Culture shock: Anticipate the risks when companies merge
Culture shock: Anticipate the risks when companies merge
Insight

Culture shock: Anticipate the risks when companies merge

Due diligence must include a deep look into possible areas of conflict arising from very different cultures and norms

Mergers between tech and non-tech firms are becoming almost commonplace in today’s market as traditional companies embrace innovation opportunities and startups look for ways to expand and grow. Yet such mergers are not without their challenges – particularly on the people side. It is incredible how quickly a significant clash in cultures can lead to attrition and undermine deal value.

From the tech company’s perspective – employees used to casual dress and flat organizational structures might feel like they’ve landed on a strange and distant planet. The same could be said for employees at the non-tech company, where more formal attire and structured hierarchies are the norm. Unless action is taken, key employees on both sides could soon head for the door.

To mitigate the risk of talent attrition, buyers should begin taking action in the pre-deal stages of a transaction. Undertaking robust cultural assessments during due diligence can help buyers better understand, anticipate, plan, and prepare for seamless workforce integrations. Likewise, buyers can use them to better address differences in the non-people-related elements of culture – such as policies, programs, and decision-making styles.

Key challenges 

KPMG’s report Culture Shock: anticipate the risks when non-tech and tech companies merge delves into the primary challenges associated with culture shock – and three ways buyers can mitigate their risks, including:

  1. Bridging the cultural divide
  2. Reconciling disparate HR programs
  3. Transitioning the workforce without eroding deal value

The reality is that 75 percent of M&A deals do not involve HR early enough in a deal, which can lead to increased integration costs and the erosion of deal value. To get the most out of a merger between tech and non-tech companies, buyers need to start thinking about culture early in the deals process and involve HR right from the get-go.