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Don’t over emphasise culture fits in M&A

user iconLawyers Weekly 18 February 2005 NewLaw

AS THE catchphrase ‘culture fit’ takes its place in the lingo of mergers and acquisitions, sources suggest that while cultural synergy between merging entities is important, it can also be…

AS THE catchphrase ‘culture fit’ takes its place in the lingo of mergers and acquisitions, sources suggest that while cultural synergy between merging entities is important, it can also be over-prioritised.

Overemphasising the necessity of culture fit in a merger can mean that, upon failure, it is “far too easy for people to blame that failure on cultural misfit”, according to Simon Dowling of Negotiation and Strategic Relationship Management.

As an adviser in the area, Dowling suggests that one of the greatest challenges faced by merging or collaborating companies is getting the negotiation process right. If negotiations are too difficult, rather than this meaning the cultures of the companies do not fit, there is a chance that negotiators are failing to design a process that focuses on creating long term values, as opposed to short term deal making, said Dowling.

The past year’s record $85 billion of M&A activity saw a preoccupation with the numbers at the expense of the people and the uniqueness of each workplace, Gadria and Designed Interventions said in a statement recently. As a result, many corporate tie-ups are doomed from the start, so stakeholders are not getting full value out of the merger.

Also emphasising the importance of culture fit, Dibbs Barker Gosling mergers and acquisitions partner Philip Stevens said last month that no merger will work without a culture synergy. From day one through to the end of the “hard core negotiations”, a unity or disunity will be demonstrated, he said. “If the negotiations are too hard, there is a likely chance the cultures are discordant,” he said.

But whether cultures fit is not merely a question of circumstance, said Dowling, it is also up to the parties. “In the context of creating alliances, an expert merger team must include people who are equipped to address long-term cultural and other alignment issues within the negotiation process.”

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