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Culture Clash: Don’t let corporate culture issues derail your merger

Corporate culture may be a soft concept, but some days it packs a very big punch.

Consider the impact of corporate culture on mergers. In the rush to complete due diligence and seal the deal, few companies conduct a cultural survey of both legacy firms and develop plans to effectively blend the two cultures. Fewer still delay, alter or abort mergers based on findings that cultural differences could jeopardize the deal’s success.

Yet studies show roughly 75 percent of mergers fail to meet financial performance expectations. And, executives often point to incompatible cultures as a prime cause of those financial shortcomings.

Mike Monahan – who executed nine mergers and acquisitions as CFO of the private equity firm, PetroChoice Holdings and now serves as the CFO of NutriSystem, Inc. – offers some advice on how to prevent corporate culture from derailing your strategic growth plans.

Setting clear business goals for the merged company and quickly showing progress in achieving them is essential to creating an effective culture and a successful merger, Monahan says. That focus helps employees understand their role in the merged company and the reasoning behind its culture, and fosters confidence that the company is capable of achieving its goals.

Leaders of the merged company need to be dedicated communicators. During its acquisitions, PetroChoice implemented several communications practices – including weekly e-mails about company accomplishments, annual meetings and travel schedules that gave company leaders face time with employees in distant offices – in order to discuss merger benefits, address operational issues, and keep morale high.

Finally, leaders of merging companies need to be willing to adjust their expectations for the new corporate culture even after the merger is complete.

“You have to be willing to be flexible after the deal closes, and open to new ideas because it’s impossible for both companies to fully know each other and their strengths and weaknesses until you merge,” he said. “There are always surprises. We were most successful when we had the right leaders who were flexible, open-minded and respectful of the different partners. In those situations, you end up getting to the right place, even though it may not be exactly what you outlined at the outset of the merger talks.”