Acquisitions

Why Prioritizing Company Culture Is the Key to a Successful Acquisition

The problems behind failed mergers rarely have anything to do with logistics or accounting or meeting sales benchmarks.
Why Prioritizing Company Culture Is the Key to a Successful Acquisition
Image credit: Tinpixels | Getty Images
Guest Writer
CEO of intive
6 min read
Opinions expressed by Entrepreneur contributors are their own.

The prospect of merging with or acquiring another company is an attractive way for a company to expand its capabilities and the breadth of its business, no matter how well-established the company is. Take PayPal for example: Despite having the second most popular financial app in the United States, the digital payment company has made acquisitions worth an estimated $3 billion in just the past few months.

Related: 10 Examples of Companies With Fantastic Cultures

Sometimes a smaller competitor on a company's acquisition radar has extensive experience in a specialized area the larger company has just started learning about. In other cases, a merger or acquisition gives a company access to markets it has never tapped into. In these scenarios and others, it's clear that an acquisition has a massive upside potential for all parties involved.

And yet, from a shareholder's perspective, a staggering 83 percent of mergers fail.

I can tell you from experience that the problem rarely has anything to do with logistics or accounting or meeting sales benchmarks. Instead, the heart of the problem is usually due to a lack of consideration of company culture. It's the reason 23 percent of employees report being "actively disengaged" in the wake of a major change event. A few missteps, and the level of disengagement in your organization can soar after a merger. Perhaps even more daunting, it can take as long as three years for a company's employees to return to the level of engagement they experienced before the major change occurred.

So, how does one go about putting company culture first when it comes to a major acquisition? As the CEO of a company that has successfully merged four companies into ours, I have a good idea of what works and what doesn't. Here's what you need to know:

Prioritize your cause and belief over common values over product.

To approach company culture effectively, the first step is to go to back to the basics. Noted management consultant and organizational expert Simon Sinek challenges organizations to ask themselves a simple but powerful question: What is the cause we are after? It behooves leaders to answer this question and communicate it in a way that the rest of the company can not only grasp but also rally behind.

On a deeper level, Sinek believes a company must ask of every individual employee: Why are you here? Why are you in this company and not in another one? If a company is not serious about posing this question to some or a few employees, the company will eventually fail that employee. If the company is not asking any of its employees this question, the company itself will inevitably fail.

At intive, we have been careful only to acquire companies that share our core values: empathy, agility and enthusiasm. If there is some perceived strategic advantage to incorporating another company into our own, it won't happen unless we are certain these values are alive and well within the company. At the very least, our belief in putting people first, both clients and employees alike, is something we do not budge on.

In the world of tech, mergers often happen between companies with different products and disparate processes, inviting friction between developers and managers. But, if the two companies coming together recognize their common cause and common values, the logistical discrepancies tend to work themselves out.

Related: We Can All Agree These 16 Things Make Us Miserable at Work

Understand that compromise matters when blending "two camps" into one company.

When two companies come together, the strategy value lies in blending two sets of assets, whether that means financial assets, compounding the power of tools each company has or perhaps the potency of bringing two brands together. The value of each of these is easy for any executive to see on paper. But, what's often not obvious is that the value is lost if talent is not retained -- on both sides of the merger.

With employee retention in mind, leaders and executives need to understand that in the long run, it's not enough to just throw money at a problem; employees may respond well to a raise in the immediate aftermath of a merger, but it won't keep them engaged forever. Employees from both the existing and the acquired company need to feel welcomed and valued. They have to believe in the direction of the company, and that they have a role in the company's future. This makes identifying leaders in the acquired company and giving them the opportunity to develop themselves and their teams further to one of the most crucial steps for success.

At intive, three-fourths of our company leaders came from the five constituent entities that have formed intive. In short, we've excelled in retaining and developing key people after mergers and acquisitions. Our values are consistent no matter what's going on in our company: The people come first. In the wake of a merger or acquisition, those who suddenly find themselves intive employees (or whatever company has acquired or merged with them) are often surprised by how much the quality of their work experience matters, which allows them to take their careers to the next level and brings even more strategy value to the acquisition.

Related: Why Office Perks Are Traps, Not Benefits

Reconcile disparate office environments by keeping the best parts of both.

Sometimes merging companies have similar or even identical values at their core but express them in much different ways. Attributes like work attire, accessibility to management and office environment can vary greatly between two organizations that otherwise have a lot in common. Leaders of the two companies need to sweat the details and have an honest discussion about the way attributes like these vary between companies and to identify which bring the most value to the revamped organization.

When intive acquired FDV Solutions in Argentina, we were quite impressed with the way the team anticipated delays in customer payments. This was certainly something that hadn't crossed our minds, and yet we were fully aware of the immense value a behavior or habit as simple as this could bring. Therefore, we took steps to incorporate a crucial part of their daily routine into ours. As a result, cash collection across our entire organization accelerated.

The importance of honest reflection regarding differing attributes between two companies coming together cannot be understated. It may be painful at first and will likely require folks on both sides to swallow their pride in the interest of a greater cause. But, when done properly, the end result will be a superior organization that's far greater than the sum of its parts.

Considering company culture above all else when two companies come together gives the new organization a far greater chance of succeeding than it would otherwise have. Putting culture first means prioritizing the people who make the companies work. An organization needs to understand that the people in each company is what differentiates it, and without them there's simply no strategic value -- merger or not.

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