Mercer: Capitalising on culture can improve M&A benefits

A recent study conducted by Mercer, a global consulting firm, has found that it is possible to proactively leverage culture in order to accelerate the value creation from mergers and acquisitions.

It is not rocket science to know that an affirmative and results-oriented culture will have a positive impact on performance. Nor is it rocket science to understand that the quicker two joining companies are able to set up a new organisational culture, the better it will be for the results and the workforce.

However, according to prior research by Mercer, only 25% of respondents from global organisations were addressing culture in their transactions in a planned manner.

For the study, Mercer interviewed a series of companies from a broad spectrum of industries. All the companies had either been acquired or merged with another entity and the study found that most of them lacked a planned approach to culture immediately after the deal process. The majority of the companies involved in the study had placed an emphasis on the financial and legal due diligence processes, while dedicating a disproportionate amount of time to softer issues such as culture.

This was quite a concern, given there was a natural tendency for productivity to drop after a deal had been sealed. Mercer found that the fall in productivity came as a result of a loss in focus.

However, it would seem that change is in the air. "Anecdotally, we see a strong shift towards companies seeing culture as a key factor in deal success," said Phil Shirley, M&A leader at Mercer in Hong Kong. Companies stand to benefit financially from senior management taking hold of the cultural reigns much earlier on in the post-deal process, and companies are catching on to this, he added.

Based on the research, Mercer has developed a model that prescribes what their clients need in order to come out the other side of an M&A deal glowing. This is an eight-step framework called the "Driver-Behaviour-Outcome" model.

The model advises that the first step is to develop a cultural integration plan with defined goals. The next is to invest resources into building a thorough understanding of how each organisation works. This step includes looking for alignments across the two organisational cultures. Next is to identify the cultural drive and decision-making frameworks that will be needed in the new organisation; and then, once all is under way, track the progress of the cultural integration.

Shirley notes that despite the best intentions of a cultural map and a defined direction for a new organisation, there are always going to be certain behavioural traits that cannot be changed, for example behaviours relating to national culture. What the model looks to address are the organisational aspects that can be influenced by how a company communicates and the rewards systems in place.

This may come off as all tried and tested knowledge. However, there is a trend within Asian companies to look for acquisitions in the West. "In those situations the cultural differences are amplified," said Shirley, noting that in such situations, clearly there is a need to identify the desired culture as soon as possible in order to try and avoid anxiety and confusion in the work force. Therefore, the implementation of systems such as Mercer's "Driver-Behaviour-Outcome" model may become more necessary as Asian corporations expand their reach into other regions.