Even when the numbers add up, culture clashes can erode M&A value

Even when the numbers add up, culture clashes can erode M&A value
Posted by Sarah Hindley on December 20, 2016.

  • Differences in decision-making approaches and employment philosophies between an American acquirer and its Japanese acquisition keep integration planning in limbo for months.
  • The merger of two American companies with similar interests seems like it should be rather seamless—except that the target company has a significant workforce population in Germany. As integration work begins, differences in communication and collaboration styles soon surface, hindering the two companies’ ability to work together to realize deal value.

Situations like these highlight some of the tension in M&A deals. A merger or acquisition is a financial decision, an investment—typically backed by projections of expected value measured in revenue generated, costs saved, and earnings produced. It’s about numbers. But for the people on both sides of the deal who have to come together to make those expectations reality, the numbers can be much less important than the emotions involved.

For an M&A investment to pay off in the long run, both the money side and the people side have to add up. An integration strategy that accounts for cultural differences and resonates with employees on an emotional level can go a long way toward bringing two entities to a common ground strong enough to support the M&A deal’s value proposition. Embedding emotional and cultural reinforcements into enterprise-wide events and processes makes it possible to influence a greater number of employees in a meaningful way and reinforce desired behaviors across countries, sites, and functions.

Even so, it may not be easy to get leaders to give cultural considerations much weight—in one study, only about half (54 percent) of leaders surveyed saw the value in evaluating the nonfinancial, cultural aspects of deals. And only half of those leaders (27 percent) actually made cultural compatibility a priority during due diligence.1

Our new report may help bring cultural considerations to the forefront. Safeguarding M&A deal value: Managing culture clash takes a closer look at the culture-performance connection and offers insights for managing cultural issues throughout the deal life cycle. Share it with your fellow leaders. (And, in case you missed it, this recent post can help you assess HR’s readiness to lead the integration effort.)

From all of us at the HR Times blog, we would like to wish you a happy holiday season. Blogging will resume on January 3, 2017.

Sarah Hindley is a principal in the Human Capital practice of Deloitte Consulting LLP focusing on change management during mergers & acquisitions and other business transformations.

1 “Dangerous liaisons; Mergers and acquisitions: the integration game,” Hay Group, 2007.

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