Unlock the full potential of your M&A through culture

A culture integration strategy will set up your organization’s future state for success

From financial to operational alignment, the M&A transaction process presents various opportunities and challenges that organizations must navigate before closing a deal. Yet one critical element, culture, is often overlooked, but it has the potential to help organizations fully harness the benefits that come with a transaction.

When organizations consider a transaction, a cultural assessment is often omitted from their broader strategic roadmap. Organizations understand the importance of culture but frequently struggle to definitively incorporate it into an M&A plan. In reality, assessing the compatibility of two organizations’ cultures demands the same level of due diligence as common considerations like financial and tax matters. This is because culture can determine whether the acquired workforce is actually a good fit.  

“During M&A, culture shouldn’t be treated like an afterthought,” said Grant Thornton LLP Growth Advisory Director Rob Ginzel. “Failing to integrate culture into M&A strategies could have a negative impact on deal success. In fact, unaddressed culture incompatibility causes upwards of 30% of mergers to fail.” 

Furthermore, employees prioritize culture more than ever before, with issues like well-being, hybrid working and diversity, equity and inclusion (DE&I) being major factors in their retention. In Grant Thornton’s , 73% of respondents indicated they want flexibility in where and when they conduct their work.

“Especially during times of change, employees want to know their company understands their needs and is prepared to meet them,” said Transaction Advisory Managing Director Angela Nalwa.

Prior to and during a merger or acquisition, organizations should build and activate a robust culture integration plan, which will prove to be a critical aspect to realize deal value. 

Contemplating a merger or acquisition? Here’s what to keep in mind to ensure culture is included in your path forward.

What is culture?

Culture makes up the shared values, expectations, ways of working and norms that an organization is built on. And the collective behaviors of every leader help define it.

“Your culture is the epicenter of what motivates people to join, stay at and take pride in your organization,” said Growth Advisory Director Kim Jacoby. “Assessing, evolving and aligning on your organizational culture positions you to acquire, develop, engage and retain top talent — along with delivering business results — before and after a merger or acquisition.”

Like all elements of a successful organization, culture should be aligned with strategy in order to enhance performance and build toward positive business results. An organization’s culture can be characterized across several dimensions:

• Innovation and capacity for change: The degree to which an organization has the capacity and capability to adopt and sustain change.
• Risk and quality: A strong orientation toward compliance enables organizations to course correct, improve prevention and detection of risks, and ensure the highest quality standards in products and services.
• Accountability and results orientation: The extent to which an organization clearly defines success and ensures everyone in the organization understands their role in achieving it.
• DE&I: The degree to which an organization attracts diverse talent and fosters an environment of respect while celebrating differences.
• Purpose and strategy: How well employees understand the purpose, strategy and structure of the organization – and the effect of these elements on employee motivation.
• Structure and decision-making: An organization’s roles, responsibilities, policies and behaviors influence leadership structures, decision-making, risk management and control.
• Leadership and empowerment: Leaders constantly shape the organization’s culture, both consciously and unconsciously, through their interactions with others.
• Communication and interaction: Organizations thrive when information and knowledge-sharing is supported and leadership frequently interacts with employees.

Before a successful transaction and the development of a cultural integration plan, an organization must assess these elements of its culture. 

Assess, align, evolve: Steps to building and activating a cultural integration plan

Throughout the M&A transaction process, there are opportunities to assess an organization’s culture and avoid negative impacts of culture misalignment. Independent facilitation of these activities is critical.

1)     Assess the current state of each organization’s culture.

It’s important to conduct and utilize several different sources and methods of data collection to observe common themes and differing points of view. This will help organizations fully understand what their culture truly is and how to best present and realize the full potential of a merger or acquisition.

“Investing in listening to employees will also lead to higher employee receptivity to proposed changes and instill greater engagement through significant transition,” said Jacoby.

2)     Align with the team on your culture’s future state.

From research gathered in the Assess phase, key challenges and opportunities can be identified. These findings will lay the groundwork for enabling cultural integration.

Prior to deal close, organizations should glean cultural similarities and differences from conversations with leadership and compare them to information gathered during the due diligence phase. Through design thinking workshops and alignment with leadership and the team, organizations can then ideate on future culture dimensions and attributes. From there, they can build out the next steps required to revitalize their culture through communication planning, change management and leadership coaching, building toward a post-transaction culture where the organization and its people can thrive.