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M&A Culture Integration —

Corporate Culture: The "X Factor" in Merger Success and Failure

PRITCHETT has spent over 30 years advising clients on the design and implementation of merger integration strategy. During that time, organizations have grown far more sophisticated and skilled in their ability to execute the integration process.

The one area where companies still struggle, though, is in merging disparate cultures. This is the black box of integration, the most complex problem that executives encounter in M&A.
About the study
Culture is a popular topic when people talk about merger issues, but little is known about actual practices. This nationwide research project was designed to explore how acquiring/merging companies currently deal with the challenges of culture integration and culture change.

The study gathered data from senior executives in 133 organizations throughout the United States. Our sampling covered a representative cross section of organizations of diverse types and sizes.

Percentagewise, the totals in the survey’s four major categories should reasonably approximate the number of mergers and acquisitions occurring annually in the various sectors.

Industries represented in the survey include manufacturing, healthcare, retail, professional services, transportation, energy, financial services and investments, plus many others.

A total of 37 respondents who completed the research questionnaire carry the job title of Chairman, CEO, President, or Managing Partner. Another 71 hold key management positions in the HR function, while the remaining 25 are in a variety of other executive roles.

This broad spectrum of input provides a wide-angle look at the current perspectives and practices regarding culture in M&A.

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Corporate Culture Services:
Culture Due Diligence/ Diagnostics
Culture Architecting with Senior Executives
Shaping Corporate Culture Training: The Mission Critical Approach to Culture Integration & Culture Change
Conclusions
PRITCHETT’s research offers important clues for cracking the code on culture in M&A. Here’s what the data indicates:
  • There’s a lot more talk than action on the culture front. Executives pay lip service to the importance of culture in mergers. but they routinely fail to back it up with dollars. Culture is the pauper when integration budgets are allocated.
  • Companies that do spend some time and money on cultural matters often proceed without a clear endgame in mind. For example, culture data is gathered with no viable methodology for how it will be used. No surprise—their initiatives fizzle out.
  • Most culture assessment efforts are conducted too late to be of much value. They’re also too ad hoc, unstructured, sketchy, and haphazard. In fact, they may very well cause more problems than they solve. There is a clear lack of efficacy in the data-gathering process and how that information is utilized.
  • Companies rely on experts in the deal-making process, but then turn culture integration over to people who lack expertise in managing the intense political dynamics and psychological complexities involved.
  • Outside consultants have utterly failed at establishing credibility in this arena. Executives have apparently concluded that the purveyors of traditional culture assessment/culture integration services don’t add value.
These findings suggest that the culture challenges inherent in M&A need to be approached from a more promising angle.
Implications
1
Culture should be a more strategic consideration in the merger process. It deserves far more weight in the initial targeting of potential acquisitions or merger partners.
2
Due diligence should scrutinize cultural aspects of the deal with the same discipline given to financial and legal issues. This simply cannot be done via a traditional culture gap analysis or compatibility survey.
3
Culture integration should be driven from the CEO/President level. This initiative cannot be delegated effectively. The architecture of culture strategy, plus the critical first steps of execution, belong to the leader.
4
Organizations should be more astute in crafting their merger communications relating to cultural issues. Both the substance and timing of these messages are crucial. Management needs to be fine-tuned in managing people’s expectations, all the while shaping workforce behavior in the desired cultural direction.
Corporate Culture Services:
Culture Due Diligence/ Diagnostics
Culture Architecting with Senior Executives
Shaping Corporate Culture Training: The Mission Critical Approach to Culture Integration & Culture Change
For more information, give us a call at 800-992-5922
or email cservice@pritchettnet.com

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