The culture you didn't buy

The headline numbers are shaky

You will see claims that most mergers fail. They are hard to pin down, because "fail" can mean many things. A safer starting point is a large review of acquisition research. Looking across the factors researchers study most, it found that buying companies did not, on average, perform better as a result of their acquisitions, and were slightly worse off. More importantly, it found that factors researchers were not measuring explained much of the difference between deals (King and colleagues, Strategic Management Journal, 2004).

In plain terms: some deals work and some don't, and the usual explanations don't fully account for which is which. Culture and people are strong candidates for the missing pieces.

Executives tend to agree. In a 2023 McKinsey survey of almost 1,100 people who lead mergers and acquisitions, 44 percent named lack of cultural fit and friction between the two companies as top reasons integrations fail (McKinsey).

Difference can cost, and it can pay

This is the part we find most interesting, because it cuts against the usual "culture clash" story.

A meta-analysis combined 46 studies covering 10,710 deals. It found that cultural differences affected how well people came together, whether the promised benefits were realised, and shareholder value, "in different, and sometimes opposing, ways" (Stahl and Voigt, Organization Science, 2008). The effect depended on how related the two businesses were and what kind of difference was involved.

So difference is not automatically a problem. It can bring new ideas, skills and ways of working. It can also make the people side of integration harder. The useful question for a deal team is not "are they like us?" but "which differences matter for what this deal is meant to achieve?"

There is more than one culture in play, too. A study of both domestic and international deals found that national culture and company culture are separate things, with different effects on how well the two businesses integrate (Weber, Shenkar and Raveh, Management Science, 1996). Two firms from the same country can still work in very different ways.

Visible leaders walk first

A 1988 study followed the top managers of acquired companies for five years. Turnover was well above normal levels, and the most visible, senior executives tended to leave sooner than their colleagues (Walsh, Strategic Management Journal, 1988). The data is old, but the pattern is a useful warning. The people who carry much of the acquired company's culture and relationships are often the first to go.

What to look at before you sign

McKinsey's own surveys suggest many deal teams wish they had looked harder. In one conference survey of about 89 people working on mergers, 92 percent said their deals would have "substantially benefitted from a greater cultural understanding prior to the merger" (McKinsey). It is a small sample from 2009, so treat it as a signal rather than a measurement.

What we suggest instead

1. Ask what the deal needs from culture.

   Start with the purpose of the deal. If the value depends on keeping the target's innovation, protect the ways of working that produce it. If it depends on cost savings, be honest about what will change.

2. Look at how work really gets done.

   Compare how decisions are made, how people are paid and promoted, how fast things move and how bad news travels. Values statements tell you much less.

3. Find the informal influencers.

   Identify the people others listen to, whatever their title, and plan how to keep and involve them.

4. Separate national and company culture.

   In cross-border deals, don't put every difference down to nationality. Some of it will be how that company works.

5. Plan for the first leavers.

   Expect senior, visible people to be at risk. Talk to them early about their role and future, before the announcement if possible.

6. Keep checking after day one.

   Culture questions don't end at completion. Set a few clear checks on how people are experiencing the integration, and review them for at least the first year.