Due to its intangible nature, businesses tend to forget about culture when dealing with mergers and acquisitions. It is more common for companies to prioritize quantifiable metrics and immediate gains.
Unlike financial and operational aspects, culture is not something you can easily measure. However, cultural differences could have long-term implications if companies neglect this aspect of due diligence.
Understanding the significance
When two companies merge, so do their cultures. Any disparities in their values, beliefs and the way they work can lead to friction. If companies overlook this aspect, they may face post-merger clashes that may cause employees to feel demotivated. It may hinder productivity and the intended synergies between the merging entities.
Assessing compatibility
Cultural due diligence involves a systematic assessment of both companies’ cultures to identify compatibility and potential challenges. There will be key aspects for evaluation to gauge compatibility. These may include:
- Communication styles
- Decision-making processes
- Management approaches
- Work habits
- Office environment
- Employee expectations
- Values alignment
Once the company has identified these cultural disparities, it can then take the necessary steps to facilitate a smoother integration.
Facilitating successful integration
As with any process of change, good communication is crucial in easing a successful integration. It is important to be open about changes, what are the expectations and the reason behind the big decisions. Doing this builds trust. Workshops and activities that involve both companies can also help bring people together.
Having strong leadership matters too. When the big bosses show the culture they want, it influences everyone else. This kind of example spreads throughout the company. It helps everyone get on the same page and makes it easier to accept new ways of doing things.
Cultural due diligence is not a mere formality, but a linchpin in M&A success. By understanding the significance of culture and assessing compatibility, the blended entity can rise stronger and more cohesive than its individual parts.