Why acquisitions fail

Why acquisitions fail

Businesses that have been set up by Entrepreneurs are often a target for Acquisition.  By design, they have an embedded culture that is strong and linked to the Entrepreneurs personality and preferences. The employees maintain the cultural norms even when the Boss isn’t in the room – which is most of the time.  It’s a sort of unique DNA.  It has made the organisation successful and attractive to the buyer, yet a lot of acquisitions fail because not enough attention is paid to how that DNA will integrate into the culture of the acquiring company.

I first learned this years back when I’d never worked on an acquisition before, but was given the pleasurable task of supporting the merger of the people side of a brilliant, fast paced, sales orientated, outsourcer into a hierarchical, paternalistic, slow moving business. Talk about culture shock for both parties and me!

Differing pace

The acquired company had tremendous pace – like a speedboat.  Decision-making had been on the spot, the owner knew most of the staff by name and he was a renowned communicator, constantly telling his staff how he believed in them.  Performance was high, which was why the purchaser wanted to buy it in the first place.

The acquirer, meanwhile, was more akin to a cruise liner. Slow moving but powerful, looking after the well being of it’s passengers, graceful in its communication, maybe a tad too controlling.  It made really well thought through and considered decisions………which, to the speedboat, was a bit like pulling teeth.  But the acquirer was also highly successful and proud of its achievements – why would it want to change? It didn’t.

Some of the life and soul got knocked out of that lovely little sales led outsourcer over the next couple of years as it became integrated into the larger, more powerful organisation and many of the original stars moved on because they didn’t fit the culture.  Top leadership in the acquiring company wondered why the sales capability they thought they had purchased didn’t last.

Why the story? 

Well, it taught me a lot of lessons that I now use when helping clients to onboard acquisitions. Organisations embarking on mergers or acquisitions need to conduct a cultural review of both businesses to find out:

  1.  Where the tension points might be
  2.  Where the similarities might be
  3.  What elements of both cultures are strengths and should be continued
  4.  Which elements of either culture are weaknesses and need to evolve

The trick is to develop an effective model for gaining a better amalgamation of employees into your business without losing the strengths that you acquired the business for.

These days, I support businesses by carrying out cultural assessments that help Leadership to understand what culture it is they are buying, so they can maintain the elements that they found so attractive during the buying phase. And maybe the current organisation can take on some of those elements too.

Don’t underestimate the power of embedded culture.  

Knowing the individual cultures of the merging organisations really does make the difference between a successful and an unsuccessful acquisition.

As Laszlo Block from Google once said, “We want to understand what works here rather than what worked at any other organisation.” Too right Laslo!

Ruth Gawthorpe is the owner of The Change Directors and helps businesses with Acquisitions and Mergers. She knows just how to capture the hearts and minds of your people during onboarding and what you need to do to maintain the important elements of existing business DNA.

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