Will Brand Culture Clash Kill Your Merger?

October 1, 2015

2015 has been a banner year for corporate mergers and acquisitions, Driven by low interest rates and easy access to money, corporations have been scooping up companies to grow, eliminate competition and expand their markets.

CVS’ purchase of Omnicare gives the pharmacy healthcare chain access to an older demographic. Charter Communications merged with Time Warner to create one of the largest cable television and broadband Internet providers in existence. And fast paced ACE insurance just purchased the venerable, yet conservative Chubb Group of Insurance companies.

Unfortunately, mergers aren’t always successful. Some fail because one company overestimates the worth of the other—and overpay. Other times, failure can be linked to a lack of synergy in services, products, resources or markets. But history—and research from the Society for Human Resources Management—has proven that over 30% of mergers fail because of simple culture incompatibility. For example, in 2003, the America Online and Time Warner merger could be considered one of the most epic failures in business attributable in large part to huge cultural divides. The 2005 merger of Sprint and Nextel Communications was also a cultural disaster. Within 3 years, Sprint wrote off $30 billion, almost the $35 billion they paid for Nextel in the first place. And the infamous Daimler Chrysler merger imploded due to a myriad of reasons, but primarily because of cultural differences in management and operational style.

Culture drives employee behavior
When two companies with their own distinctive cultures combine, there’s a huge potential for failure. Even with integration consultants working to forge a new synthesized culture, there are bound to be issues.

All institutions and companies have their own cultures. Some are shaped by strong beliefs of their founders, such as Steve Jobs and Apple; others by a sense of social responsibility evidenced by Toms Shoes; still others consciously create a culture that reflects their customer-focused business model like Zappos.com.

Corporate culture influences how employees behave and shapes what is expected of them. It is seen in the large and small decisions of every day business. In a merger, the acquired company must adopt and adapt to a new set of cultural norms and make new behavioral choices. Which isn’t always easy.

Behaving is believing.
After all the stock shares have been divided, the payouts made and the organizational structure solidified, it can be the employees who will make or break the ultimate success of the deal.

That means, all the employees of the newly formed company—from management on down, and especially those who were acquired—need well defined, specific examples of what behaviors are the new norm. If the old value of slow, thoughtful conservativism is being replaced by a value of speed, risk-taking and aggressiveness, there’s a huge need for employee re-education.

Measuring employees’ awareness and expression of a new brand through their behaviors and actions—along with helping employees self-define and integrate on-brand behavior through brand workshops—can bridge merged cultures and aid in more successful brand integration.

Cultural values—and their demonstrated behaviors—need clear definitions. Even from one person to another, cultural values such as integrity, collaboration and innovation need to be defined by each person in terms of their job, tile, function or role. “Tell me what you want me to do? How should I behave? How should I be living the new brand’s culture?” These are the questions that must be addressed or a merger runs the risk of the failures of the past.

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