Mergers and acquisitions are a key part of many organisations’ strategies. Often, millions of euros are at stake as well as the very future of the organisations and the executives who are coordinating the merger. Unfortunately, more often than not, the benefits of mergers or acquisitions fail to materialise or fall short of expectations.

While it is clear that successful mergers and acquisitions must be based primarily on strategic, financial and other objective criteria, ignoring a potential clash of cultures can lead to financial failure. Far too often, cultural and leadership style differences are not considered seriously enough or systematically addressed. Many acquisitions that looked very promising from a strategic or financial viewpoint ultimately fail, require major surgery and/or extensive subsequent handholding because these “soft” issues were neglected.

Merging two corporate cultures from the same country with the same language and traditions is challenge enough. That challenge is compounded when differing country cultures and norms are added to the equation. What might be seen as a healthy, assertive “bias for action” in one society may be seen as rude, offensive and inappropriate behaviour in another. These issues must be dealt with because more and more multinational acquisitions are taking place.

Since the culture factor is so critical for any merger, it is important to understand the role of this phenomenon and to address it in each phase of the merger or acquisition process. So let’s look at some guidelines for creating a successful merger.

  1. Retain key leaders. It is essential to identify those people critical to continued success and initiate a plan to ensure that these key people stay and remain engaged and aligned.
  2. Communicate the vision. The sooner that some semblance of certainty about the future can be communicated, the sooner people will settle down. Once a new vision for the organisation is created, new future targets are set and new teams are connected and aligned, people can refocus their energy in a forward direction.
  3. Address the new organisational structure as early as possible. Failed mergers are characterised by a tendency to have unclear reporting relationships and frequent changes in the reporting structure. In one of our studies in 2019 of merger successes and failures, it was found that 78 percent of the failures were characterised by frequent changes in the reporting relationship after the merger. Successful acquisitions were characterised by clear reporting relationships that were established early on and not changed.
  4. As leaders of an acquiring company, go out of your way to acknowledge as many positive aspects of the acquired company as possible. At the same time, set clear expectations and create an environment in which there is a high level of openness to change.
  5. Avoid throwing out the baby with the bathwater by identifying which cultural factors have historically made an organisation great. For example, if a company had historically been successful based on its culture of service and quality, rapid and insensitive cost-cutting could begin to destroy what made that organisation great in the first place. One example is the acquisition of a smaller, highly entrepreneurial company by a larger, more formalised one. That combination poses cultural challenges because it is hard to provide direction and additional structure. However, this must be done without killing the entrepreneurial goose that lays the golden eggs.
  6. Be clear about the nature of the union and be willing to talk about it. Is it a true merger of equals, an acquisition that attempts to use the best of both, a stand-alone holding company or just an assimilation?
  7. Communicate the reasons. Most people understand that mergers and acquisitions take place for business reasons. It is important at the outset to communicate the benefits of the merger. People may not like it, but if they see that it has a legitimate purpose, and the benefits are obvious, there is less resentment and employees are more likely to accept it.
  8. Make sure the acquiring company’s leader(s) communicates in person as much as possible. It is easier to be resentful towards an unknown, invisible ogre, than it is to be resentful about a person you have personally experienced as being real, rational and concerned. Successful mergers only happen when senior managers make themselves visible and accessible to all employees affected by the merger and promote the benefits at all levels. Employees at all levels need to experience the buy-in and support of their leaders for the merger or acquisition.