Culture: Key reason why mergers and acquisitions fail
Global business conditions are becoming increasingly volatile due to ongoing trade restrictions. While companies may pause to analyse and address immediate challenges, they are also exploring mergers and acquisitions (M&A) to drive growth.
Culture is more than values on the wall or team-building exercises. It is defined by the everyday behaviours that influence business outcomes—behaviours shaped by leadership expectations, governance, performance systems, and communication norms.
During a merger, the cultural dynamics of the involved companies become increasingly complex as two distinct sets of behaviours and operational systems collide. Without a clear integration plan, these cultures may fail to merge effectively. Many organisations mistakenly assume that employees will naturally adapt or that a top-down approach will seamlessly align cultures overnight. However, without intentional design and strategy, this misalignment can lead to confusion, hinder decision-making, and disengage even the most high-performing teams.
The four-step plan for culture integration in mergers and acquisitions
Step 1: Assess cultural risks before the deal closes
- Review current company culture artefacts, organisation structure, communication flows, and work processes.
- Hold leadership interviews to evaluate decision-making styles and governance structures.
- Perform organisational assessments to pinpoint areas where integration could face resistance.
Step 2: Align leadership to co-create the go-forward culture
Leadership misalignment is one of the most common reasons M&A deals fail. While leaders may assume they share a vision, conflicting decision-making styles, priorities, and behavioural expectations often emerge post-deal closures, causing confusion, delayed integration, and stalled value creation.
To avoid this, leadership alignment must go beyond business targets.
- Establish a shared cultural vision—grounded in the combined organisation’s strategic goals and mutual strengths.
- Define the desired leadership behaviours that will drive integration, foster collaboration, and model the culture for the rest of the organisation.
- Identify key operational enablers, such as governance structures, performance metrics, and communication models, to support those behaviours.
Step 3: Embed culture through structure
- Create cross-functional integration teams that bring together leaders and employees from both legacy organisations. These teams co-own the cultural integration roadmap and work together to identify shared practices, bridge differences, and design new ways of working.
- Embedding culture into employee engagement and performance systems, so that behaviours are consistently recognised, modelled, and reinforced.
Step 4: Track and refine cultural integration over time
- Establish regular pulse checks and feedback mechanisms—such as surveys and town halls—to surface insights and ensure employees remain engaged in the integration process.
- Monitor key cultural indicators, such as decision-making efficiency, employee retention, and engagement levels.
- Adjust integration strategies based on real-time insights to ensure culture remains aligned with business objectives.
- Highlight success stories and positive cultural shifts to build momentum and encourage ongoing engagement in the co-creation of the new culture.
How culture clash in mergers and acquisitions can impact organisational morale
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Case study: Oil and gas company in Asia faces challenges in cultural misalignment
An oil and gas company in Asia experienced the impact of cultural misalignment during its acquisition by an Asian energy group. As integration began, significant cultural divides surfaced. The new management imposed a strict culture that clashed with the existing leadership's decision-making style, leading to low morale, high turnover, especially among management, and increased resistance to change.
Recognising the urgency, the company engaged Mercer to address these cultural challenges. Mercer conducted a culture diagnostics assessment and Executive Culture Assessment (ECA) to identify key integration issues.
Through leadership alignment workshops, executives created a unified vision, defined essential business behaviours, and set clear expectations for cultural integration. Mercer then developed a structured integration plan, embedding cultural priorities into the overall transformation strategy. A pulse check framework was also introduced to help leadership measure progress and make necessary adjustments.
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The result: Greater operational efficiency, stronger leadership effectiveness, higher employee engagement, and a measurable drop in attrition—particularly among the management team.
Cultural integration is an essential component of M&A success
With experience across more than 1,400 M&A deals each year, Mercer brings the expertise, data, and frameworks to turn cultural alignment into a strategic advantage to M&A success.
Learn more about how we can help you identify cultural risks to deal objectives, and build a comprehensive integration strategy and operating environment.