mergers and acquisitions culture clashes - diagnosing and dealing with them

M&A Culture Clashes: Diagnosing and Dealing with them

Philip H. Mirvis

Fortune magazine “merger maven”

with Mitchell Marks

@DenisonCulture.com

M&A Culture Clashes: Diagnosing and Dealing with them

Philip H. Mirvis

Fortune magazine “merger maven”

with Mitchell Marks

@DenisonCulture.com

Merger hit rate

65-85 % of Mergers and Acquisitions Fail

Vs. precombination earnings of 2 cos.

Vs. promised returns by executives

Vs. costs of capital

WHY?

Combination Phases

Phase

Typical

Emphasis

Successful

Emphasis

Pre-Merger Financial Strategic

Merging Political Transition

Planning

Post-Merger Damage

Control

Value

Creation

Define the End State

ac

qu

ire

d

Theoretic Synergies

Leading Edge

Technology

Broader User Base

Faster Time to Market

Product Reliability

Technology Transfer

Company A

Engineering &

Marketing

Quality

Matrix

Planning

Professional

Collegial

Teamwork

Our Way

Company B

R&D

Speed

Functional

Ready, Fire, Aim

Entrepreneurial

Political

Star System

My Way

Think

Organization

& Culture

How and

where to

Integrate?

Degree of Integration

What’s happening

in this picture?

Company A Company B

Physical Signs and Public Behaviors

Norms and Values Private Behaviors

Beliefs on „Human Nature and Reality‟

“Layers” of Culture

Culture Clash: Stages

1. Perceive Differences

2. Magnify Differences

3. Stereotype

4. Denigrate

Same or Different?

Very Different!

They are all that way

We are good; they are not.

Business Consulting

Economic Consulting

Perceive

Differences

Magnify Differences

Stereotype

We vs. They

Win vs. Lose

Diligent Due Diligence

Synergies: Strategic and Financial “Fit”

Organizational and Cultural Fit– Complementary organization structures/systems– Depth of management talent– Understandings of the market– Cultural norms and values– HR relations, stakeholder issues

Do your homework-Internet, reporters, academics, retirees, former employees, etc.

Culture Surveys!

The Denison Organizational Culture Model

Adaptability

Translating the demands of the

business environment into action

“Are we listeningto the marketplace?”

Mission

Defining a meaningful long-term direction for the organization

“Do we know where we are going?”

InvolvementBuilding human

capability, ownership, and responsibility

“Are our people alignedand engaged?“

Consistency

Defining the valuesand systems that are

the basis of a strong culture

“Does our systemcreate leverage?”

Software Acquisition

Overall strong profile

Key areas for leverage: Teamwork, Empowerment, Creating

Change, Agreement and Coordination & Integration

Need for Strategic Direction & Goal Alignment

Integrated IT Company

Stronger Internal Focus

Key areas for leverage: Teamwork, Empowerment, Core

Values, Agreement and Goals & Objectives

Need for Strategic Direction, Capability Development & ADAPTABILITY

Software Acquisition Integrated IT Company

Culture & Integration

Integration:

How important

to Strategy?

Savings?

Synergy?

High

Low

Easy Hard

Culture Clash:

Ease of Integration?

Combine

Quickly

Combine as

Needed

Combine

Carefully

Coordinate,

Combine

Slowly

Separate

Post merger cultures

Multicultural

Integrated: Distinct but all part of the family

Pluralistic: Many tribes, in confederation

Segregated: Superiors and inferiors

Monocultural

Melting Pot: One “happy” family

Pressure Cooker: One family or else

Ethnocide: Kill „em off