A merger or acquisition is always based on a financial proposition but, once the deal is done, success largely depends on the effectiveness of the leaders and how well they work together. What many leaders fail to recognise is the impact they have on organisational culture.

This is how renowned culture and values expert Richard Barrett describes the connection:

“Culture is determined by the values, beliefs, and behaviours of the current leaders of an organisation and the institutional legacy of past leaders as reflected in the values and beliefs that underpin the policies, systems, processes, structures, and procedures of the organisation.”

Given this explanation, it’s not surprising that bringing together organisations with different leadership legacies is arguably the ultimate ‘change challenge’!

Culture starts with the Board

Culture is now a hot topic for discussion around the boardroom tables of many big businesses and it is clearly on the agenda of the corporate regulators and investors alike. Culture is not only rising in corporate status, it is becoming a significant consideration when it comes to M&A decisions too. Boards are factoring in cultural issues when evaluating the risk of prospective deals and they are increasingly unlikely to pursue a merger if they perceive a lack of cultural fit or have concerns about values and behaviours.

Beyond their traditional governance functions, boards are also playing a more prominent role in defining values and influencing culture. Directors can contribute by role modelling and communicating the values when in the business; selecting and managing the right chief executive; supporting the senior leadership team to embed the values and reinforce desired behaviours, and ensuring there is a structure and process in place so people can speak up about ‘bosses behaving badly’.

Designing the new cultural landscape

Leaders orchestrating M&As usually hail from various financial, legal, and other such ‘analytical’ sectors. They understand the main drivers for doing the deal, they can likely articulate the new big picture, but many stumble over cultural issues and implications. Organisational culture, as expressed through the values, beliefs, behavioural norms and expectations that guide the way people conduct themselves, their work and their interaction with others, is reinforced by ten interrelated components:

  1. Organisational structure – informal and formal centres of influence, power, and authority
  2. Leadership practices and behaviours
  3. Goal-setting and measures
  4. HR practices such as job design, recruitment and selection, appraisal processes, and so on
  5. Reward and recognition, celebrations
  6. Training, development, mentoring, coaching
  7. Workplace environment, facilities
  8. Communication processes and practices
  9. Policies and rules – written and unwritten
  10. Routines, rituals, symbols, ceremonies

To improve the likelihood of a successful merger, leaders need to reimagine all aspects of the amalgamated entity’s culture to support the new strategy.  All aspects must be aligned and interacting harmoniously. Through these cultural levers, leaders can influence people’s behaviour and performance and that helps shape and reinforce organisational culture.

“Current staff must be bought into the potential of the future state as soon as possible.  This is what requires considerable planning, thinking, time, and effort to get right. However, the payback is tenfold when you hit your year-one forecasts” – CEO, listed and acquisitive tech firm.


Bringing the senior team together

The senior leadership team is a microcosm of the whole organisation and if there is a lack of cohesion in this team there will be a lack of internal cohesion, full-stop. This is a major risk factor in M&A that needs serious upfront attention.

A Group HR Director recently confided that his biggest concern and the biggest risk factor for their upcoming ‘merger of equals’ was the executive team culture. Formerly competitors with significantly different organisational cultures, they intended having a blended leadership team. Recognising that this was going to cause friction and factions if not managed well from day one, they were seeking some external assistance to bring this team together.

The only way to build unity within the top team is to create a climate of trust and the best way to do that is for the leaders to spend quality time together, getting to know each other, setting some ground rules for how they will work as a team, and mapping the way forward.

“Successful M&As are about synergy, not dominance.” – Executive General Manager, IT sector


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To your success,

Linley Watson
Australasia’s Authority on M&A Culture Integration