Chapter 3 ‘The culture will take care of itself’ and other M&A myths In 1998 Citicorp and Travelers announced plans to merge And one year later, a different story: to create Citigroup, a huge financial conglomerate that combined banking and insurance. While the merger was a megadeal and highly transformative, it is still notable to our analysis because it ran into many cultural problems right from the start. We are talking about putting two While this deal has been the subject of many articles, which cultures together that are quite another internet search will unearth, the issues around different, quite distinct. I am trying hard culture and cultural integration are what we are interested in to understand how to make this work. examining. In today’s deals, many of the issues repeat, and I will tell you that it is not simple, and the comments below still ring true today even 20 years later. it is not easy, and it is not clear to me John Reed, then CEO of Citicorp, was quoted as saying the that it will necessarily be successful. following: As you put two cultures together, you get all sorts of aberrant behavior. I will Shortly after announcement during an Investor Q&A tell you that the literature of putting session: two families together speaks volumes to me. The problem of stepparents, the description of some children rejecting one parent and other children rejecting The culture will take care of itself. other parents is all meaningful to me. People will ultimately learn how to work together. They may not like it. And what you really have to do in a They may complain a lot. But you merger is change. But the willingness know what? Five years from now, they of people to change is limited, and will be quite surprised at how they what you pay them seems inversely have learned to get along.” correlated to their willingness to Business Week, June 7, 1999 change.” “Is this marriage working?” Fortune, March 20, 2000 “Behind the Shootout at Citigroup” His words turned out to be prophetic, Reed left the firm in 2000 and Citi and Traveler’s “separated” in 2002. In this brief description, he has covered a broad range of issues: from the initial and all-too-common refrain of “culture is not that important” to the pain points that occur if it is left to chance — with leadership, pay and change challenges all wrapped up in a few sentences. How advanced acquirers approach culture in M&A 9