Culture risk in M&A 

After studying the data and considering our experience supporting clients on over 1,400 deals annually, we see a clear pattern. Culture, left to chance, has significant potential to derail operations post-close. 

While many consider culture a “non-financial risk,” 30% of transactions fail to ever meet financial targets due to cultural issues. If these operational risks are not recognized and addressed, they can lead to low productivity, flight of key talent, customer disruption and value destruction. 

This is a practical guide for those navigating the cultural complexities of a deal. It is a purposeful departure from the common, purely academic rhetoric around culture in business. 

This research will help you prioritize and document culture risk and formulate a clear plan of action to generate better investment returns. Make no mistake, the common denominator driving deal success and economic value across broad sectors of business and industry is people. This is particularly true in today’s prolonged seller’s market, where buyers are taking on enormous financial risk and paying record multiples to complete larger deals. 

This research includes input from 1,438 “road tested” business executives, HR professionals, employees and M&A advisors. While it is important to dispel any notion that an “ideal culture” formula exists, our research shows culture matters more today than ever in M&A. 

Successful leaders drive deal value and gain competitive advantage by leveraging culture to empower, engage and energize the workforce.

We launched our comprehensive M&A Readiness Research™ series on people issues to better understand emerging trends through the lens of experienced dealmakers.

The purpose of this research is to demystify culture in M&A and identify practical strategies and solutions to hedge culture-related integration risk. We took the pulse of 1,438 stakeholders involved in transactions, who told us culture, left to chance, has significant potential to derail operational performance post-close. Stakeholders from 54 countries who have been involved in over 4,000 transactions in the past 36 months on both the buy and sell sides reinforced that the common denominator in delivering sustainable economic value in this prolonged seller’s market is people. The respondents to our research work for companies employing over 43 million people. Our researchers went deep inside these organizations to talk with employees, business leaders, HR professionals and M&A advisors about their experiences; we also considered how different age groups, geographic locations, industries and company sizes influenced people’s views on culture. From these voices and our experiences, we see a clear pattern emerging: Culture absolutely matters in M&A.

Culture is about individual behaviors that deliver business outcomes and how operational drivers can be leveraged to reinforce those behaviors. Cultural alignment is critical for effective organizational change in M&A.

A well-articulated strategy allows for more-effective organizational choices. Organizational choices include how work is done; how resources are structured; what is measured; how talent is selected, developed and rewarded; and how leaders foster a winning culture.²