Rising interest rates and inflation have been blamed for the global merger and acquisition (M&A) market’s laboured start to the year after the volume of deals made in Q1 fell by more than one fifth on the same quarter last year. Companies looking to secure M&A transactions in the coming year could equally battle a sustained period of low economic growth, making it harder to secure funding for mergers and acquisitions from cautious banks and private equity companies.
But economic volatility is not the only issue thwarting M&A deals. Cultural incompatibility between merging organisations can be just as problematic to their success. When considering such a transformation, it is paramount that companies realise the negative effects that clashing values and beliefs can have upon their people and business. To avoid this, companies should adopt a people-first approach and understand how they can achieve cultural cohesion for new and acquired team members.
The first thing to acknowledge is the emphasis that is often placed upon buildings, legal contracts and other tangible resources involved in M&A transactions. Albeit an important focus, companies that hone in on just these aspects risk neglecting to address any compatibility issues between the organisations’ people. Given that a disconnected culture can disrupt a merger or acquisition entirely, organisations should endeavour to prioritise the hearts and minds of the people who will form the new company and identify how to fortify relations between merging teams.
Establishing an honest picture of what the company’s culture will look like early on is one effective means of achieving this outcome. From the outset of any merger or acquisition process, businesses should undertake an initial feasibility study, placing the relevant people at the centre of the analysis to investigate how their morals and principles differ and determine the impact these divergences will have upon employee wellbeing, cohesion and productivity. The power of compatible beliefs and values should not be underestimated, so identifying any gaps will help to set realistic expectations of the work required to bridge them.
Avoiding assumptions about the eagerness of transferring employees to work for the merged organisation is equally key. While it is easy to presume the positive values of a business will align with those held by the team of another organisation, it is crucial to listen to the perspectives and beliefs of new people. Companies should aim to be sensitive to other viewpoints and take care to understand what motivates incoming employees in their current organisation. By doing so, they will be able to determine what implications the transition could have for new people. Previous experiences are pivotal and considering the history of acquired team members will provide insight into their perception of the changing situation.
On top of early assessments, companies should also weigh up the risk of misalignment between the two businesses. Up to 90 per cent of M&A deals fail, so it is vital that any cultural discrepancies are addressed to ensure they do not burn precious time, resources and effort, or, worse, derail the union entirely. Businesses need to consider whether they can afford to take such risks and find proactive solutions that accommodate all the beliefs and values of the people involved moving forward.
To facilitate the formation of a shared set of values, companies should additionally collaborate early on in the M&A process to eliminate negative behaviours towards the transition. Creating space for two-way open communication to occur will enable the best elements of both organisations’ cultures to have a presence in the future and prevent one company from monopolising on best practice. Ensuring all viewpoints and opinions are heard is fundamental to the development of a culture that is inclusive for existing and acquired people.
To maintain this environment, individuals who are experienced in the reformed culture and values will need to make sure everyone forming the new team engages with them; a study carried out by job search firm Glassdoor found that 56 per cent of respondents feel company culture is more important for job satisfaction than salary. In an M&A scenario, where the introduction of new people has the potential to jeopardise employee happiness, having experienced team members to build trust between people from the two organisations will serve to reinforce employee contentment and encourage engagement and contribution to the culture.
Subsequently, when undertaking the aforementioned measures, it is vital that people remain the central focus at every stage of organisational transformation. Change journeys can come at a huge personal, temporal and financial cost if the necessary insights have not given the attention they require, and realising that sooner rather than later will reinforce the likelihood of a successful merger or acquisition further down the line.
Sarah Towers is operations director at Entec Si