Culture and Value Creation

Bob Schultek
Author of
The Gauntlet

The fundamental premise of any business acquisition is that the merged organizations will be more valuable together than they would be if they continued as separate entities. An acquisition is supposed to be an exercise in value creation. Yet, a KPMG study indicates that 83% of acquisitions fail to boost value, and often, value is actually destroyed. Something goes very wrong along the way.

Of the five key due diligence parameters for acquisitions – risk, price, strategy, management capacity and culture – the least attention is typically paid to culture integration. This is no surprise, since assessing the ingredients of a company’s culture – values, behaviors, relationships, attitudes, and commitment to customers – is not readily quantifiable.

How has the culture of the target company contributed to its success?  How has it motivated its people to invest discretionary effort to achieve goals?

The KPMG study indicates that value creation is more dependent on successful culture integration than on any other factor; it is the root cause of success or failure for an acquisition. Without a full integration of cultures, creating value will not be possible. Get it wrong and nothing else matters. Trust erodes…unproductive conflict increases…commitment fades…accountability is avoided…and results fail to materialize.

To evaluate another organization’s culture, ensure that you understand your own. Then you’ll be able to make clear choices about the expected values, behaviors, relationships, attitudes, and environment for a new, combined entity. Be specific and direct about what matters and why. Be sure that the merged organization will serve customers better. If uncertainty arises about the potential for a complete, successful integration of cultures, hit the pause button on the acquisition.

Without a specific plan for integrating cultures, value cannot be created and sustained.

How has your culture contributed to your company’s success?
How aware are your people about the expected behaviors and attitudes that define your culture?

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