How do you manage and resolve corporate culture conflicts and tensions during and after a M&A deal?

We always say you learn more from the deals you don't do. Culture fit is the first and most important thing to consider in any deal. It is also the #1 thing that can cause a deal to fall through. Core values start at the top so spend as much time as you can with the founder/CEO to understand what drives them. Next, spend as much time as possible with key leadership to ensure that the team practices what they preach. Transparency and flexibility are keys to any successful integration so the stronger a relationship you can build during diligence the better.

Cultural fit is critical to the success of integration. The merger of two corporate giants left an indelible mark on its employees, with the cultural divide persisting long after the formal integration. Even after many years, long-term employees instinctively identify as 'red' or 'blue', reflecting their former affiliations and values. A telling anecdote highlights the profound cultural divide. Just before the merger, a blue employee extended a business card in anticipation of collaboration to a red colleague at a trade fair. The red employee, expressing deep-seated animosity, ripped the card in half, declaring "This is what we do to people like you.", symbolizing the existing mistrust between the two companies prior to the formal merger.

1. Assess the cultural differences: Conduct a cultural assessment of both organizations to identify any differences in values, beliefs, communication styles, work practices, and other cultural factors. 2. Define the new culture: Define the new culture that you want to establish post-merger. 3. Communicate the new culture: Make sure that everyone understands what the new culture means, how it will be implemented, and what the expected outcomes are. 4. Address the cultural gaps: This may involve changing policies, processes, or behaviors to align with the new culture. 5. Provide training and support: This can include cultural awareness training, leadership development programs, and coaching.

Managing corporate culture conflicts and tensions during and after an M&A deal is crucial for the success of the integration process. Here are steps to address these challenges: 1. Pre-Deal Cultural Assessment Cultural Due Diligence: Conduct a full cultural assessment of both organizations during the due diligence phase. Identify key areas of alignment. Cultural Fit Analysis: Evaluate how well the cultures align with each other and with the strategic objectives of the merger. Understand the core values, behaviors, and working styles of both orgs. 2. Leadership and Communication Ensure that all leaders are aligned and can articulate this vision in a consistent way. Maintain open and transparent communication throughout the M&A process.

One cannot underestimate the value of effective communication with employees in the M&A process. A perfect example of why this is critical comes from an acquisition in which I was involved where the deal terms required that a certain percentage of the target company employees remain with the joint entity for at least 18 months after the transaction. Because of rumors flying around prior to the deal closing - and employees understandably worried about their jobs - some employees left prior to the deal close and others were interviewing before they learned that all positions were protected post-close. So, the best way to combat that risk is to involve employees early and often, assuage concerns quickly, and communicate transparently.

Resolving culture 🤺 conflicts. Here is what you should do. 🏆 Winning in M&A. Preferably, you act before there is a conflict. But that’s a different story, to be told later. Because now it is too late. There is a conflict. That needs attention, as every disruption - be it in “normal life” or business – needs attention. Conflict in the business environment needs leadership / top-management attention. It’s not that I’m saying you shouldn’t ask for professional support. But make sure that the conflict, the involved parties receive leadership and top-management attention. Be clear about what is ✅ acceptable and what 🛑 not. Recall the reason behind the Acquisition, The WHY! Start a moderated process so they find a common solution.

Integrating two corporate cultures after an M&A deal is a delicate process that requires thoughtful planning and a gradual, inclusive approach. Tools to leverage include: Conduct a Cultural Assessment: Analyze values, leadership approaches, decision-making processes, and org structures. Leverage tools like surveys, collaborative whiteboarding, and workshops to identify similarities and differences. Identify Key Cultural Drivers: Highlight the aspects of each culture that contribute to success and employee engagement. Pinpoint Potential Conflicts: Recognize areas of cultural clash, such as risk-taking, or innovation preferences. Develop a Unified Vision Map: Collaboratively define a unifying vision that aligns with the M&A’s goals.

Having spent more than 35 years leading non-organic growth projects first at Assurant Inc. and then at American Family Mutual Insurance Company, S.A., I can attest to the critical importance of advance preparation and attentive execution relating to cultural issues. With the helpful benefit of hindsight, there was always some aspect of culture--the acquired entity or the acquiring entity--that we did not fully understand and think through in advance of closing. Learning after the fact is costly and disruptive!