MANAGEMENT OF CULTURE IN MERGERS AND ACQUSITION

By Bolaji Okusaga Managing Director, The Quadrant Company

What is a Merger?
A merger involves the integration of all

products, services, processes, systems and administrative functions of two or more organisations to improve the competitive positions of the organisations.

What is an Acquisition?
This is a structured transfer of one

organisations assets to another in an agreed and orderly manner. The organisation acquiring is usually referred to as the acquirer, while the organisation being acquired is referred to as the target.

Synergy Defined
WORKING TOGETHER
Combined action + operation Greater Advantage
This assumes that the collective advantage to

be gained by joining forces is greater than the separate existence of each organisation.

THE M&A PROCESS Acquisition Phase

Planning Phase PRE-MERGER PHASE

Integration Phase

POST MERGER PHASE

Initiation

Negotiation & Transition

Integration

Why do Organisations Merge? The Hard-issues / Strategic Fit

Horizontal
share the same market segment in the same industry. Advantages Expansion of Franchise / Market share Economies of Scale Dominance of market segment Vertical have different
niches within a larger industry. Advantages Expansion of product portfolio Diversification of product / service mix Enlargement of market scope and customer segments

Mergers & Acquisition Failure Rates

Mergers and Acquisition have less than

a 50:50 likelihood of success Up to one-third of mergers fail within 5 years Up to 80% of mergers never live up to their full expectations A 3-way or 4-way merger is exponentially more difficult than a 2-way merger.

Why do Mergers / Acquisition Fail The Soft Issues

CONFLICTS OF CULTURE this usually affects operations and processes MULTI VISION this affects organisational strategy
FAILURE OF LEADERSHIP this leads to the pursuit of self interest instead of the larger organisational interest

Why do Mergers / Acquisition Fail People & Culture Fit

Corporate culture and existing value systems
Staff qualification Core competencies and Intellectual Capital Leadership styles and communication systems Strengths and weaknesses of the critical

success factors of each business units

These factors make or break

mergers and acquisition deals.

Why do Mergers / Acquisition Fail Stakeholder Fears

THE SHAREHOLDERS : fear of a dominating merger partner
THE MANAGEMENT: fear of loss of position & relevance THE STAFF: conflicts due to fear of changes in middle management

News of the Merger

Commitment to The Situation

Denial Enjoyment

Fear Anger Sadness Acceptance Relief

Liking Interest

Pitfalls of the Transition Process

1. 2. 3. 4. 5.

How is all this going to affect me The personal / departmental list anxiety Organisational proliferation emphasis on
temporary rules & reporting relationships at the expense of the job

Infrequent and Irrelevant Communication Triangulation conflicting objectives & loyalties 6. Time management balancing time constraints
with adjusting to the new reality

7. Leadership crisis

Checklist for an M&A

What competitive advantages do we have? In what market(s) shall the new organisation play? What are the strengths of the partners in the deal. Do the organisations fit together?
The vision and corporate

personality is not negotiable

Problems Associated With Improper Cultural Integration

1.
2.

3.
4.

Realization of difference the them and us syndrome Mutual stereotyping Mutual blaming Battle for cultural dominance

Fixing the Soft Issues in a Merger & Acquisition Deal

Corporate Culture: This is simply put: the way we do our thing around here
Culture Mechanism Strategy Market

Values Style

Structures Products Capabilities Delivery Reward Systems

Customers Competition Shareholders

Cultural Due Diligence in M&A

Cultural due diligence is imperative in

any M & A transaction because all mergers and acquisition transactions are human transactions; failures or successes are therefore attributable to the human factor. Explore the cultures of the organisations involved in the deal as you explore the financials and the legal implication of the deal.

Cultural Due Diligence Process

Assessment Process involving three

core steps:
-Determine Current State -Define Desired Picture -Conduct Gap Analysis
Determine appropriate alignment /

intervention initiatives
Tools: Culture Mapping Climate Survey

Benefits of a Cultural Due Diligence

Gives employees clarity and sense of purpose
Helps employees to view the integration as a

meaningful process Helps shift the focus from just getting the deal done to making the partnership viable over the long haul Helps employees to focus on similarities and not differences Supports in the creation of a culture by design and not by default

 Thank you