Mitigating the Culture-Clash in M&A
By Rolf Olsen for Leidar
The world was turned on its head by the onslaught of COVID-19, leaving many businesses struggling to survive and thrive. Despite this upheaval, the fierce pursuit of success through mergers and acquisitions (M&A) has continued.
In 2021 alone, a staggering $5 trillion was spent on M&A activity, a testament to the enduring desire for growth and dominance. To ensure successful M&A, one crucial factor must not be neglected – mitigating the culture clash with communication strategy and cultural alignment activities.
Drawing from my experience working on more than ten $1 billion plus M&A projects over the past 20 years, I have witnessed firsthand how poor communication can lead to catastrophic failures while successful communication can make all the difference.
As each merger and acquisition brings its own unique challenges, there are crucial boxes to check off to ensure that all communication runs smoothly.
But of all these essentials, cultural integration reigns as the most crucial of them all. This aspect is just as important as the merger of assets, those involved are humans driven by both their individual personalities and the shared culture they come from.
When two companies with vastly conflicting cultures come together, decision-making becomes arduous, and effectiveness is greatly hindered. Identifying the existing gaps in culture and finding ways to bridge them is essential in building a unified vision for the future of the newly merged entities.
I have seen the culture clash up close on multiple occasions, most notably when Compaq acquired Digital in 1996 and when HP acquired Compaq in 2001. Issues around these M&A projects are widely reported. However, lesser known are the stories surrounding the significant acquisitions made by Digital prior to being subject to the acquisition by Compaq. I was personally involved in all of them.
I distinctly remember being called by my boss while heading home to Norway for my Christmas holiday in 1990 and being told that I have to go to Dusseldorf instead of Oslo. Digital Equipment Corporation had acquired the majority of Mannesmann Kienzle, a prestigious technology company with a workforce of 4000 employees.
However, despite their technological prowess, Mannesmann and Digital had vastly different cultures. I recall arriving at the Mannesmann headquarters pre-announcement to develop the communication activity, dressed informally as was the norm at Digital, only to be greeted by waiters donning gloves and the air of formality on the executive floor of Mannesmann. It was clear that merging these two cultures would be no easy feat. Similarly, taking over Philips Information Systems division six months later also became a cultural challenge. Yet in the press release, we used “cultural fit” as a foundation for the merger-positioning.
Peter Drucker said “Culture eats strategy for breakfast”. Having a solid communication strategy for driving alignment of culture is crucial in every M&A deal. Last year we saw evidence of how important and effective this can be. A client had acquired a 4000 strong company in a foreign market, and we were engaged to support the integration. To have a trusted external partner in such a process can make all the difference. Trust is crucial to move people and align forces.
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