Can Culture Be a Key to M&A Success?
By Anthony Milonas, Managing Director and Chief Development Officer
I’ve had the opportunity to lead organizations through the mergers and acquisitions (M&A) process. I’ve also come in as a leader post-acquisition with the task of getting a newly formed company pointed in the right direction. In both cases, I’ve had a front row seat to the role culture plays in successful M&A situations.
Know the culture of the company you’re planning to acquire – and if you’re compatible
Having some level of understanding around whether their culture is healthy can help you determine if something can be merged. A lot of M&A fails because of misalignment of culture, which can easily impede results. An unhealthy culture can fall apart before you can fix it; a culture that’s opposite to your existing company culture can signal tough times ahead for employee engagement, retention, and more. Doing a culture assessment, reviewing culture and engagement surveys to understand how employees view and align to culture, and talking to leaders and decision makers about culture can provide important insights and help set the stage for success.
Understand the current leadership and what – if any – alignment exists between the values and behaviours of the CEOs
Early on in my career, I took over from a CEO with whom I was very much aligned – we both saw performance as important but believed that you could only achieve top performance through your people and your culture. That alignment in values and approach made it an easy transition for me and for the organization.
I have also had experiences where the values were not aligned, and where the focus was on elements that may not have been aligned with my own. That lack of alignment between leadership style and values led to a bumpy transition for everyone involved.
Understanding the values and behaviours of leadership can help you assess the compatibility of the two organizations. Consider developing a profile for key leaders within the organization, similar to how you would develop a profile of the business itself: What is their approach to leadership? What are their motivating behaviours? What is their focus? Tools like DISC profiles or TTI Success Insights assessments can be helpful here.
Measure and assess often
When it comes to culture, engagement, and performance, measurement is key – at any time. Annual and pulse surveys, listening sessions, one-on-one meetings, and skip-level meetings are all valuable tools to help you measure and assess the challenges and opportunities your team is facing as they relate to the culture you’re looking to build. Standard 360 reviews can also be valuable when it comes to assessing the team based on culture add plus technical competence. If you have a senior leader who is performing but doing so in a way that is not aligned to culture, you may get medium-term results, but long-term things will suffer if your team is unhappy and feeling like there’s no purpose and no direction forward to the culture you (and they) want.
Be ready to compromise (when appropriate)
Remember that no matter how compatible the organizations in an M&A environment seem on paper, both companies have their own unique culture before merging and there might be some growing pains. Leaders who take an “our way or the highway” approach to culture risk alienating employees of the acquired organization – and if you lose the hearts of your people, you lose their ability/desire to lean in and really develop a healthy business. Instead, take the time to understand what their culture was and what was working well. You may find values or behaviours that you’ll want to adopt to help strengthen your own culture and that can help ease the transition for everyone involved.
At Waterstone, we work with clients every day who are looking to assess, measure, build and re-align their culture. Book a call with our team today to find out more about how our team of experts can help you make culture one of the keys to M&A success.