Cultural Fit is the key to successful mergers
Every textbook and article on acquisitions will tell you just how important cultural fit is but few help you understand just what that means and even less provide a pragmatic way of working out whether you are going to have a problem. It seems that this material is written for academics, behavioral consultants or executives who already have significant experience with such projects. Rather unfortunate for the aspiring entrepreneur who is trying to make sense of it all.
Few acquisitions do not have cultural issues to be resolved
I have my own cultural fit scars from several acquisitions and divestments I was involved in. In the case of the businesses I acquired, I was keen to retain the acquired employees but it is very difficult to provide guarantees when you don’t know what the future will entail. At the same time, I could see that the staff were coping with a massive change in their work environment. In one case we were acquiring a business from two retiring partners who had founded the business over twenty years earlier. In another case we were merging with a business where the structure of the business would have to be changed to avoid duplicate roles. Little wonder the acquired employees were uncertain and stressed out.
In the business I sold, one went to a recently listed US business where we really knew little about the management. We found out very quickly, however, when our new CEO turned up and told us we were all incompetent and going about our business in entirely the wrong manner. In the second case, we sold out to a global corporation who seemed to lose us for a few months after the acquisition as they went through several restructures.
Individuals focus on their own issues
From these experiences and from extensive reading of the literature, I can see that acquisitions quickly go off the rails when the acquirer fails to consider the impact on the individual, whether they are employed in the vendor or in the buyer. The basic issue is one of stability. While business life is not without its risks, people become accustomed to their circumstances and find a balance between work and private endeavors which they cope with. When this balance is upset through the possible and actual acquisition activities, they react by focusing on their own world and often react by resigning, neglecting their duties or aggressively working against the takeover. Even assurances of continued employment and no change is sometimes not sufficient to settle their fears.
Providing individual counseling, frequent communication, retaining staff and leaving the acquired business to continue as an independent entity can go a long way to stabilizing the transition to new ownership. However, many acquisitions result in redundancies, mergers of departments and changes in direction. Major changes are anticipated to impact individuals more and thus much greater attention needs to be given to individual transitions. When such change also involves a dramatic shift in the manner in which the business operates, especially in the manner in which people interact, make decisions, are rewarded or interact with customers and suppliers, significant numbers of acquired personnel can be expected to resign, be less productive or be disruptive. It is, therefore, of little surprise that such acquisitions often end in failure. Smart buyers work hard to manage the changes involved or simply avoid taking on acquisitions where they can foresee such outcomes.
