Introduction This paper is the second of a series about advanced M&A Our first paper in the “M&A cultural practices of advanced cultural practices. The intent of the series is to share the acquirers” series showed how M&A practitioners brought current state of leading practices in cultural work, specifically structure and discipline to cultural discussions through and only for the M&A situation. capturing in one place the parts of culture that have the greatest impact on a transaction. This paper focuses on It is based on the findings from a unique and highly how they created the business rationale for incorporating experienced group of M&A practitioners that meet on a culture as part of their M&A process in the first instance. regular basis with Willis Towers Watson to share and discuss Each firm has different ways of describing the work they do their views on this area. Each firm’s participants are drawn in “culture” and so the terms “cultural work,” “assessments,” from its in-house M&A functions, representing corporate “investigations” and “organizational assessments” (the term development, business development or corporate strategy several use for their cultural work) are used interchangeably. (the term varies based on each firm’s internal definition of the The important point being that each firm has an organized role) and its Human Resources M&A group. Throughout the and disciplined approach to the work and a clear rationale for series, the content reflects the discussions within the group what they do and why they do it. and not the sole practices of any one firm. As in any approach to complex problems, the first step is to The distinguishing feature about the group that will also understand the specifics of the business situation. For M&A help readers understand the content better is that cultural deals this means understanding how a transaction is put investigations are an accepted part of their M&A process. together, from beginning to end, and what happens, and what is important, throughout this journey. To achieve this means understanding, the deal life cycle, the phases within this cycle and the goals within each phase before determining where “culture” fits. Commentary on studies on culture in M&A The research shows that cultural issues consistently The group reviewed the vast amount of external research in rate as a key source of deal failure. Generally, though, this area to consider what could be learned from what others studies did not have a consistent definition of culture and outside the group were doing. The comments below reflect definitions were either based on author’s definition, not the summary of several of the group’s discussions in this defined at all or often applied with the benefit of hindsight area but are not specific to any research paper or article. to a deal already classified as a “failure.” Therefore, there is no certainty in reviewing the studies that respondents were Generally, the research confirms that, by any measure, thinking about the same issues and terms when responding M&A is a complex, high risk venture. Based on the source to their views on the role of culture in deal failures. But this of the research material, between 50% and 70% of deals is not an uncommon finding, in that when respondents are fail to meet their intended goals. This statistic does need asked about their definition of culture, answers can vary, more explanation. It relates to whether the deals reached even for respondents within the same organization. or exceeded the goals on which the decision to invest was But no matter what the definition, culture is clearly one made. But it does not mean these are necessarily bad or of the most complex areas for organizations to address; poorly performing deals; they may well be profitable in partly because these organizations find it hard to express their own right, but they have not reached the profit and the compelling business reasons to conduct cultural work performance measures on which the deal investment was in M&A in the first place and partly because they don’t based, or for a deal built upon multiple goals, only some of have the knowledge, skills or experience to do anything which have been fully met. meaningful about it. 2 willistowerswatson.com