Poor work culture can derail mergers and acquisitions

Report finds 100% of UK employees would consider leaving a job if it was not a good cultural fit for them after M&A activity.

New research has revealed that 43% of M&A transactions worldwide have experienced culture issues so serious that deals were delayed, terminated or purchase prices were negatively impacted.

This year the UK events industry has seen plenty of its own M&A activity, from American Express GBT acquiring HRG, to AOK acquiring Melon Events.

But a bad cultural fit can be major dealbreaker – every person asked during the research said they would consider leaving the company if the company culture changed for the worse after a merger or acquisition.  

The report by Mercer, a global consulting company, called ‘Mitigating Culture Risk to Drive Deal Value’, features survey and interview responses from more than 1,400 M&A professionals based in 54 countries.

"If the global deal making community intends to create economic value for shareholders in M&A transactions, our research is crystal clear; culture matters," said Jeff Cox, Mercer’s Global M&A Transaction Services Leader.

"When looking to transform the workforce for the future of a newly formed organisation, simply ignoring culture is not an option."

Additional findings include:

  •  "Governance and decision-making process" (53%) and "Communication style and transparency" (46%) also ranked highly as important aspects of organisational culture.

  • Deal makers also said that 30% of deals fail to ever achieve financial targets, due to such culturally-related issues as productivity loss, key talent leaving and customer disruption.

  • Human resources professionals rate "collaboration" (69%) and "empowerment" (64%) as the most important components of culture, while executives rate "governance/decision-making process" (60%) as the most important.

The report also offers definitive action steps as to how to best mitigate culture risk, including a three step plan:

1 – Clearly articulate deal objectives and risks

2 – Insist on confirmatory cultural diligence

3 – Prioritise culture, especially after first 100 days of signing the deal

Phil Shirley, Mercer’s UK M&A transaction services leader commented: "The research has shown that paying attention to the cultural dimension is especially important in the UK context, which is consistent with our observations on numerous M&A integrations.

"If we dig deeper into the data it is clear that leadership behavior is seen as a key driver of corporate culture in the UK and needs to be considered carefully on all deals where people are critical to success."

 

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