Cultural Compatibility: Predictor Of A Transaction's Potential Success

We have previously reported on human capital considerations in M&A transactions; in this post we consider how corporate culture affects a deal's possibility of success. While qualitative considerations often sit on the backburner in the lead up to a deal, compatibility of corporate cultures can be an important factor in determining whether a merger or acquisition will be successful. According to a survey by Bain & Co., executives have indicated that the number one cause for a deal's failure to achieve promised value is due to clashes in corporate culture.

Corporate culture is multifaceted and can include behavioural norms and characteristics, the operating model of the company, including the organization's structure and governance mechanism, the method by which employees are incentivized and rewarded, and the workflow process.