Company culture is the secret to 1+1 = 3 in today’s complex M&A deals

As they race towards Day 1, today's deal makers focus on many things to get the transaction across the finish line. Top priorities are often linked to the immediate impact on operations and value creation: IT integration, TSA finalization, reporting redesign, and other operational to-dos. A tremendous amount of energy and muscle is poured into target selection, due diligence, deal structure, and more. But a sobering reality of M&A work is that many of the deals are destined to fail. 

Even when every piece of the people, process, and technology agenda is seamlessly executed, that only gets you to closing and Day 1. There's a significant factor that often goes unaddressed—the marriage of the two cultures into one cohesive community with a common vision of the future. When company cultures collide, all the tactical work that went into Day 1 execution can be rendered meaningless. It doesn't have to be that way, though. Rather than lose sight of what can be a deal-killer, teams are now taking an intentional, step-by-step approach to cultural integration, allowing leadership and deal sponsors to safeguard their investments as well as unlock unforeseen opportunities. 

The three essential building blocks of an approach driving successful outcomes in a timely, transparent way are: 

1. Clearly define the vision. 

To achieve success, all the employees, teams, and leaders must be heading towards the same destination, especially since the starting lines can be so very different. Explicit (and commonly understood) definitions of drivers of future value and strategic objectives are essential. Do you remember the identity crisis around the Microsoft and Nokia integration where the software-centric approach clashed with a hardware-focused culture to create a mismatched aspiration? 

Among its many defined strengths, the future state should describe the brand identity of the new company in the marketplace—what it will be known for and what its mission and values are. These components not only explain how the new company will generate revenue but will help win the war for talent by attracting and retaining a diverse workforce. 

2. Assess the Cultural Baseline.

With the vision established and agreed upon, it's important to know the starting point. HP has all the characteristics of a large corporation. This should be a key identifier especially when the acquisition is a smaller, entrepreneurial/agile organization like Autonomy (a 2011 acquisition that ultimately led to a multi-billion dollar write-down). 

Understanding the organization's readiness for change, knowing the potential accelerators, and planning for obstacles are key parts of the integration process. In our work, we suggest a 360 view using a variety of tools and techniques that help us go deeper to understand the organization’s nuances. This spotlights greater understanding of the complexities of each culture, identifies the right cultural levers to pull, and develops the core values that will align and transform the new company. 

3. Driving change forward.

When the organization’s cultural drivers are clearly defined and a structured plan is designed, the roadmap to integration becomes easier to navigate. We lay the foundation with an explicit vision of the future, clearly defined expectations for leaders’ behavior, and the ways employees will interact and connect. These are the cultural elements we want to encourage or remove.

Each and every employee, from the most senior leader to the newest recruit, needs to feel empowered to drive the change, modeling desired behaviors and tying together the social framework of the new organization. With all of this in place, all that remains is to execute. With rigorous governance and open lines of communication, the organization can adjust to opportunities, share success stories, and ensure everyone understands the state of play on the journey. 

Day 1 will happen. And so will day 100. By being intentional and rigorous in their treatment of cultural integration, dealmakers and sponsors can ensure that their new venture not only survives but thrives—and becomes even greater than the sum of its parts.