By Steve Murphy, CEO of Epicor Software Corporation
Anyone watching M&A trends over the past year knows that M&A deals picked up in the second half of 2020. Since all signs point to this trend continuing, let’s look beyond the numbers and talk about a crucial aspect of successful deals that doesn’t always get addressed – the integration of company cultures.
Selecting a company to acquire is a lot like dating. Likewise, integrating or merging two companies is similar to the first year of marriage/co-habitating. That’s why, at the risk of sounding crass, it’s important to know who you’re getting into bed with and that you set up clear communication to make sure the transition is as seamless as possible.
"First Comes Love:" How to find the best culture fit for your company
First, think ahead of time, and think with the end in mind. If you’re considering an acquisition, it’s essential that you perform an honest assessment of the company’s culture to see if it’s a reasonably good fit with your own. Look for similar values, which will allow you to bridge the gap more easily during the transition process. If there are major discrepancies, obstacles will be more difficult to address.
Most people will talk a good game, so play close attention to behavior and observe the norms by getting to know people over a few months. How do they interact with and treat others? What do they spend their time talking about? What do they say and better yet, not say? Meeting in person is still preferable when picking up these social cues, but if it’s not safe for you to do so, utilize video conferencing.
The most important thing is not whether the assessment is conducted in person or virtually, but that it’s done honestly and from the outset. A refusal to do so not only has the potential to hurt efficiency, it can also negatively impact employee satisfaction, engagement, and even retention. Ultimately, it won’t just be your employees that suffer – your customers will suffer as well.
"Then Comes Marriage:" How to successfully integrate company cultures
Now that you’ve decided what company will be a good fit with your own, it’s time to begin the integration or merger. To make this as smooth as possible, here are some practical tips I’ve picked up over the years as CEO of a large global software provider:
1. Don’t leave people in limbo
This is the first thing to address when acquiring a new company. And while it may seem harsh to “pick the best athlete” right away, if you’ve ever been in a position of job uncertainty, you’ll understand this reasoning. Employees left in limbo will naturally begin to feel rudderless and nervous. Respect your employees and avoid unexpected (and unwanted) resignations by letting people know if they have a new role right away. The same goes for someone getting an exit package.
When you buy a company, look at each employee individually – name by name – well ahead of any deal being cut, and make sure you have an idea of who you have a job for. If you want them to stay, make it worth their while by promoting them! Yes, this means a lot of preparation work on your part as a business leader – but it will set you and your employees up for success.
2. Be clear on whether it’s an acquisition or merger of equals
This is pretty cut and dry, but it’s important to clearly communicate the company dynamic and what the expectations will be. You want everyone to have a clear understanding of their role so that they are all on the same path forward.
3. Share your vision to get employee “buy in”
Next, you’ll need to share your plan for the combined company, why this acquisition or merger makes sense, and why it benefits them as an individual. This is important because you not only give a focused direction for the company and a common goal for everyone to work towards, but you affirm that all employees (existing and new) have a purpose and unique role to play that allows them to utilize their specific skillset.
4. Provide two-way communication – and overcommunicate
Personally, I’m a big advocate of communicating face-to-face whenever possible, and I find a lot of value in holding town halls. (These days it might need to be virtual, depending on the size of your team.) Let employees have the floor to ask real, hardball questions – and follow through. To demonstrate that you take your employees’ feedback seriously, have senior staff work on issues that arise from these discussions themselves rather than delegate. Then, let employees know what actions are being taken.
5. Get the right people involved
If you want an integration or merger of companies to be truly successful, find out how the people who “do the work” work together.
Start by looking to your individual contributors. For a software company, this might mean talking to your developers. Teams located in different time zones or who are used to different work processes will experience growing pains that you will need to account for. For example, you may have members from one company who are accustomed to starting work at 11am and working through the night, while members from another company are in the habit of beginning their workday at 6am. This stuff matters, and hearing from these members of your team is of great value.
Any M&A deal – regardless of how similar the two companies’ cultures are – will require adjusting to a new balance. The most important thing to remember is that the culture of the new company should reflect the overall culture of where you both started. But with time, patience, communication, and respect, you have a great chance of success.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.