The importance of integrating culture into a new professional landscape following a merger and acquisition cannot be overstated. The ultimate success of an M&A transaction hinges on how well the cultures of the entities being merged are aligned and integrated. Particularly in the dealership-based industries, companies can be strongly identified with the people who found and lead them. This means even two dealerships offering the same product line can run in quite different fashions.
While the advantages of combining two dealerships can look quite straightforward on a spreadsheet, it is the unique human factors present in each organization that need to be accounted for and blended together in just the right way.
How you work your way through this complex and often hazardous process can spell the difference between a successful merger and a doomed one. According to a survey of 123 organizations by Aon Hewitt, ineffective post-mergers and acquisitions culture integration is a common cause of failed M&A transactions. This often shows itself through the loss of key personnel, low productivity, and not achieving the synergies projected for the deal.
At the Dave Cantin Group, our mergers and acquisitions team consists of professionals with decades of combined experience across a wide variety of roles within the automotive industry as well as related industries such as heavy trucks, motorcycles, recreational vehicles, and powersports. We’re here to help you get past challenges including cultural integration and more, because our goal is to offer you the best possible service up to the closing table and beyond and help you secure your legacy. Contact us today to speak to one of our M&A specialists or read further on the challenges of cultural integration in automotive M&A.
What is culture, anyway?
Corporate culture is much more than relatively superficial factors, such as dress code or regional location. The most relevant aspects of corporate culture are the direct result of the company’s mission, vision, and values – as well as its management processes and other related aspects of how work actually gets done. The cultures of different companies will naturally vary, based on the beliefs and practices of their founders, managers, and employees. Cultural integration is not a process of judgment of who does things “right” or “wrong”. It is a matter of blending the best parts of each culture into a cohesive whole that all stakeholders can support and believe in.
Understanding the Cultural Landscape
Achieving cultural integration is something to be aware of early in the dealership M&A process. In fact, a close examination of the culture of any dealership that is an acquisition target should be part of the acquirer’s due diligence. Some adaptations and compromises are to be expected, but too many conflicts can be insurmountable. If the cultures of each company appear to be incompatible, then this is a huge red flag for the outcome of a merger. During due diligence, it is essential to analyze and compare how each company approaches items such as:
- Innovation
- Decision-making
- Problem solving
- Communication and collaboration
- Setting priorities
- Getting work done on a daily basis
- Supporting change
- Employee retention
Lack of compatibility in too many of these areas can signal that the two cultures are so disparate that they cannot be successfully integrated into one. One need look no further than Daimler-Chrysler as one example among many from the automotive world where cultural integration failed and doomed the hoped-for valuations projected for those mergers.
If the integration of the two companies’ cultures appears to be problematic, then you may be better off seeking a target company whose culture will be more compatible with yours.
Related reading: What Are the Key Metrics to Look At for M&A Target Identification?
Harmonizing Cultures for Success
While the dealerships involved may have different cultures, they can blend well if a proper effort is made. This starts by fully understanding each corporate culture, including their similarities and their differences. Identify both the opportunities presented by the affinities between the cultures, as well as the difficulties inherent in their divergent natures. For example, two dealerships in the same local area may support the same charitable efforts, but may have differing philosophies on incentives.
The next step is to emphasize those elements of the culture that will support the inherent economic value in the deal and reinforce them through the cultural integration process. Keep in mind that true cultural integration is not something that can be delegated solely to the HR department. It must be hard-wired into the new company’s “operating system.”
The transition will require ongoing interventions of both the emotional and intellectual kind at all levels of the enterprise. Tracking the progress of cultural integration can be done by keeping tabs on such metrics as productivity, employee retention, and job satisfaction.
The Role of Leadership
The leadership team must drive the process of cultural integration by modeling behavior that supports it and completely aligning themselves with it. The leaders should regularly communicate the benefits of the process, explaining clearly what the benefits are for everyone in the organization. By promoting the new shared values and their benefits, while responding to specific concerns, trust can be generated that this process will be a good thing for all involved.
Overcoming Challenges
It is natural for the cultures of the two dealerships being combined to “clash” to a certain degree. This is inherent in the process of cultural integration. Some of these challenges can include:
- Conflicts between leaders and managers
- Mismatched communication styles
- Resistance to change by employees
- Loss of the unique and desirable aspects of each company’s culture
The key to achieving a smooth and lasting cultural integration is to identify and recognize the areas that are most likely to disrupt the integration process. Then they can be directly addressed and worked through. The worst thing you can do is to ignore these disruptions, which will make the differences between these various aspects of the companies’ philosophies and styles into real stumbling blocks to the new venture’s success.
The Hidden Challenges
Working through the cultural integration process can reveal many issues that were initially hidden but reveal themselves as you get more deeply into the details. Cultural integration cannot be forced onto the new organization that has resulted from the merger. Instead, being mindful of the cultures of both dealerships will help you to successfully negotiate these potential minefields and preserve the projected value of the deal. Misperceptions must be worked through so that they do not cause internal conflicts that make the planned-for synergies unattainable.
As an example, imagine that a dealership being acquired has a superior benefits package and its employees are deeply concerned that it might be cut back to match that of the acquirer. In this situation, the acquirer might be better off upgrading to the acquired company’s benefits package, especially if not doing so could lead to a massive exit of sales, service, and/or administrative staff. Boosting the benefits will also generate goodwill toward the acquired company’s employees from those of the acquiring company, assisting the integration process. The moral of the story? Prioritizing the realization of the deal’s value should take precedence over haphazard cost-cutting that may be penny-wise but pound-foolish.
Achieving Unity
The success of integrating your post-mergers and acquisitions culture depends on several strategies, including:
- Assessing the cultural differences of the dealerships involved early in the M&A process during the due diligence phase
- Having a plan for the cultural integration process, which takes all of the key cultural differences into account
- Keeping employees engaged in the process, with free-flowing communication encouraging collaboration and addressing any concerns regarding the integration process
- Total buy-in from the leadership on both sides of the merger, who should demonstrate unconditional support for the cultural alignment and communicate this to the rank and file, both in word and in deed. In other words, walk the talk!
Successful cultural integration involves being inclusive and proactive, communicating expectations transparently, defining a shared set of values, and setting up an understandable and clearly defined organizational structure that supports the new organization’s principles, while providing the support and training needed to help employees adjust to the new reality.
To cap it all off, remember to acknowledge the progress being made toward the goal of cultural integration as the process evolves. Milestones should be celebrated as a way to motivate everyone in the organization to think of themselves as agents of positive change, working together toward a culture that supports everyone’s needs and aspirations. When done properly, cultural integration can assure you of a much better chance of success in the world of M&A.
Related reading: Tips to Ensure a Successful Post-Merger Integration
Cultural Integration is Just One Aspect of the M&A Process
Integrating your post-mergers and acquisitions culture within strategic M&A endeavors is of the utmost importance as a way of achieving all of the hoped-for value inherent in the merger. The Dave Cantin Group is your trusted partner in helping you to achieve successful cultural integration in M&A deals in the dealership-based industries.
At DCG, we have a unique perspective within M&A for automotive, heavy truck, motorcycle, RV, and powersports dealerships because we represent both the buyer’s and seller’s sides of the deal. While many M&A companies are actually just ‘brokers,’ our team consists of financial and automotive specialists who successfully bring together both sides of the transaction, negotiating the best possible outcome for each party.
DCG’s track record in connecting businesses and facilitating deals that drive growth and innovation truly speaks for itself. Contact our team now to speak to an M&A specialist.