Cultural Fit – serious vetting in M&A

In any M&A situation, there are many organizational aspects requiring careful assessment, but perhaps the most commonly overlooked and undervalued aspect of the due diligence process, is that of cultural fit.  Many within our industry are far more comfortable in assessing the fiscal aspects of the deal and reviewing broader business synergies, than they are […]

In any M&A situation, there are many organizational aspects requiring careful assessment, but perhaps the most commonly overlooked and undervalued aspect of the due diligence process, is that of cultural fit.  Many within our industry are far more comfortable in assessing the fiscal aspects of the deal and reviewing broader business synergies, than they are in dealing with the ‘softer’ aspects, such as people and culture.  It’s these softer aspects however, which carry such potential for either the enhancement or outright destruction of a merger.

Consideration of culture needs to be given earlier in the process.  Too often organisations don’t start thinking about it until after the deal is done, while some only once employees, particularly those they especially wanted to keep, start exiting.  Culture needs to be on the table before due diligence begins.

According to Karen Isely of Isely Associates International, being well versed in your own organisation’s cultural attributes is what provides the foundation for the success of the deal, and of the organization itself.  This not only means addressing the aspect of culture early on, but starting with your own existing culture.  She suggests asking questions such as:

• What sort of culture will be required to successfully meet our future business challenges?
• How does this differ from our existing culture?
• What actions need to be taken to shift our culture moving forward?

Once you understand where your own existing culture is at, it becomes possible to assess the cultural impact of potential partners (i.e. what impact will their culture have on your own, and is their culture likely to shift you closer to, or further away from where your culture needs to be).

Isely suggests it’s only after cultural impact has been determined, that cultural fit should be assessed (i.e. whether your people will get along with each other and work successfully as a unified team).

The actual ‘assessing’ however, is only the beginning!  Once you’re satisfied that a good cultural fit exists between businesses, consider the following tips for a merger with minimal mishaps:

1. Get on the front foot – be proactive and transparent from the get go and take steps early on to align the different cultures. Try conducting a culture audit across both groups.
2. Create a roadmap for the new organization – what’s the future vision for the combined organization? Create a clear structure which defines this and work towards it.  Where will the two businesses complement one another?  What new resourcing demands will there be?  What roles will be duplicated?  How will you manage any redundancies?
3. Communication is key – seriously, if you were only to follow one of these tips (not recommended), make it this one! The merger of two organisations, while exciting for some, can be highly threatening and stress creating situations for many employees.  Recognize this and remain as transparent as possible.  When employees are uninformed of significant changes going on around them, rumors can quickly circulate and create negative sentiment.  Even if you don’t have all the answers or details, acknowledge this and reassure employees that you’ll share regular updates as information does come to light.  Communication is essential at every stage throughout this process.
4. Don’t stop short – the job’s not done once the deal is signed. The process of successfully assimilating two distinct cultures takes time and careful ongoing management.  Continue to monitor progression and seek regular feedback from employees.

Jadeja Partners – Call for an obligation free discussion
Phone:         1300 523 352
Web:            www.jadejapartners.com

Magnus Yoshikawa
Mobile:         0408 885 944
Email:          magnus@jadeja.com.au