5 steps to ensure an effective M&A through cultural integration

Unlocking the power of culture:

5 steps to ensure an effective M&A through cultural integration

A common misconception among companies is that culture merely represents the “soft” side of the organization. What this perspective misses is that a consolidated and well-functioning culture serves an essential basis for decision-making, defining what your business priorities are and what elements are more marginal.

Culture is present when defining short-term plans, identifying long-term objectives, setting roles for professionals and establishing how your business approaches its operations and strategy. Among other benefits, an organization with a well-structured culture is more quickly able to put a strategy into action since its leaders will be more aligned and prepared to execute it.

A company with a clear view of its business essence will also be better equipped to make more effective decisions due to less uncertainty surrounding questions such as the areas in which it wishes to invest and the challenges it will face once going through significant structural changes.

Doing your Homework

With a target acquisition in the crosshairs and before closing the deal, it is vital for any organization to keep in mind and identify whether the attributes it seeks to acquire in the other company rely on a particular culture to operate. To effectively acquire tangible attributes through a merger and acquisition (M&A), such as specific capacities, production lines or brands, culture is often not a sustaining factor or even required. If, however, the business thesis aims to obtain certain intangible attributes – such as creativity, innovation, agility, marketing expertise, publicity assets, content, digital solutions or even ESG practices – it is important to recognize that these do not function in a cultural vacuum. Such capacities are often intricately tied to the cultural context of the company you are merging with or acquiring and will not lend themselves to a “plug-and-play” approach. We have seen M&As fail when companies overlook this connection: specific cultural setups are the fertile ground on which intangible attributes are able to thrive – replanting them in an alien environment will quickly cause them to wither. If your organization wants to maintain certain acquired asset, it must be conscientious of the factors that sustain it. Assuming the culture of your organization will be an automatic fit could end up being a costly error.

Setting the Stage

Business leaders are increasingly realizing that a well-defined culture is much more than merely “nice to have” when pursuing an M&A. Beyond merely capturing synergies, culture is essential for ensuring that the deal is set up for success. It must be considered from the very outset, from outlining the M&A plan and proposition (the business thesis) to evaluating potential partners. The integration process itself will be much faster – and ultimately more effective – for a company that has categorically laid out its own culture and determined which aspects of the operation and business are negotiable and which are not.

While the business leaders we have worked with believe in the inherent value of culture as a dealmaker and actively seek to capture cultural synergies, many companies lose their way when attempting to define, structure and guide culture. One important point to note here is that there is no such thing as a “good” or a “bad” culture. Instead, we believe in the idea of a “needed” culture for the company – one that is aligned with the business model and the company’s given reality. The key question to ask is: What kind of culture is needed for the envisioned deal to succeed? This means having a clear business thesis for the M&A defined in advance and identifying how the merger in question will contribute to this.

To prepare the organizations for the M&A, we recommend carrying out a cultural due diligence to identify and understand the needed culture and expose any misconceptions that could undermine the deal. Understanding the answers to a number of key questions will prepare your business for the culture-related challenges ahead, at both the practical as well as intangible levels. Once the leadership has made the decision to move forward despite the difficulties ahead, the business thesis should be used to orient your organization in establishing a clear structure for positioning the new culture. Now that expectations, objectives and cultural targets have been defined, we propose following a five-step methodology for achieving effective alignment between culture/values and the business goals to set your M&A up for success.


The Road Ahead

Set The Cultural

Culture should be defined, iterated, and planned based on the objectives of the deal alone.

Understanding The Reality
Via Cultural Diagnosis

There is no right or wrong culture, only one that is more or less aligned with the milestones of your cultural compass.

Mind The Gaps,
Take Concrete Action

There is no right or wrong culture, only one that is more or less aligned with the milestones of your cultural compass.

Don’t Tell

Lead culture in the day-to-day.

Engage, Measure,
Adjust & Repeat

Implement KPIs that allow your business to identify and effectively adjust to changes and developments.

Food for Thought

The point of cultural integration is to create and maintain coherence between two companies in any M&A deal. Making a concerted effort to define, reinforce and live the needed culture will help provide clarity regarding targets, actions and behaviors among leaders, especially in a new context that can leave stakeholders feeling unsure of what to do and of what is to come. Culture is not an immediate value-add – it takes time to bear results, requiring leaders to stay the course to ensure coherence and build unity while responding quickly to reality. Culture provides a consistent rationale along with a common, structured approach and principles that can be leveraged to turn the ambitions of an M&A into reality.

  • On 17 January 2022