Cultural issues and Challenges in Mergers & Acquisitions

M&A  are increasingly becoming the preferred  strategy  to expand into new geographies, to ensure a committed  , reliable source of raw materials and intermediate products and  modes of transportation  especially after  the  deleterious effects of disruption in supply chain during the pandemic became evident.

While M&A can offer numerous benefits like acquisition of new technologies , expansion into new markets and achieving operational synergies , they present considerable and  substantial challenges with the cultural issues being the most complex and critical to the success of the  merged entity. It is important to address and navigate  these issues both at the inception stage , during the  integration phase as well as in the post merger period.

Organizational  culture plays a fundamental role in any organization and includes the values ,beliefs , behavioral patterns and norms that determine how the leadership and  employees at all levels interact and make decisions both within the organization and also in relation  with the outside world  including the clients or customers, suppliers , prospective associates /employees , media and the public at large.

When two organizations with distinct culture come together , it can lead to clash of  deeply ingrained values   and   established practices breeding resentment especially if the employees of the acquired company view the acquisition as a loss of their distinct identity and  the employees of the acquiring company suffer from and display a conquerors complex .

Leadership styles   of two organizations  can be a major hurdle as the approach of one organization may not meet the expectations of the other.

Communication styles  are unique to every organization developed over time and embracing a new style can pose a significant challenge in the  integration process.

Uncertainty  about the job, changing roles, prospects for advancement in the new merged entity can result in decreased employee morale and productivity.

A merger/ acquisition effects every aspect of working life of employees of both the organizations and neglecting these issues can result in  mistrust, passive resistance to outright defiance , impaired decision making and negating  the benefits, objectives and purpose of the M&A.

The issues highlighted above underscore the need to address these issues and navigate the path which is often slippery  with care and empathy.

The strategies to address these issues need a deep commitment of the top leadership and involvement of dedicated teams of  employees from both the organizations.The following  strategies and measures need to be put in place to  address and successfully resolve  these  issues  to realize the full potential of the M&A.

At the inception stage itself a cultural due diligence should be conducted through a cultural assesssment process identifying areas of commonality and possible areas of conflict to develop a clear understanding of  the cultural  landscape .

A shared vision for the merged entity engaging stakeholders from both the entities needs to be developed to define the values , norms and practices  to be followed by the merged entity.

An open and transparent communication with employees of both the organizations at all stages of the process to address their apprehensions and concerns, share the vision and provide clarity on the integration plans.

Offer training and development programs especially in team work  to help people adapt to new culture.

The progress of the integration process needs to be monitored continuously at all stages and course correction made  to address the emerging issues.

Cultural issues hold the key to success and failure of M&A  and failing to address these issues in time can erode the anticipated  benefits . By prioritizing cultural compatibility  , conducting  due diligence and adopting a proactive strategy , organizations can build a stronger , cohesive merged entity and increase the chances of a successful merger to realize the full benefits and potential of M& A.