HomeBlogM&ABridging the Culture Gap in Cross-Border M&A

Bridging the Culture Gap in Cross-Border M&A

Do you understand the culture gap? If not, this read is for you. Fundamentally, we should all understand that cultures vary across the globe, whether it be from country to country, or region to region. But companies have a culture, too.

Have you ever worked for an organisation that had a really toxic culture? Perhaps staff members did not get along, or management defined hard workers as those who gave their life to the company, working hundreds of hours a month for no more pay, and sometimes sleeping at work?

In mergers and acquisitions (M&As), it is really important to understand that two company cultures are merging, and this might not be easy. Bridging this culture gap is incredibly important if you expect to become one large, efficient machine.


Understanding culture

Culture can be defined in many ways, but it is essentially a way of communicating that has become intrinsically linked with being at work. Culture in the office can be bad or good, depending on whether or not it has been fostered in the right way.

Google, for example, has a very specific company culture, which prioritises the edginess of their employees, and lets them come to work wearing whatever they want, for example. Banks usually have a much more corporate company culture. Media agencies are often associated with a ‘work hard, play hard’ company culture that is usually best suited for young people. Your company culture is not always decided, it is sometimes formed without your knowledge or control. That isn’t the way it should be, but unfortunately the concept of company culture takes a backseat to more important things, like making revenue.

If you don’t understand the link between company culture and success, you might be in for a rocky ride. A bad company culture can give you a high turnover of staff, or mean that people don’t want to work their hardest for you, because they are unhappy at work.

A good company culture – and by this we don’t necessarily mean ‘fun’ – is one where staff are respected and given the opportunity for growth, however it is you do that. It is one where staff feel safe and secure, and as though they are important, and their role instrumental in the success of the business.

Culture is a way of life, composed of learned and shared behaviour relating to patterns, values, norms, and material objects. It is just as important to recognise that company cultures exist, and that they can be fostered in a positive way, especially if you are hoping to merge with, or acquire, another company.

And don’t be lulled into a false sense of security. Company cultures can change quickly, and a key opportunity for this to happen is during a merger or acquisition. That’s because you’re bringing an alternative culture onboard with your own, and this can be devastating.

When you’re merging with or acquiring a company, you should expect to experience some issues when you try to merge company culture.

But you can counteract that, by bringing onboard a change manager as early on in the process as possible. They’ll be responsible for helping you to determine the company culture you want, and fostering this culture throughout the process of the merger, to leave you better off than you were when you started.

In cross-border mergers, this is even more important, because you’re not only dealing with company culture, but also with specific national culture, which might make things difficult. Perhaps you’re merging, for example, with a culture in which a mid-day siesta is a common occurrence, or where things we view and standard and common courtesy here in the UK – such as over-apologising and over-thanking – are not commonplace. How would you integrate your staff with staff of a company you are merging with in either of these situations?


National culture

You must have a really good understanding of the shared values, beliefs and common history that bring people together depending on the nation you are working with. It is imperative that companies who take part in cross-border M&As have a good understanding of headquarter culture and culture in the location of the target entity, and how those differ.

Trying to force your employees to change their national culture is not going to work. You can try to encourage a change in company culture, but only if that aligns with national culture, as this defines at least part – if not all – of most of us.

Both parties involved in the M&A need to be prepared for this merging of cultures, because they might impact procedures, behaviour, rules and norms. This interaction between cultures might not always be smooth, and could be detrimental to the success of your M&A.

Getting an understanding of another country’s culture before purchase is a great start, and should be done prior to engagement to make sure it is possible to merge. There are many ways to do this, including travelling to the other country, speaking to employees there, online research, reading, and employing a specialist.

We recommend you do your research through all of these mediums before you engage with another company about merging with or acquiring their business.


Culture conflict

Understanding the potential conflicts you might endure when you merge with or acquire another company overseas is something you should prepare for. Culture conflicts can occur across all areas of the organisation, from floor employees to directors.

There are several reasons you might see a culture conflict, including because of:

  • power imbalance,
  • general cultural differences,
  • goal competitiveness,
  • assimilation vs. ethnic identity maintenance,
  • and competition for scarce resources.

If you are worried about any of these aspects of an M&A, it is a really good idea to employ a professional to help you. The last thing you want is to end up with two separate companies that don’t work together at all.


Final thoughts

If you are merging with or acquiring a company from abroad, it is almost certain that national or company culture clashes will occur. We recommend you employ a professional change manager to help you with this, as they’ll know how to prepare your existing team and new team for the changeover. You should bring them onboard as early as possible in the process, to give you the absolute best chance of merging successfully.

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