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Mergers and acquisitions (M&A) are often seen through the lens of financial figures and market share. While these are undoubtedly critical, they're just one piece of the puzzle. Cultural integration is at the heart of M&A. It’s the glue that holds a merged company together, yet it’s one of the most challenging aspects.
In this article, Court Carruthers, President and CEO at TricorBraun, discusses how to ensure your cultural integration is a success.
“Growth is the goal, and if growth is based on people—their knowledge, relationships, and ability to thrive in your company, then there's probably nothing more important than culture.” – Court Carruthers
The importance of cultural integration in M&A
Culture plays a critical role in M&A. It’s not just about operations or assets. Successful companies recognize that their people and culture are central to their long-term success.
Court says that if you're buying a company for growth reasons and people are a big part of that growth, then cultural integration matters a lot.
Court’s recent study shows that cultural fit can be the most important factor in the success of M&A. It's less about factories, inventory, and buildings and more about people. If a business wins on the caliber of its people, then culture is the way to build and sustain that.
Companies that prioritize cultural fit and invest time in aligning cultures see better outcomes in terms of growth and long-term success. Ensuring that cultural integration is done correctly is key to sustaining growth and achieving strategic goals in the marketplace.
Understanding the unique needs of acquired companies
TricorBraun focuses on buying first, second, and sometimes third-generation family businesses. Often, they’re dealing with first-time sellers who may have deep emotional ties to their company. That’s why they make an effort to build relationships and understand the unique needs and circumstances of the acquired company to help them in the process.
How they’ll fit in TicorBraun’s culture is a critical part of the assessment process, making it easier for them to blend with it. TricorBraun’s decentralized approach to integration, while allowing new companies some autonomy, eases the transition for employees and helps preserve the positive aspects of the original culture.
Approaching cultural diligence
Court points out that everyone involved in M&A at TricorBraun is responsible for understanding the cultural fit between the companies. Cultural fit is evaluated continuously—through conversations, observations, and long-term relationships. If cultural assessment is left until late in the process, it may be too late to address potential issues.
TricorBraun takes cultural fit seriously, even in challenging situations like auctions. They assess cultural fit by paying close attention to how people interact during formal meetings and even in casual conversations. It’s crucial to involve many perspectives in assessing cultural fit and to start this process early to avoid surprises later on.
Not all deals are worth pursuing if cultural fit is lacking. Even if a company looks great on paper with strong financials and synergies, if the people involved can't work well together, the deal is likely to fail. TricorBraun has learned that forcing a cultural fit usually doesn’t work and can lead to unhappy teams and difficult integrations. It's better to walk away from such deals.
How to ensure a successful cultural integration
Cultural integration in M&A is complex and challenging, even with the best practices, great people, and detailed plans in place. But here are Court’s tips on how to ensure a successful cultural integration:
- Transparency: Be transparent about what will change post-acquisition and ensure both parties understand and are comfortable with those changes. At TricorBraun, they maintain relationships with potential acquisition targets for years, ensuring a deep understanding of the cultural fit.
- Professional function: Treat M&A as a specialized, professional function, just like accounting or IT. Companies that are good at M&A don't treat it as a one-time project but as an ongoing process requiring expertise. TricorBraun builds detailed target profiles and follows a rigorous diligence and integration process, learning from each deal through post-mortems.
- Seamless handoffs: The transition from the corporate development team (which handles the deal) to the integration and business teams (which manage the post-deal phase) is crucial. TricorBraun ensures that these handoffs are smooth by involving integration leaders early in the process and maintaining overlapping responsibilities to avoid the founder feeling abandoned after the deal closes.
- Keeping stakeholders comfortable during acquisitions: Ensuring that executives and all team members feel comfortable during the transition is critical to retaining talent post-acquisition. TricorBraun achieves this through a detailed day-one plan that addresses employees' key concerns, such as changes in pay, title, and benefits.
Advice
Court’s advice for corporate development practitioners is that while financial modeling is important, it’s crucial not to get too bogged down in it. The focus should be on the people, cultural fit, and strategic alignment of the deal.
There are no shortcuts to successful cultural integration. The process requires disciplined execution. At the heart of it is building strong relationships, being clear about what will change, and ensuring everyone involved is comfortable with the transition.