The complexity of cultural integration is one of the main reasons for unsuccessful M&A’s

On October 23rd-24th infor-media Russia held the second forum for HR-directors on “Successful practices of human resources management” in Moscow. Ilya Sternin, Incorpore’s Executive Director of gave a talk on Cultural integration in M&A’s.

The main points of the talk

Successful deals are made in case the management focuses on 2 groups of tasks: human relations and managerial issues (based on research of PricewaterhouseCoopers, 1998).

The main M&A failures named by most researchers are caused by:

  • incompatibility of corporate cultures;
  • difference in management practices;
  • human factor;
  • the problem of integrating corporate cultures.

Consequently, the complexity of cultural integration is among the main reasons for unsuccessful M&A’s.
So why does it happen? The point is in complexity of managing corporate culture, specifically:

  • «Corporate culture “distribution”: comes out in everything, involves too many factors which must be considered;
  • Absence of technological methodology: soft factors are hard to operationalise, the effect of uniqueness of each culture is profound;
  • Underestimation of the cultural factor: the dominant stereotype about the priority of uniting financial, operational and manufacturing flows; lack of heed and resources;
  • Limited manageability of CC: high inertia, long-term impact, especially when two deeply embedded CCs merge.

Main Stages of cultural integration:

  1. Cultural audit of merging enterprises
  2. Developing an integration model
  3. Project group to integrate cultures
  4. Events calendar
  5. Ongoing organisational culture monitoring

Integration of ornanisational cultures in the framework of the Baltika holding merger was presented as a case study (late 2006 early 2007)

An audit of 4 separate organisational cultures that later merged into 1 holding was conducted. The data obtained as a result of the research was the basis for a cultural integration model that took into account existing risks and advantages.

The scope of works included:

  • Shaping ideology of the unified company;
  • Discussion and dissemination of the CC;
  • Transmitting and instilling values;
  • Designing a strategy for internal communications;
  • Separate OC development programmes.