Tuesday, May 30, 2023
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Navigating M&A Complexity: Building the Right Culture

Global mergers and acquisitions (M&A) activity hit a record high in 2021, with optimism that 2022 will continue to be a strong year for deals, according to Barclays. But after the deal is done and officially takes effect, that’s when the real work happens. That’s when the real success of an M&A is determined, and it all starts with company culture.

While having a compatible company culture may seem like an obvious consideration, most companies focus only on tangible factors, including revenue and profit, customer mix, and internal talent pool. How well two company cultures fit is often overlooked or an afterthought.

The reality is that cultural factors and organizational alignment are critical to M&A success (and avoiding failure). According to McKinsey, about 95 percent of executives describe cultural fit as the key to successful integration. However, 25% cited a lack of cultural cohesion and consistency as the main reason for integration efforts to fail.

To avoid failure, the first thing a company should do when considering a merger or acquisition is to engage in a culture mapping exercise, which entails mapping the target organization’s values ​​and comparing them to the acquiring company’s values . This is a good start and can be the start of many ongoing conversations. At CDW, we validate the company’s culture through multiple discussions to ensure that the values ​​written are truly part of the company structure and not just a sign on the wall.

Ensuring cultural alignment is taken seriously by both parties, this validation process should be led by the executive team; they must be committed to cultural assessment. In addition, the following outlines three key actions to ensure cultural alignment between the two companies during and after the acquisition:

1. The process of listening to employees

should begin early and act before cultural integration becomes a challenge. Listening also sounds easy and obvious, but most companies are not good at it. Active listening is a very important tool that should be used to assess cultural fit during mergers and acquisitions. It is critical to understand how the company started and how it has grown from an employee’s perspective. Integration teams should ask employees questions about their careers, their greatest source of pride, and one thing they might change about the company. These informal stories are where the culture and personality of the organization are really revealed.

2. Doing independent research

Informal research on the Internet is a powerful tool for many Tool reasons, including understanding company culture. Of course, a bad employee review shouldn’t break the deal, but the themes come up when you look at social networks, employee feedback sites, and the company’s informal activities across various platforms. Reading these posts should give the acquiring company a sense of what the company celebrates, what it spends its energy promoting, and, by direct extension, represents the real priorities of the organization’s culture.

3. Verify your understanding

This part of the merger is very subtle and difficult to define. Every company is different, with different internal structures and nicknames. Again, every company has a different approach to how work gets done and why it is successful. You have to repeat what you think you heard to confirm your understanding, and throw aside all assumptions about how things should happen in order to understand how those things really work (or don’t) in different contexts.

After acquisition, monitoring the success of cultural integration is critical. One of the ultimate goals of many acquisitions is talent retention, which requires often keeping the pulse of cultural fit. There are a number of different ways to diagnose suitability, including regular surveys, exposure to large numbers of employees, employee focus groups, or management interviews.

Company culture in action

Make sure the organization stays true to its established culture It’s a never-ending process. The global pandemic and its impact on the labor market has placed the onus on all leaders to think more holistically about their employees, while also refocusing on work as a whole part of life.

As M&A activity continues to intensify, there is no doubt that companies will continue to face challenges in keeping in touch with their employees, especially as M&A activity significantly increases team size. It’s been especially difficult throughout the pandemic, when the inability to travel means there’s no opportunity to visit employees or gather in informal settings.

At the end of the day, the way you promote your culture is through constant communication and feedback, using emails, surveys, video messages, roundtable discussions, group chats and other things that work best for different teams and location to ensure communications are accessible and inclusive to all. The entire company must be underpinned by company culture for the integration to be successful, especially if talent retention is a key outcome of the investment assumption.

Just as important as a commitment to focus on culture is being able to identify when two company cultures may simply not coexist. Making the decision to leave based on cultural incompatibility can be difficult, but it is – and will be – for the best in the long run. When cultures are inconsistent, employees may feel that they will not continue to thrive, causing existing harmony to be disrupted or destroyed during the transition.

Overall, if you ensure that cultural fit is emphasized throughout the company in the M&A decision making process, you will ensure a cohesive end result that enables employees to thrive in the new environment, Make them feel heard, seen and valued.



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