Is culture an important factor in an acquisition?

Question

Answer

I've gone through tons of acquisitions, both in large and small companies. For acquisitions or mergers between companies that are almost equal in size, culture is the biggest factor. The saying is true: culture eats strategy for breakfast. That's literally what happens, so having a focus on culture and people is very important.

Answer

The acquisitions I've been through were for engineering talent in smaller companies. I haven't been at ginormous companies, so I've never had to figure out how to make Oracle and SAP work together, for example. The most complicated aspect has been culture, especially when you're bringing in engineers. You could go from founder to founding engineer, and that move is very nuanced but it means a lot. And then there are other considerations: Now that they have the golden handcuffs on, when are they going to leave? How do we keep giving them interesting projects?

In my experience, the key factor has been a culture match. And when it comes to people, that's a tougher aspect to control or predict. Whereas with tech, you can say, "Here's where the integration is going to fall, and this is when you do master data management." It gets much trickier once you start to deal with people.

Answer

Culture can be measured in a lot of different ways, including by human resource rules and regulations by country. In France, for instance, the culture/laws are such that if you give an employee of the company you're acquiring any signal that you plan on keeping them, it can be used as evidence that they were hired to stay on post integration. Even though they were going to get laid off, if you put a mug on their desk on the day of integration, they can use that to prove they were hired. Then you have to go through a year-long process to terminate them instead of making them part of the layoff as intended. So I always push for more transparency for the human part of the equation, but over and above that is understanding not just the culture of people, but the culture and laws associated with individual countries and how they expect you to treat employees.

Answer

Depends on the purpose and nature of the acquisition. If the main drive is to acquire technology then culture might not be the most important factor. If the acquisition intent is to merge both companies and they complement each other then culture is a major factor for success.

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In some cases, the answer is an absolute YES. I worked for a company that was a prime target for acquisition by one of the leading cloud providers (every single product would fit into their portfolio), but cultures were complete opposites.

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Mostly I would say yes, but I have been involved in several acquisitions and sales where culture wasn't a good match/fit, but strategically from a business, market, industry opportunity perspective, it made sense and overall was successful.

Understanding that wasn't the question being asked, it's also important to understand whether the acquisition was a long or short-term play. Again, culture may play an important role in the beginning, but depending on the longer-term goal or objectives it may not really matter if there is another acquisition or sale. Another point to consider, in terms of the acquisition and culture are we talking about the acquiring parent business or the business being acquired?

Is culture an important factor in an acquisition?

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