Navigating Cultural Differences In Mergers

The last couple of days, I’ve shared some thoughts around culture in M&A. Today, I’d like to talk about the power of employee listening for understanding the target company’s culture and powering cultural integration. Before the announcement, we can only get the perceptions of people who are under the tent, outside parties, and what’s been shared in the media. That means we’re only getting part of the story during the cultural due diligence phase. To learn the rest of the story, we want to hear what employees have to say. We usually do this with surveys, interviews, and focus groups. They provide invaluable insights to help us understand potential areas of both cultural synergy and culture clash. I’ve found there are frequently disparities between how leaders perceive their organization’s culture and how employees experience it. Employee listening helps to bridge this gap, offering a more nuanced view of the culture. A few years ago, I worked on a deal where the value drivers were rooted in warehouse efficiency. None of the target’s leaders have ever worked in the warehouse – in fact, they really didn’t think about the warehouse much during the sale, and they saw the warehouse workers as fungible. Everything was focused on the office where they worked. So, of course, all of the cultural questions were answered from the perspective of an office worker who was not a key value driver. After the deal was announced, the integration leader and I spent time in the warehouse, listening to the employees there. They had great ideas about how we could make the acquisition more successful, including inexpensive ideas that would drive efficiency, which was the entire goal of the deal. We worked with their leadership to implement several of the ideas. We drove amazing synergies in this deal – synergies that never would have happened if we didn’t spend time listening to employees who were overlooked during the formal diligence phase. This experience underscored the importance of comprehensive employee listening. It's not just about the boardroom - it's about every room. In your experience, how have you used employee listening in cultural due diligence? I'd love to hear your thoughts. #MergersAndAcquisitions #CulturalDueDiligence #EmployeeListening

🔁 Simple 3-Step Process from McKinsey & Company to Organizational Culture in Mergers 🔁 With a cheat sheet to create a unified company culture. Success hinges on more than financial synergies. You must work on seamlessly blending organizational cultures. McKinsey's seasoned experts share a proven three-step approach to mastering this crucial aspect of integration, drawing from insights gained through 2,800 mergers from 2014 to 2019: 1️⃣ 𝐃𝐢𝐚𝐠𝐧𝐨𝐬𝐞 𝐡𝐨𝐰 𝐭𝐡𝐞 𝐰𝐨𝐫𝐤 𝐠𝐞𝐭𝐬 𝐝𝐨𝐧𝐞 > Dive deep into each company's DNA, uncovering the unique "secret sauce" and identifying pearls that must be preserved > Don't rely on gut instincts - employ a scientific approach through surveys, interviews, and focus groups to build a fact-based understanding 2️⃣ 𝐒𝐞𝐭 𝐩𝐫𝐢𝐨𝐫𝐢𝐭𝐢𝐞𝐬 > Ask two important questions: What behaviors will maximize deal value? and where are the gaps that demand attention? > Develop a clear from-to roadmap, ensuring alignment across the top team, and involve target-company leaders for successful implementation 3️⃣ 𝐇𝐚𝐫𝐝-𝐰𝐢𝐫𝐞 𝐚𝐧𝐝 𝐬𝐮𝐩𝐩𝐨𝐫𝐭 𝐜𝐡𝐚𝐧𝐠𝐞 > Embed the identified themes and initiatives into the company's operating model > Redesign policies, processes, and governance to reflect the desired culture > Identify influencers within the organization and empower them as change agents > Leverage signature initiatives to underscore commitment I’m sharing below a cheat sheet on creating a unified company culture. Check it out.👇🏼 What do you think is the most underrated factor in cultural alignment during mergers? 💭 #Culture #CultureIntegration #MergersSuccess #Leadership #CorporateTransformation

An acquisition isn’t a strategy. It’s a starting point. The deal is done. But the team? Not yet. Here’s where we see integration stall every time: 🔸️Culture is assumed, not aligned. 🔸️Middle managers are left in the dark. 🔸️The new “we” never gets defined. To get ahead of that, here are 3 steps you can take today: 1. Define 3 non-negotiable behaviors that highlight what good leadership looks like now. Get specific. Co-create these expectations across both legacy teams. 2. Spot the hidden tripwires. Culture isn’t the poster on the wall, it’s how decisions get made and who gets rewarded. Identify mismatches early, before they trigger breakdowns. 3. Equip the middle 20%. These managers carry the weight of change. Invest in their clarity and confidence now, or risk confusion later. Allison Wright and I built a culture integration tool to support this work- one that surfaces blind spots, aligns behavior, and creates shared language for what’s next. Signing the deal is the easy part. Building a unified team that performs? That’s the real integration. What’s one thing you wish someone had told you before your first M&A integration? #MergersAndAcquisitions #Leadership #IntegrationStrategy #OrganizationalEffectiveness #CultureChange #ChangeManagement #Transformation

A few weeks ago, the “M&A Whisperer” Jennifer J. Fondrevay led a discussion with Extraordinary Women on Boards (EWOB) on the human dynamics that can make or break a deal.    What questions should the board be asking beyond the numbers? What should buyers and sellers be pursuing before and after the deal for successful M&A integration, particularly with respect to talent management? As described by Jennifer (and experienced by many in the Zoom room), M&A can foster an "us versus them" mentality, which can undermine the success of the deal. Boards should be asking questions: * to understand culture at each of the combined entities, * how cultural differences will be bridged, * how the vision for the combined companies will be communicated to employees and other stakeholders, * what actions are being taken before (if possible) and after announcement of the transaction to increase commitment to the transaction from the employees at both buyer and the target company. Tips for Sellers of a Target Company: 1. Plan for Cultural Integration: Ensure that there is a well-thought-out plan for integrating the cultures of the merging companies. 2. Focus on the Bigger Picture: Communicate the vision to the employees and how the M&A fits into the bigger picture, including what is anticipated for the target company and its workforce and providing a vision of how the target company, its relevant divisions and its employees can benefit.   3. Diligence: Is the buyer a serial acquirer (true in almost all cases for a PE buyer or an add-on to a PE portco; true in some cases for a strategic buyer)? How well have historic acquisitions integrated? Tips for a Buyer of a Business: 1. Learn from the Acquired Company: Take the time to learn from the target and integrate the best elements of both cultures and operating approaches. 2. Demonstrate Commitment: To gain and increase trust, show continued and consistent commitment to the vision in words and actions. 3. Define Organizational Structure: Focus on defining the organizational structure based on what is best for the customer. Consider the teams needed to achieve the vision and ensuring that the structure supports the combined company's goals. Challenges (and Tips) for both buyer and sellers: Often only a few employees at the buyer and target company know about any proposed deal. To minimize loss of trust, be as transparent as possible with employees at the combined companies following the deal announcement -- transparency around the business go forward, strategies, workforce, etc.. Be well. Winston & Strawn LLP https://lnkd.in/gNPfAt_J