Culture is at the core of the way companies work and it embodies the underlying values, behaviours, and resulting style of the leaders and employees. Being able to articulate cultures of different companies and sub-groups in advance of a merger is one of the most powerful evaluation tools available to M&A practitioners. There are 5 good reasons why you should include cultural analysis in your M&A activities.

1. Culture in M&A
Steve Coote - Director, VSC Growth
Jul 2013
Copyright © 2013. All Rights Reserved. VSC Growth
… 5 reasons why it matters

2. Corporate culture is, “...the water in the fishbowl of any
business. Employees are immersed in it, inundated
with it, but unconscious of it – at least, until things
change. When one company acquires another and the
water from those two corporate fishbowls is combined,
it often results in a shock to the system for everyone
involved.”
– Mendenhall & Galbreath

3. Culture is at the core of the way companies work and it
embodies the underlying values, behaviours, and resulting style
of the leaders and employees. Studies consistently show that
poor cultural fit between merging firms is a key contributor to
some of the most destructive and expensive failures.
Being able to articulate cultures of different companies and sub-
groups in advance of a merger is one of the most powerful
evaluation tools available to M&A practitioners.
Here are 5 good reasons why you should include cultural
analysis in your M&A activities….
Why Culture Matters

4. Significantly improve M&A success
rates and reduce failures
Higher success rates increase company earnings, improve
returns to shareholders, and align with executive incentives.
Cultural Due Diligence is used to predict the performance of the
merger (or acquisition) in advance by getting to know the
merger partner better than they know themselves, and then
predicting their performance within your firm.
1

5. Enjoy smoother merger
implementations
Merging firms that have a tight cultural fit will find implementation
easy because people speak the same language, share similar
viewpoints, and can agree on the way forward with limited effort.
On the contrary, merging firms with a cultural misfit requires a
more comprehensive approach and increased management
“bandwidth”. Understanding the degree of cultural fit in advance
enables formulation of integration plans that deliver success.
2

6. Achieve Post-Merger Synergies
sooner with less friction
By addressing cultural factors before signing, both firms are free
to start work on upside opportunities from Day 1 with less
distractions and disputes. In fact, bringing the partner “into the
tent”, helping them understand their culture, your culture, and
how the two are likely to interact post-merger, wins “hearts and
minds” and builds your firm’s M&A reputation in the market.
3

7. Ability to tackle more complex
strategic deals
Some deals have a great strategic logic but have high risk due
to a range of issues that increase complexity (e.g. cross-border
M&A, entering new markets or sectors, or concerns over
leadership depth). By assessing the multiple layers of cultural
“fit” (e.g. national, industry, organisational, individual) and
considering a range of response scenarios, new types of
strategic acquisitions are possible.
4

8. Improve Leaders’ ability to achieve
M&A outcomes
Leaders centrally involved in the post-merger structure have a
significant bearing on M&A success or failure. Choosing and
supporting these leaders is easier when their individual cultural
“fit” is assessed as part of due diligence and support is targeted
at helping them positively influence the desired M&A goals.
5

9. M&A Culture
Services
Service Features Client Benefits
Strategy Development
Strategic Cultural
Assessments
Map cultural profiles at multiple levels (national, industry,
organisation, target, individual)
Assess scenarios & respective effort (resources, time,
dollars) required to “bridge” cultural gaps for strategic
acquisitions
Inform strategy and target selection
Better informed on strategic fit with
improved ability to tackle more
complex deals with high potential
payoff.
Due Diligence Phase
Cultural Due
Diligence
Post-Cultural DD
workshop (if
required)
Map multiple cultural profiles
Flexibility with cultural dimensions assessed
Consider current and preferred cultural states
Scored by both leaders and employees
Methodology to engage other stakeholders
Assess culture congruence & strength
Cross reference with other DD investigations
Risks/Opportunities assessment
On-line or face to face surveys
Fast turnaround of results
Improved M&A success rates by
using cultural due diligence to
predict the performance of the
merger in advance.
“Get to know the target better than
they know themselves”
Our M&A Culture Services
(1 of 2)

10. M&A Culture
Services
Service Features Client Benefits
Integration Planning
Phase
Cultural inputs for
post-merger
integration plans
Recommendations on cultural factors for
implementation
Guidance on activities that support or shape culture
Informs selection of appropriate structures & systems
Stakeholder analysis and communications
Holistic approach to improve sustainable results
Win “hearts and minds” early and
strengthen your firm’s M&A
reputation
Post-Merger
Integration
Integration
support &
coaching
Guidance on communication strategies and styles
Easy to understand proven process & models with
graphical representation
Ability to identify and address sub-cultures
Culture pulse surveys
Start working on upside synergies
from Day 1. Achieve post-merger
synergies sooner and with less
friction
Leadership Support
Aligned Leaders
360 peer surveys raise self-awareness
Personal profiles overlain with company profile to
identify strong fit and development areas
Supports key leader appointment decisions
Supports leadership & succession plans
Improve Leaders’ ability to achieve
M&A outcomes
Our M&A Culture Services
(2 of 2)

11. Achieve better outcomes on your next M&A deal. We work direct
with acquirers and collaborate with M&A consultants. Call or
email to find out more…
Steve Coote, Director
Phone +61 412 148 428
steve.coote@vscgrowth.com.au
Jenny Maree, Consultant
Phone +61 413 179 854
jenny.maree@vscgrowth.com.au
www.vscgrowth.com.au