The Importance of Cultural Integration in M&As

by: Colleen Kelley

Mergers and acquisitions are a key strategy in business growth.  Getting to the inked deal with the prospect of increased shareholder value is the first measure of success.  However, this vision may quickly become unglued as the impact of cultural differences ensues.

Cultural Integration

In fact, this was one of the factors in the demise of Nortel.  According to a study conducted by the University of Ottawa’s Telfer School of Management, “Nortel tried to acquire companies without the processes or culture necessary to integrate them.”  This is not an uncommon scenario.  Conventional wisdom suggests that 50% to 70% of mergers and acquisitions fail to deliver increased value to stakeholders.  Of those unsuccessful M&A transactions, as many as 85% fail due to mismanagement of cultural issues.

Fortunately, in recent years there seems to be a growing understanding of the importance of cultural integration to successful M&A transactions.  There are some well-understood steps to creating a great cultural transition plan:

  1. Start in due diligence.  Develop a cultural assessment as part of this process.
  2. Understand the culture of both organizations and the characteristics of that culture.  Include behaviours, skillsets, goals and visions.
  3. Define the level of urgency required.
  4. Define what the new culture is envisioned to look like.
  5. Define a cultural change roadmap:  i. understand the differences and develop a plan to address each item, and ii. translate into measurable events and results

I’ve learned the hard way that it’s critical to create a cultural transition plan similar to those prepared for other aspects of a corporate integration.   Proactively addressing cultural integration will help you achieve your vision and join the fortunate 50% that actually manage to garner the expected value from an acquisition or merger.

If you’re interested in learning more about the broader topic of integration, you might find our ‘From the Art of the Deal to the Science of Successful Integration’ presentation slides useful. Head this way to view the slides.

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