Improving M&A: Considering a Pre-Transaction Framework to Inform Post-Transaction Integration

Abstract

We conducted a phenomenological evaluation of an investment banking firm’s services to consider potential strategies for addressing the cultural aspects of Mergers and Acquisitions (“M&A”) within the pre-transaction phase of the M&A activities. Underappreciation of the cultural aspects of organizational integration within the M&A planning process is attributed to most M&A failures (Weber & Tarba, 2013; Nguyen & Kleiner, 2003). Our partner organization believes that a more systematic assessment of the cultural aspects of M&A during the pre-transactional phases of their engagement would better position its clients to address post-transaction integration challenges and achieve the financial and business strategy objectives for the M&A while positioning our partner organization as an advisor of choice for such transactions. Ultimately, we conducted 22 semi-structured interviews across three informant categories, inviting our participants to “paint” their own picture of the M&A transaction processes. From our interviews, we identified six key themes that then aggregated to three key findings: 1. Facilitation & Variation highlights the consistency and proficiency with which much of the early-stage activities occur and captures how informal expertise and varied objectives lead to variation throughout the later stages of the pre-transaction processes. 2. Tensions Impacting Understanding and Trust revealed themselves primarily in relation to a) transparency and participation, b) price versus culture, and c) time constraints; and 3. Clarifying Assessment addresses three elements of assessing cultural fit as framed by our Informants: a) defining indicators of culture, b) understanding the impact of change on clients and counterparts, and c) understanding the importance of the assessment to the transaction. We recommend three interrelated opportunities for adjustments to our partner organization’s services that may improve how their clients experience post-transaction integrations by moderating the degree of variance in service and better equipping clients to understand the M&A process more generally: 1. Articulate more formally the advisors’ informal knowledge as captured through post-engagement debriefing. 2. Formulate an assessment framework that clarifies the importance of culture and guides clients (and Counterparts) through identifying elements of key cultural differences; and 3. Educate Clients regarding process-related tensions and best practices.