Understanding the Impact of Organizational Culture upon Mergers & Acquisitions: So, What Next? (Part 3)

In our series on the impact of organizational culture upon the process and the outcomes of Mergers & Acquisitions (M&As)[1], we established that while key stakeholders active in due diligence recognize and acknowledge the importance of organizational culture as a variable impacting successful results, there is little to no rigorous attention to this factor.  The reasons are diverse but at its foundation, implementing an accurate assessment of the respective organizational cultures during due diligence is considered risky, complex and expensive to conduct, and moreover is not the primary expertise nor accountability of any one profession in the due diligence process.   In short as summarized by a participant in our research,

Regardless of what you know (about organizational culture), don’t discuss it — … If it’s not reported, it didn’t happen, and you never have to deal with the issues[2]

Based upon evidence in the literature, our research and our consultation expertise we found there are substantive financial, HR, and change management issues and risks that arise due to impact of the organizational culture(s), particularly when it is overlooked as summarized in Figure 1 below.

Figure 1:  Impact of Organizational Culture on M&As

We propose that a robust, cost-effective and meaningful cultural assessment of the respective organizations in the M&A can and should be implemented.  The findings from this rigorous assessment of the organizational cultures, values, and people will facilitate an effective and cost-efficient integration of the respective groups, and proactively respond to the potential challenges that have historically undermined M&As. The optimal timing for the assessment is prior to the formal Signature & Closure phase, once the agreement has been announced but is not finalized.  The assessment will provide clear and reliable evidence regarding the alignment of organizational values and ideals and identify any gaps or challenges in integrating the workforces.   Alternatively, the assessment can also be conducted with a different focus at the Letter of Intent phase or post the M&A once the change management plan has been implemented, as delineated in Figure 2 below.

Figure 2: Optimal Assessment of Organizational Cultural for M&A’s

The organizational cultural assessment complements the due diligence as the findings optimize the efficiencies for financial, legal, HR, and senior management by proactively identifying strengths and challenges between the organizations and facilitates preventative planning. To be beneficial to the two organizations as well as the expert stakeholders in the due diligence process, certain conditions for the assessment should be met.  The organizational cultural assessment ought to be conducted independently by a third-party to mitigate the risk of perceived bias.  It should be positioned to the participants as an organizational effort to better understand the needs and challenges of its employees and must not reference any confidential information regarding the due diligence.   The assessment should be deployed to a representative sample of management and employees at both organizations, and data collection and analyses must be conducted confidentially to protect the participant’s identity.

Regardless of the outcomes of the due diligence, the assessment findings will enhance internal operations for each organization as it can support development of transformational and organizational interventions.   For the proposed integration of two organizations, the findings highlight the synergies and gaps in the respective organizations, creating realistic expectations for integration budgets, and enhance synergy time and savings. Moreover, the findings will facilitate interventions for people in the organizations to transition better in the new environment, integrate better with their peers, and substantively reduce unnecessary attrition, conflict, or loss of key talent.  

At the end of the day, once the financial components are finalized, what are organizations looking for in a Merger or Acquisition process? Ultimately an efficient, smooth integration of resources, infrastructure and workforce are essential if key performance indices such as the integration budget and synergy savings are to be met.   Our senior team can help you obtain this data in a concerted manner. We provide detailed, customized and applicable recommendations and can guide you through the risks and implications of the cultural differences and suggested actions. Curious about learning more? We can offer you at no-cost a brief, validated organizational assessment tool.   For more information or questions, we can be reached at info@thepillars.ca or info@cohaesio.ca

[1]Laverdière, D., Hayes, S., Samne, C. & Pertus A. (2018). Understanding the Impact of Organizational Culture upon Mergers & Acquisitions: Insights from Canadian M&A Experts -Part 1. (online – Last modified on January 8th).https://www.linkedin.com/pulse/understanding-impact-organizational-culture-upon-from-hayes-psyd/

[1]Laverdière, D., Hayes, S., Samne, C., & Pertus A. (2018).  Understanding the Impact of Organizational Culture upon Mergers & Acquisitions: Insights from Canadian M&A Experts -Part 1. (online – Last modified on January 8th). https://www.linkedin.com/pulse/understanding-impact-organizational-culture-upon-from-hayes-psyd/

[2] H. Michael Sweeney (2000). Twenty-Five Ways To Suppress Truth:   The Rules of Disinformation (Includes The 8 Traits of A Disinformationalist)

Authors:

Sean M. Hayes, PsyD, Cohaesio

Dominique Laverdière, CRHA, Cohaesio

Johana Cadavid, The Pillars

Caroline Samne, The Pillars

Anne Pertus, The Pillars