Culture Matters.

|Grow through Acquisition

Multiple studies conclude that anywhere from 70% - 90% of M&A transactions result in failure. (Obviously, these deals were not advised by BAMA. :) ) While it is debatable as to what defines a “failed” merger or acquisition, the leading cause is a lack of cultural fit.

A company’s culture is synonymous with our individual DNA. Embedded in the organization are the mission, values, purpose and other intangible attributes of a company that are not only impossible to duplicate, but nearly impossible to quantify. At the end of the day it boils down to human behavior and how interactions and decisions are made on a day-to-day basis.

Interestingly enough, in the dozens of meetings we’ve held with senior executives regarding their acquisition strategy and parameters, we never hear them describe the type of culture or management style that best fits their organization. They tend to get sidetracked by a specific economic profile or product/service expansion – common and important factors in evaluating acquisition targets.

If the majority of deals fail due to a lack of cultural overlap then why don’t we give more consideration to culture on the front-end?
The challenge is likely tied to our ability, or lack thereof, to measure and appropriately define culture. The most obvious solution is spending adequate time with the people that lead the organization. While it is not practical to interview every employee within an organization prior to making an acquisition, you should allocate ample time meeting with senior management to learn more about their approach to the following areas:
• What is the overall mission and goal of each company? Are you in business to make money? Serve the local community? Offer a niche solution or provide a turnkey offering to customers?
• How are decisions made on a daily basis? Is the organization flat or is the environment bureaucratic in nature?
• Collaboratively discuss why the acquisition is being proposed in the first place. What attributes of the target company is most attractive and what is plan to leverage those attributes?
• What are the mission statements for each entity and how do they relate or complement each other?
• Identify what the general perception of each company is in the marketplace. How does each reputation compare and what changes will customers and other stakeholders experience through the transition.

Thinking proactively to ensure there is a cultural fit upfront will save you a lot of time, money and headache down the road. Give careful consideration to the group you are acquiring and make sure you understand the intangible elements affected by a transaction.

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