In a true merger, no one culture should win.  Having one side win over the other can be the kiss of death to the deal.  Unfortunately, more often than not, what we have experienced in the merger frenzy are acquisitions disguised as mergers.  There is typically an acquirer and an acquiree, and the lead company´s culture typically dominates.  If you are the acquiring company in a deal and you are not interested in blending cultures, we hope you will at least respect your partner´s culture.  Respectfulness helps the "merged" employees see what you as the lead company have to offer in the way of structure, processes, and business behavior.  One simple way to accomplish this is to ask people how and why they do the things.  People enjoy talking about their work.  It gives them a sense of pride and their contributions need to be honored.  In the age of the internet, accessing a fast and powerful cultural assessment can be conducted and analyzed in the first 90 days is key.

Example Timeframe:

You must recognize in M&A activity that the elements that make up the company you are acquiring culture are being threatened, and the status quoor aspects of the employees´ way of lifemay be changed or, worse yet, lost.The first step in managing a cultural collision is to understand both cultures.You must spend time developing a Cultural Resume, yours and theirs. This process allows you to visualize in detail where there is congruence and incongruence between the two cultures.  This process prevents you from jumping into the integration process blindfolded.

Creating a Cultural Resume also allows you to determine the potential fallout of imposing your culture on your potential partner, which may cause you to have second thoughts about such an imposition.  You may even have second thoughts about potentially eliminating a culture that is deep-rooted and is very successful.  Remember, people join organizations for lots of different reasons.  You can readily see the obvious extrinsic benefits, but a cultural assessment will help you see the intrinsic cultural benefits - flexible work hours, educational opportunities, casual work environment the level of trust and empowerment the organization values.  The list goes on of what attracted people to your potential partner.  Show respect for each other´s cultures.  They are what brought you to the point of considering and moving forward on this deal.

If you do choose the path of cultural assimilation, be aware that you will encounter more negative force and resistance than if you make an effort to work together in building a combined cultural future state.

As a leader, you will begin to see what all engaged couples need to see.  The marriage isn´t the wedding, nor is the merger the moment you sign all the documents to make it official.  You must change your focus from getting the deal done to making the partnership viable over the long haul.

As a leader, you will need to begin to understand how to decode, translate and contextualize the overt messages and publicly available information about your potential partner or your new partner.  Unless key players from both organizations learn to read the deeper meanings that the other side´s culture communicates, then mutual working relations remain under threat.

You will also need to develop a prudent, yet aggressive and solid transition plan when it comes to combining the two cultures.  The plan must generate a road map outlining what needs to occurby when,and who will make each step happen from the human system integration perspective.  Good project management is what we are talking about.  You must be able to measure and track your progress.  This cannot occur when you rely on your gut rather than on hard-core data.  A process like Cultural Due Diligence provides you with that data.

Our experience shows that conducting an early and thorough assessment of organizational culture can help the acquiring company forecast the deal and manage cultural issues before they become bottlenecks and diminish deal value.

Facts and statistics on the role of culture in M&A activity:

-        An independent study commissioned by New York based law firm, Wachtell, Lipton Rosen & Katz on merger and acquisition activity in the banking industry, found 7 common factors that affected M&A success.  4 of those factors were culturally related.

-        2004 Chaos Report, produced by the Standish Group found that only 34% of information technology projects achieve desired results.  The remaining 66% of projects were found to experience two common issues:

1.      Issues in problem solving or data gathering at project onset

2.      The most significant factor impacting success revolved around a lack of employee or team commitment to implementation

-        It has been proven that nearly 75% of merger and acquisitions fail.  Failure is defined as not meeting their strategic or financial goals in a specified time frame.  Using this benchmark, according to a Mergestat report there has been 4,879 deals as of June 2006 at an estimated value of $616 billion dollars.  Given these statistics, there is a possibility that 3,659 deals may not reach their expected ROI for a potential loss of $462 billion dollars.

-        Organizations do a great job of Legal Due Diligence and Financial Due Diligence.  In fact, deals would not get done if not for these in-depth and significant processes.   The missing link in M&A is the "Cultural Due Diligence" where the human systems of both organizations are assessed, diagnosed and combined.  In business today, the bottom line is that you can´t just focus on the traditional bottom line!

We see a growing number of global mergers happening; more specifically a shift from US companies acquiring abroad and a more recent trend of foreign companies purchasing US companies.  This trend leads to the complexity of blending national cultures as well as organizational cultures.

With these trends, it is imperative that you secure sufficient information on both organizations that tell a very clear story about what is really going on.  Otherwise, you may not be able to write an accurate and defensible prospectus/integration plan.  In other words, your motive in gathering this information should allow you to truly grasp the magnitude of the integration process and differences in the human systems.

Here are some questions you might ask:

-        What is it going to take? 

-        Are we willing to make the investment? 

-        What are the congruencies? 

-        What are the incongruencies?

-        Do we really need to combine both cultures?

-        What are the advantages or disadvantages? 

-        How much work will be involved? 

-        What are the resources that must be committed to this process?

-        What are each of our core organizational values and do they match?

Remember that positive, long lasting results are what you must be after! 

For more information on the role of Cultural Due Diligence in the merger and acquisition process, please visit us online at www.emergeinternational.com or contact us via email at info@emergeinternational.com

About EMERGE International:

We believe in creating healthy and productive work environments.  In fact, since our inception in 1996, we´ve dedicated ourselves to it.  At EMERGE International our focus is to ensure that our holistic approach and validated assessment tool, the Cultural Health Indicator^TM (CHI) is accessible to the widest range or organizations possible.  From self-service models to full-service consulting, we have a range of options to meet every project requirement that are on time, on budget, every time.

EMERGE International is a WBENC certified woman-owned business.