Why Combining Cultures Is the Hardest Part of a Merger — and How to Solve It

Mergers are common in the current tech landscape, but forging an effective culture from two disparate companies can be a challenge. Here’s how to overcome the hurdles.

Written by Travis Ferber
Published on Apr. 12, 2022
Why Combining Cultures Is the Hardest Part of a Merger — and How to Solve It
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One of the biggest challenges for any fast-growing company expanding via an acquisition is ensuring you have a cultural fit with the new partner that will keep both teams operating at full speed. Bringing together two fast-growing businesses can be incredibly risky. Acquisitions are a huge distraction from your company’s ongoing operations, and they can slow down growth in the short term, ceding market share and talent to competitors. If you want to maintain growth, you need to bring everyone together quickly. To do this, start by combining the two company’s cultures, and you’ll be better positioned to align business goals without slowing down.

 According to a McKinsey report, 25 percent of executives cite cultural misalignment as the primary cause for why integrations fail to meet expectations. Market position, growth opportunities and competitive threats are key strategic reasons for a merger, but common ground is necessary to maintain the value of the deal. Just as you would any other strategic rationale for a deal, you have to be deliberate in your consideration of the cultural fit when evaluating an acquisition. 

 Look at the failed network infrastructure/media company deals of AT&T/Time-Warner and Verizon/Yahoo. Both of these examples suffered from poor cultural alignment that wasn’t addressed or remedied. The companies spent millions of dollars on advisors, branding, retention packages and other projects to integrate these companies, only to have these mergers unwind within three years. Both met ignoble ends wrought by poor cultural fits.

 My company, Fivetran, recently acquired HVR Software. Fivetran automates data integration, pulling in data from 150 SaaS applications, normalizing and transforming the information, and combining it into a unified schema. HVR is a leader in enterprise data replication and has been addressing the problem of change data capture for many years. By combining companies, we saved years of development time for both groups. 

Importantly, we recognized early in the diligence process that retaining key talent in both companies was critical to fueling our growth. When we combined the businesses, we focused first on getting everyone working together with a shared vision, and respect for what each company had built — this was our first priority for aligning the two teams for success.

3 Steps to Merge Company Cultures

  1. Find common beliefs and values.
  2. Listen to employees from both companies to learn what’s important.
  3. Build communication to highlight similarities.

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Defining Culture

Culture has many meanings, but in the workplace, it comes down to how a company’s employees interact, what values they share and what “muscle memory” they call on for timely decisions. 

In a merger, defining the new culture involves answering several questions.  For instance, does the team make decisions by holding many meetings to reach consensus or does a single voice from the top set priorities? What values are ascribed to various behaviors (e.g., starting meetings on time indicates respect)? What processes and systems reinforce those behaviors and values — things like formal reviews, compensation plans and remote work policies. 

Culture isn’t just wearing jeans on a Friday; it’s the fabric that holds a company together. 

 

Implementing Integration

The first step to successfully bringing two businesses together is to identify the key cultural similarities and differences during the diligence process. Meet with the management team and spend time understanding how they think, what they value, who is essential, and how the company operates. With this information, you can create a transition team comprising functionally equivalent leaders from both companies. 

This team’s responsibility is to weave the companies together. They are the backbone of the integration. You need to prepare them by sharing the strategic rationale for the deal and the cultural similarities and differences you’ve found so they can successfully navigate differences and highlight areas of alignment.  

 Once you’ve selected your team and prepared them for their role, get everyone in the same room (or at least same video call) to start working together. First impressions matter, and they can set the tone for the rest of the integration. Encourage everyone to be humble and empathetic. You can always learn something from a new partner.

 

Bringing Everyone Together

The transition team will align functional departments across both companies, but focusing employees on common goals is the trickiest part of an integration. 

When we first started working with the integration team at HVR, we found that we shared many common beliefs and values and that we had similar people in equivalent roles at each company. This was reassuring for the staff at both companies because they saw that they could work well together, and it meant that we could accelerate our integration. At Fivetran, we believe strongly in “one team, one dream.” We have a fast, agile learning culture, and so does HVR. But you need to look at where the two companies are similar and where employee expectations may differ so you can address those rough spots and learn from each other. 

If you want to learn what’s important to the other company’s culture, listen to what their employees are saying. When Disney acquired Pixar, part of the deal stipulated that Pixar be allowed to keep some culturally important practices like their annual paper plane contest and other creative activities. Little things like company holidays, corporate perks or even the brand of coffee the new company will use are important to employees — so make sure to listen for employee priorities, even for the little things.

Once you’ve identified what matters and where differences and similarities lie, build communications that highlight similarities, help managers with tip sheets that manage their expectations around differences, and constantly keep people informed about the integration status and the shared goals and values of the combined company. Bi-weekly company all hands meetings, company wikis, newsletters, manager training, and employee onboarding — these are all key channels to use in combining corporate cultures.

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Build Smarter Companies

If you’re looking to grow your company through an acquisition and you need the people to make the deal work, make sure the two cultures can fit together from the start. Otherwise, you should walk away and explore other options. From my experience managing mergers, you have to be deliberate about cultural integration if you want to combine two high-growth companies without slowing them down. 

 You know you’re on the right track when you see employees from each company getting excited about other teams’ projects. If they’re sharing goals, ideas and plans, then you know you’ve created a unified culture that will build a stronger company for the future.

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