Many mergers or acquisitions are initiated with the buyer thinking that this will lead to synergy benefits and thus value creation.
In preparation, a buyer and its M&A advisers develop business cases with projections and other numerical material with the goal of substantiating in which areas operational improvements (synergy effects) can be realized.
Such intended synergy effects may include cost savings, such as on joint/larger scale purchasing after the acquisition, reduced housing costs because one or more locations can be merged, reduced personnel costs because certain departing employees do not have to be replaced after an acquisition because positions are "double occupied," etc. Or conversely, potential benefits on the revenue side because a broader product/service package can be offered to customers of both companies.
Integration
However, practice proves more recalcitrant. Integrating organizations and processes often turns out to be more cumbersome than previously thought. What seemed so easy to realize on the "drawing board" (forecasts in Excel) is more difficult in practice. The result is that synergy benefits are not fully realized or are only realized later than planned.
What is or are the causes of this? Several studies show that insufficient attention to the "cultural fit" between businesses is the main reason. After all, many M&A experts and executives focus on the financial aspects of a transaction and typically have less affinity for culture management.
Culture
It is essential to clearly define the purpose of the acquisition beforehand. And as a corollary, what culture will the new organization adopt: that of the buyer or that of the seller?
As an example, if the purpose of the acquisition is to strengthen the buyer's existing business by bringing in new customers, then the new organization is more likely to adopt the buyer's culture. But if, on the contrary, the buyer's goal is to transform its own operations, then it makes sense that the culture of the acquired company will be the basis for the new organization.
In short, sharply defining the purpose of an acquisition is the starting point for the rest of the process.
Key employees
Then, as part of cultural management, involving key employees in the transaction, integration and working out the new organizational structure increases the chances of a successful acquisition (realizing desired synergy/value creation).
So it is advisable in the due diligence phase not only to look at financial, tax and legal aspects, but also to examine cultural and integration aspects. So what does the new organization look like in terms of structure? What are the key positions? Who are the culture guardians? What talents should be retained? And this also means saying goodbye in a timely manner to employees you do not wish to retain.
Where it is critical to regularly communicate the original purpose of the transaction within all levels of the organization, to the extent possible given the confidentiality of the transaction.
In short, by conducting a careful cultural check beforehand, adapting the organizational structure accordingly and appointing key people to ensure the cultural change, you ensure that the intended value creation is also realized and increase the chances of a successful merger or acquisition.
