Mergers and acquisitions are complex multi-disciplinary and multi-functional projects that require professional management in order to get the best out of them. A good merger can combine two mediocre companies into one great company, while a badly managed merger can literally destroy great companies resulting in losing market share and competitiveness, decreasing share values, destroying brand value and image etc. History has recorded thousands of such cases including the well known mergers of HP-Compaq and AOL–Time Warner. Without further research one would say that a number of mergers fail to meet the objectives, but several studies and reports including ones of Harvard Business Review, Hay Group (91%) and KPMG (83%) have come up with shocking findings that around 80% to 90% of all mergers fail to meet the pre-merger objectives. According to the KPMG study only 9% of all mergers and acquisitions were completely successful while all other failed to some extent.

While there are many aspects and factors to take into consideration when deciding on a merger or acquisition such as the financial aspects, competition, markets, customers, brands, company image, market shares etc., one factor that will have deciding influence on the level of success of the future company is the compatibility of the corporate / organizational cultures.

In its shortest definition corporate culture is the way the things are done within the organization. The way work is done, how people cooperate, communicate, care about each other, serve the customers, the level of innovation and creativity, the processes and many more are defined by the culture. It is the heart and the soul of the organization. Or, as I usually would say, Culture is not just one part of the story. It is what defines the story and determines its success.

Therefore, the success of the M&A story will strongly depend on the compatibility of the cultures of the merging companies and the way this part of the process is led.

This has been the topic for researches and studies to many authors and researches including Stahl and Voigt (2004) according to whom the cultures of merging companies should be compatible in order to be successfully integrated. Or, Child, Faulkner and Pitkethly (2002) whose basic point is that to enhance the M&A performance, the acquiring companies should adopt an adaptive approach to their different international target companies, i.e. trying to implement a universal approach to different cultures is not a winning M&A strategy.

The clash of incompatible cultures can result with negative effects in many different areas such as decreased performance, effectiveness and efficiency, ruined interpersonal relations, lack of collaboration and communication, low customer satisfaction, mistakes, lack of accountability, blaming instead of solving, ruined corporate image, decrease in employee engagement, decrease of the value of the company etc.

To prevent the negative implications of potentially incompatible cultures this aspect of the M&A should be taken seriously, with a well developed plan including several major steps:

1. Assessing the Cultures Prior to the Merger

The first step first step in the process would be to assess the corporate cultures of the merging companies in order to see their specifics and understand all the important details. There are several culture surveys that could be used for this purpose such as the Denison Culture Survey based on the culture model that is focused on 12 indexes grouped in 4 traits (Mission, Adaptability, Involvement, Consistency) or the STAR Culture Survey covering 32 Core Value Elements grouped in 8 Core Value Areas (Leadership, People, Excellence, Partnership, Change & Innovation, Simplicity, Attitude, Winning). Besides the 8 Core Value Areas the latter survey also covers culture Strength, Adaptability and Orientation.

Besides the assessment of the traits or the core value areas (depending which survey you are using), assessing the culture strength and adaptability is of crucial importance, as well. Companies with strong organizational cultures are more likely to produce a culture clash. On the other side the more adaptable cultures can be easily shaped into one mutual culture.

One could always develop and use an own culture survey and assessment, but considering the importance of the process and the effects that it could have on the success of the future company, using a tested methodology would be highly recommended.

2. Analyzing the Compatibility of the Cultures

The next step in the process, after the cultures assessment, would be to analyze the compatibility of the corporate cultures of the merging companies, to see what are the elements that are similar and what are the elements where the companies differ one from the other. This would give a precise picture in what are the areas to work on and if there are some elements with alarming differences.

3. Define the Future Culture

After the analysis of the compatibility, the next thing would be to define the characteristics of the desired future culture for the one future company. This will mostly depend on how the new company and its brands should be positioned on the market, what should the values be, what should it stand for, the purpose, mission and vision etc.

4. Make a Detailed Culture Shaping Plan

The characteristics of the future culture will represent the basis for the culture shaping plan which should be comprehensive and should foresee actions in both companies before the merger even begins. The set of pre-merger measures will set the foundation and ease the way for the activities that will follow after the two companies merge into one.

5. Setting Up a Project Team

The last, but definitely not the least is the project team that would lead the whole culture shaping process from assessment and analysis, through future culture definition and making a culture shaping plan, all the way to the execution of that plan. Again, as with the survey, one could always use own resources to lead the project, but taking into consideration the importance and the complexity of the whole process it is highly advisable to equip the team with experienced experts and consultants that have been assessing, analyzing and shaping culture before that. If the merging companies do not have such individuals, then the solution would be to hire external experts and consultants rather than allowing someone to experiment in these crucial moments.