This article was updated on June 18, 2018.
Mergers and acquisitions (M&A) are a common strategy for growth, and M&A activity is hitting record high levels. According to JPMorgan Chase & Co., global M&A deal value hit more than $6 trillion dollars at the end of 2015.
However, the M&A failure rate is estimated to be between 70 and 90 percent, reports Business Review Europe. Often, deals fail because businesses are not proactive about handling complex questions of culture and people. "Not only are you asking two companies to integrate under one corporate mission, but you are bringing together large groups of people with their own personalities, ambitions, behavioural traits and ways of working," notes Business Review Europe.
Finance leaders can be so focused on the terms of the deal that they forget about the cultural and people issues. But in order to reduce the risk of deal failure, finance leaders can work with HR to address these issues during integration activity.
Emphasize the Original Purpose of the Deal
One of the first things finance leaders can do is work with HR and reiterate the original purpose of the merger or acquisition, which should drive how to handle cultural issues as the two organizations are integrated. According to Forbes, the more assimilated the acquired business needs to be, the more the culture of the acquiring business needs to dominate. In the case of an acquisition, it likely makes sense to integrate the acquired business into the acquiring business culture.
On the other hand, if an organization was purchased because of its innovative processes, technologies or products, its culture should be preserved and not necessarily assimilated into the acquiring business culture. From the very beginning of a deal, finance and HR leaders should work together to match cultural decisions to the original purpose of the acquisition.
Select the Right People
As with many deals, staff redundancies and layoffs may happen. When it comes to making these decisions, it's not just a numbers game. The right people need to match the original purpose of the merger. One outcome of downsizing must be to "preserve the organization's intellectual capital," reports The Balance. Finance leaders should consider what competencies the organization will need going forward that will help the business stay competitive. In whatever disciplines an acquired organization has strength — whether marketing, operations or engineering — the people in those areas should be retained.
Be Mindful of Optics
Because the risk of mergers and acquisitions failure is so high, finance leaders should take proactive steps to get ahead of possible cultural and people problems during an M&A. The Balance notes that it's important for leaders to pay special attention to how people are treated during the integration process, and not just people leaving the organization. After all, the talent that remains is watching how the business treats departing employees and could form opinions about whether they want to stay with the new organization.
Finance leaders can help HR adjust the organizational culture when merging businesses. By sticking to a clear vision, selecting the right people and treating employees well throughout the deal process, finance and HR leaders can work together to cultivate a successful cultural transition.
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