The Importance of Culture in Post-Merger Integration

The list of high-profile Investment Management integrations is ever increasing as the trend towards consolidation in the industry continues unabated. We have worked in the industry for many years and experienced the various facets of merger & acquisitions both directly and through working with firms. The insight we have developed has informed our methodology and pragmatic approach.

There is no denying this is a hectic business; things are bound to misfire and conflict is often unavoidable – there is an art to managing this to achieve a positive outcome. From our perspective, we believe that one factor which is a key contributor to the success of these integrations is the strong focus on building a unified culture and more importantly, the speed of deployment.

The early focus of integrating companies is often on the most tangible outcomes, such as delivering a common investment platform, or the realisation of synergies. These are correctly high on the agenda but would a focus on culture distract from realising the benefits of an integration? It is AlgoMe Consulting’s view, contrary to the common misconception, a focus on culture throughout the integration process, both reduces the cost of integration and ensures benefits are met sooner.

As we referenced in a previous article[1], culture can be defined as a set of behaviours and mindsets that characterise an organisation (“the way things are done over here.”) As such, we believe that culture can be managed through a number of levers that, if actioned concurrently, can help influence and encourage behaviours conducive to a successful integration. Vision, leadership, a common language, working practices and communication are in our opinion the key levers to be managed in the course of an integration programme:

Vision

An initial focus for the executive is to clearly define a common strategy for the combined business. Alongside this, the mission, values and culture of the firm need to be set and shared.

Up front work on defining the culture of a combined business can allow the management and, by extension, the entire workforce, to work towards a common vision. It sets a positive tone to the discussion and allows project sponsors to develop strategies that achieve the integration objectives in a sustainable way that has broader buy-in from both “heritages.”

Leadership

Uncertainty around job security can lead to negative behaviours as individuals seek to protect their jobs and their team members. Early focus on the definition of management structures removes ambiguity and allows teams to move forward. It is far better for leadership to establish stability early and take tough decisions, than create uncertainty and instability over the long-term as rumours and assumptions will fuel poor morale.

Common language

In everyday life, people interpret conversation based on their own reference points. The workplace is no different and, without anchoring discussions around common reference points, there can be inefficiencies and misunderstandings made in every meeting. Take time to understand how teams and individuals work and accept that things will start hard but, with effort, will get easier over time.

Working Practices

Anyone who has sat in early integration meetings will recognise the common scenario where representatives rigorously defend their current processes regardless of the pre-merger conversation being centred around the need for change. The industry is changing, and this is an opportunity to do things differently and to address issues with ways of working. Be open about current challenges and recognise that new ways of working need to support the combined business.

In terms of delivery, ensure that focus is given on a shared methodology as teams will work in conflict until they are instructed to work differently. There is the added challenge to external resource that may not be familiar with the expectations from either heritage. Ensure that effort is given to train teams as change will not happen overnight, especially for teams that are not used to doing things differently.

Communication

Transparency is critical in getting buy-in from the wider workforce. People will understand delays to milestones or changes of approach if they are brought on a journey. The entire firm will be bombarded with information and change so it is essential that integration comms structures are established and that multiple channels are used. Emails get lost but one-to-one’s, stand ups, podcasts, video can all be used to ensure key messages land over time.

It is essential that all of these cultural levers are considered by the top management down. All of these elements managed properly help fuse two entirely separate organisations into one stronger market presence. They are not items that can be outsourced to third parties and will require strong leadership to address correctly. The key is to mandate that early planning recognises the importance of a shared culture, and to instil that approach in all integration activities across the firm.

[1] “Why does culture matter for the Investment Management industry?” (July 2019)