Acquire Culture
Culture is essential in considering an acquisition for a number of reasons. First, it has a significant influence on the productivity and engagement of employees. It’s forgone consultation that post-covid employee engagement is at an all-time low. A company's culture, in-office or not, needs to encapsulate its values, behaviors, and practices. If the acquired company’s culture is too different from the acquiring company's, it can lead to friction and conflicts, affecting employee sentiment, productivity, and integration resistance. This will have detrimental effects on the performance and profitability of the business, thus, shareholder value. To minimize the all-to-common productivity dip during the change management integration activities, it's necessary to carefully assess the cultural compatibility between the two companies.
Secondly, culture plays a critical role in determining customer interactions and brand perception. If the acquired company has a customer-centric culture, it likely enjoys a strong reputation and loyalty among its customers. Dramatic changes in this culture can disrupt these relationships and potentially harm the company's market standing. Understanding the existing culture and making efforts to preserve its positive aspects during and after the acquisition is crucial. Some customer loss is inevitable, but alignment during due diligence, key customer introductions to the acquisition activity, and proper focus on culture integration will provide the best odds of realizing acquisition value.
Lastly, culture can significantly impact innovation and business strategy. For instance, a company with an abundance mindset often operates from a stance of innovation, ready to be agile with the market trends. A company, with a scarcity mindset can stifle creativity and risk-taking. This shows signs of future market laggard vs. generators of the next boom trend. Assessing cultural alignment isn’t just about risk avoidance; it’s also about gaining knowledge of strategic alignment to make the RIGHT acquisition decision regarding your acquisition strategy.
In conclusion, considering culture in an acquisition is a strategic move. It aids in making informed decisions about integration, helps retain valuable employees, ensures the continuity of customer relationships, and can serve as a source of competitive advantage and engine for future organic growth in the newly formed business. Neglecting the cultural aspects can lead to lengthy integration resistance and ultimately a failure in achieving acquisition value even when all other indicators during due diligence, such as a market-leading presence or the balance sheet, looks outstanding.
By: Matt Scamardo
