Ensuring the Success of a Merger

11/29/2016

Though mergers and acquisitions (M&As) are highly common in today’s international business world, they are often marred by difficulties. Indeed, many companies do not take the necessary steps to facilitate the smooth incorporation of the involved companies on all levels, specifically the cultural level.

TMC has extended experience helping clients work through international joint ventures and cross-border merger and acquisition initiatives. Here is a specific case study that explains how TMC partnered with a client to prepare for a successful cross-border merger and acquisition.

Recently a client came to TMC for support in providing insights on cultural integration as they were preparing for a merger.

As a first step, TMC cultural facilitators analyzed the Cultural Orientations Indicator assessments of the both companies’ general employee populations. Then they conducted interviews with top leadership in the merging companies to get an idea of the cultural norms that are expected, reinforced and rewarded within each company. The facilitators aggregated both sets of findings into a comprehensive analysis.

The first level of analysis found that there was a high degree of similarity in work-style preferences between employees in the partner organizations, with almost 1/3 of the data points having a less than 5 percent variance. For instance, 72 percent of Company A employees had an individualistic preference, while 68 percent of Company B employees had the same – a mere 4 percent difference.

However, when TMC cross-referenced this preference to the cultural norms of the overall organizations, there showed up a distinct difference between Company A (individualist) and Company B (collectivistic) despite all the aggregates pointing to a simpler picture. In other words, the behaviors that were expected, reinforced and rewarded by the top leadership of Company B wasn’t how their employees actually preferred to work. This was a key point that TMC recommended the clients address during the integration phase.

The second level of analysis moved into a deeper review of the insights across both organizations. At the company cultural norms level, for example, there was a deep dissonance, with the opposing orientations of hierarchy (in which power differentials play a significant role) and equality (with an emphasis on everyone having an equal opportunity). As this greatly affects decision-making and power balance in and across organizations, TMC strongly recommended a plan to address this deliberately and systemically.

To embed the recommended actions and strategies into the client’s plans, TMC laid out a roadmap that carried them through the merger announcement into the first 100 days of the partnership. The recommended steps included:

  • Preparing the leaders to lead
  • Defining a picture of success of business outcomes
  • Building a shared identity between the entities
  • Co-creating and defining the culture
  • Tracking, learning and optimizing as the relationship developed.

This path would look different for other situations, but the premise stays the same: To maximize the results of a merger and acquisition, both organizations have to consider the impact of culture on their desired business outcomes, and work to overcome any cultural gaps that could mar their partnership. By doing this, they can step into the new organizational structure together in order to realize their end goals.