The Marriage Analogy in Mergers and Acquisitions (M&A)
The business activity of a Merger and Acquisition (M&A) may be likened to a marriage. Couples need to fully understand each other before they commit to marriage to ensure some success in their life together. Statistics have shown that the top issues due to which most marriages fail include incompatible personalities or financial hardships. It takes respect, effective communication, and a common set of goals to build and sustain a future together. Isn't M&A much like that? Not surprisingly, in a survey of Forbes 500 companies, CFOs assessed 'incompatible cultures' as the top challenge in achieving synergies.
Challenges and Success Factors in M&A Transactions
The challenge and success factors for achieving deal value in M&A transactions are largely aligned and consistent as below:
- Effective due diligence to ensure that the risks, constraints, and liabilities in the business are understood
- M&A readiness
- Selection of the top team
- Effective leadership from the top team
- A well-executed employee communication program
- Integrating pay, rewards, and benefits
- Change management
- Cultural alignment
In all these factors, cultural alignment is rated as the most challenging people issue. Towers Watson's recent studies also indicated that clashes between disparate corporate cultures can be a barrier to successful post-merger integration. It was found that even though strategic and financial aspects of a deal are taken into account, sociocultural aspects can result in acute inter-organizational conflicts and mismatches between HR and managerial policies and practices.
Defining Organizational Culture
What defines the culture of an organization? It could be taken as the sum total of the following six aspects:
1. Leadership
2. Mission, objectives, values, and strategies
3. Organizational structure
4. Brand promise
5. Programs, policies, practices, and a work environment including national culture
Unmistakably, the culture of an organization manifests into customer experience, shareholder value, and business results. In a cross-country deal, the organizational culture of the buyer and seller could be astonishingly divergent on fundamental and strategic counts.
The business activity of a Merger and Acquisition (M&A) may be likened to a marriage. Couples need to fully understand each other before they commit to marriage to ensure some success in their life together. Statistics have shown that the top issues due to which most marriages fail include incompatible personalities or financial hardships. It takes respect, effective communication, and a common set of goals to build and sustain a future together. Isn't M&A much like that? Not surprisingly, in a survey of Forbes 500 companies, CFOs assessed 'incompatible cultures' as the top challenge in achieving synergies.
Challenges and Success Factors in M&A Transactions
The challenge and success factors for achieving deal value in M&A transactions are largely aligned and consistent as below:
- Effective due diligence to ensure that the risks, constraints, and liabilities in the business are understood
- M&A readiness
- Selection of the top team
- Effective leadership from the top team
- A well-executed employee communication program
- Integrating pay, rewards, and benefits
- Change management
- Cultural alignment
In all these factors, cultural alignment is rated as the most challenging people issue. Towers Watson's recent studies also indicated that clashes between disparate corporate cultures can be a barrier to successful post-merger integration. It was found that even though strategic and financial aspects of a deal are taken into account, sociocultural aspects can result in acute inter-organizational conflicts and mismatches between HR and managerial policies and practices.
Defining Organizational Culture
What defines the culture of an organization? It could be taken as the sum total of the following six aspects:
1. Leadership
2. Mission, objectives, values, and strategies
3. Organizational structure
4. Brand promise
5. Programs, policies, practices, and a work environment including national culture
Unmistakably, the culture of an organization manifests into customer experience, shareholder value, and business results. In a cross-country deal, the organizational culture of the buyer and seller could be astonishingly divergent on fundamental and strategic counts.