a short assessment across different lenses such as reporting, decision-making and communications can help identify the areas of difference. Companies can then develop specific action plans to address any gaps.
2. Plan how culture and change will be implemented
Planning how culture and change will be implemented can be undertaken both during the pre-deal and post-deal phases, where collaborative development of the combined organisation’s values and ways of working increases the likelihood of a successful integration. Goals, objectives and KPIs should be defined and developed for the integration to help track performance and benefit realisation with a cultural lens.
3. Change and engagement requires more than just a communications plan
While communications play a central role throughout the lifecycle of an integration, change and engagement is much more than just that. Achieving buy-in and support from all employees is key to developing a joined up culture and ways of working. One of the ways this can be achieved is through joint working groups where employees can share their views on their organisations' value. Celebrate successes when teams from both organisations work together to shape the vision and key objectives for their respective areas of the business.
The three key cultural factors outlined above form a pivotal part of any integration, needing to be executed and embedded fully in the combined organisation. These elements should not be downplayed and can play a vital role in overall success.
The benefits from a change management approach during an integration are clear: improved key talent and knowledge retention, greater collaboration between teams, and increased awareness of their roles, are all more likely to deliver a successful outcome.
If you would like to get in touch to discuss practical approaches to maximising the success of M&A activity, please do not hesitate to contact Mike Creasey.
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