Following a merger or acquisition, leadership often has wet dreams about leveraging the merger/acquisition to maintain the best cultural components of both company via the forging of a new culture, enhanced by the stronger points of each component.
Yet, there is no such thing as creating a new culture in a merger, based on the best of both companies. Following an acquisition or merger, there is an inevitable Darwinist struggle between weaker and stronger cultures.
In this short post, i shall relate to driving a culture change in a post-merger/acquisition environment.
One culture (generally the acquiring company) asserts its culture on the other and dominates it. There is very little that can be done to prevent this, although the degree subtlety may appear different. I am not even sure that this Darwinism is bad, because companies need one dominant culture to enable integration.
Over time, the acquired company’s culture may have some minor impact, but this will be in the context of the dominant culture.
There are three areas of focus which can create some cultural change in the year or so after merger/acquisition period.
1 The acquiring company will need to focus on the creation of scalability in order to get value from the acquisition. This need can drive massive change.
2. The acquiring company will need to create a loyal power structure in the acquired company,which does not try to preserve autonomy.
2 The acquired company needs to go thru a period of mourning, to accept the new regime and to eventually join the acquiring company as individuals, not as a group.
Final comment:
Beyond the consultants role in enabling, planning, execution and monitoring of mergers, a consultant would be wise to see his/her role as a midwife, not trying to fight some of the natural course of post merger events.
This having been said, there is a lucrative market for pre-packaged crap (protocols) that merge 2 or 3 cultures into one in a few easy steps.
Another good one, Allon.
Having experienced this a few times as an internal OD player, I can offer two examples in support of your point.
In one case, the acquiring giant publicly stated that it was buying the company I worked for for its culture. What happened? That intention quickly fizzled out after the deal closed.
In another case, the acquiring company rode into town, guns blazing, chopped off all management heads in the company I worked for, and rounded up all the survivors to instill fear in them. “Get with the new program or get out” was the new mantra.
So much for honoring the culture of the acquired.
The old saying “To the victor go the spoils” seems apt when it comes to such post-acquisition culture stories.
So right on. What I did experience in the acquisition of Picheney by Alcan (before it got bought out by Rio Tinto) was a true research by Alcan to identify best practices that could be implemented based on its strategic direction. I did not witness the same when Rio Tinto bought out Alcan.
In my experience with take-overs, I have noticed that when the purchasing company has paid too much merely to prove to the other contenders it had a bigger dick – as Freud would put it – , a sense of resentment gets expressed in sometimes senseless ways even from a strict business perspective.
I have such telling examples of this Darwinian reptilian thinking.
Allon, that is so true. I’d also like to add that in every organization there are aspects of culture and operations that are “mission critical”, i.e., if you change these things you change the fundamental nature of the organization.
Acquiring entities need to examine the acquired entity and ask themselves, what is it in this organization that if we were to change it, then the organization would no longer be what it is.
For example, when the German company Wella acquired Sebastian International, a California Italian company, they did so because they wanted to have a high end luxury line of hair care products. However, they realize that creativity, glamour and and certain amount non-conformity were mission critical to Sebastian. Wella proceeded to Germanize Sebastian and in the process destroyed the essence of the company. Sebastian went from the epitome of glamour in hair and make up to nothing more than a poorly designed web site. Sad.
Hey Allon- As usual, great article. Love that you don’t pull any punches. I agree that there is an ‘inevitable’ dominance of the acquiring company’s culture—at the same time, a lot depends on the true reason for the M&A and the intention of the acquirer. If their intention is ‘best of both worlds’ then it is about how the acquiring company can be aligned and live out it’s intentions- whatever that might be. In this respect, there is quite a lot of Below the Waterline work to prepare the acquirer- not least of which is to understand their own patterns of doing things and what they might need to change in order they get the expected value from New Co (beyond initial synergies)- in the area of Value, I am 100% in agreement with Ariane’s response. I do think Polarity Management is a very helpful tool to help top teams get clear around the subtleties of what and how the best of ‘the other’ might show up as the PMI unfolds. Additionally, some of our (SLI) work with acquired teams also help to surface what people valued about their old companies and what they would want to bring to New Co—but how that information is handled depends greatly on the intention(s), openness, flexibility and- the speed of the ticking clock for financial synergies in the ‘mothership’.
Amy
Thanks Amy.
Useful comments.
The agenda of the acquiring team’s staff is generally “acquire a bigger empire”. Dealing with this issue is a critical success factor.
There is also a gap between what the ownership wants from a merger and what senior management wants from a merger.
I agree w you and Arianne about polarity management, which is useful.
allon
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Amen, brother! As you’ve heard me say, ‘The reason most M & A’s fail is all the effort went into the ‘A’ and not enough attention was paid to the ‘M’.
Can’t count the number of consultations I have been involved in that were based around some kind of M&A. . . In each one, the reality you lay out here is exactly what happened, even when the buying company committed to ‘not conduct a take-over’. Helping the bought company grieve and let go of what they had usually helps them move on and embrace the new reality.