Tuesday, September 30, 2008
[IWS] Mercer: CULTURAL INTEGRATION ISSUES in M&A COST MILLIONS (Survey) [29 September 2008]
IWS Documented News Service
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
Mercer
Millions in value lost in M&A deals due to cultural integration issues, according to Mercer survey
Nearly 60 percent of respondents report that cultural integration issues had a negative impact
http://www.mercer.com/summary.htm?idContent=1323305
United States
City , 29 September 2008
Cultural integration issues in M&A transactions have direct financial implications on deal value, according to the results of Mercer's Cultural Integration Snapshot Survey. The survey, which included 119 organizations from across the Americas and Europe, found that more than half of respondents reported that the success of recent M&A transactions was negatively impacted by cultural integration issues.
Asked to estimate the financial impact of cultural integration issues, respondents differed only slightly between the American and European surveys. In the American survey, forty-four percent of respondents reported that between US$1 million and US$5 million was lost or not realized in a significant transaction their organisation had recently undertaken, with nearly one quarter estimating that it was over US$5 million. In the European survey, forty-three percent of respondents reported that between 1 and 5 million was lost or not realized in a recent significant transaction, with nearly 30 percent estimating that it was over 5 million.
"Cultural integration has a significant impact on the benefits of deals for organizations," said Elisa Hukins, the leader for cultural integration in Mercer's M&A global consulting business. "According to several of our clients, the impact of cultural integration can be much greater when the synergies lost, as a result of cultural misalignments over time, are factored in. We are working with one organization that estimated that it's failure to quickly manage conflicting cultures early on "cost" them hundreds of millions of dollars of lost revenue over a three year period."
"Our research confirms that organizations are starting to turn this tide by developing processes, tools and capabilities aimed at reducing the risks and taking advantage of the opportunities presented by organization culture before, during and after a deal closes. Significantly, organizations citing a more positive impact of culture in recent major transactions were those that had invested in implementing structured cultural integration processes and programs from as early as the due diligence phase."
According to Bob Bundy, Mercer's M&A global leader, the key is to start making assessments of cultural differences that will affect deal value as early as possible during the initial consideration of a deal. "It is remarkable just how much information we are able to gather and analyze even without 'touching' the target," said Mr. Bundy. "Using non-invasive methods, we are able to inform senior teams about just how differently the two organizations operate and behave, and identify potential challenges and risks to deal success. This information is invaluable to factor into purchase considerations, including the purchase price and the cost of successful integration."
Although 72 percent of survey respondents cited culture as an important contributor to creating value in M&A transactions (with nearly one third stating that it is critical), the survey highlighted the fact that many organizations were not well-prepared to effectively manage cultural integration issues. While nearly one quarter of companies are moving towards developing a more formal cultural integration process, 68 percent still do not regularly use a systematic approach to identify gaps between organizational cultures.
Another challenge identified by survey respondents was the lower levels of executive engagement in leading M&A-related cultural change. Only 37 percent of organizations surveyed said that they had invested to some extent in developing managers with the expertise to understand and lead cultural change, with 28 percent indicating that they have invested very little or not at all. Additionally, many organizations may not have the right people leading the changes required for cultural integration. While HR professionals were viewed as being key culture change champions, only a quarter of senior executives were reported as co-leaders of cultural integration efforts in their organizations.
Mercer's survey showed several positive developments in the M&A cultural integration arena. "Some organizations that are focused on driving higher levels of value faster from their transactions are taking actions to address cultural integration issues more proactively," said Ms. Hukins. "In fact, over half indicated that they plan to invest more heavily to improve the management of cultural issues in deals in the short term. As our survey shows, not doing so can have a tangible and dramatic negative financial impact, and especially in the current climate, maximizing and accelerating value from each and every transaction is critical."
Notes for Editors
The survey was conducted among 119 companies across more than 17 industry groups, with 76 percent of respondents headquartered in the US and 19 percent in Europe. A full copy of the survey report is available upon request via email at GLOBALM&A@mercer.com.
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
Mercer
Millions in value lost in M&A deals due to cultural integration issues, according to Mercer survey
Nearly 60 percent of respondents report that cultural integration issues had a negative impact
http://www.mercer.com/summary.htm?idContent=1323305
United States
City , 29 September 2008
Cultural integration issues in M&A transactions have direct financial implications on deal value, according to the results of Mercer's Cultural Integration Snapshot Survey. The survey, which included 119 organizations from across the Americas and Europe, found that more than half of respondents reported that the success of recent M&A transactions was negatively impacted by cultural integration issues.
Asked to estimate the financial impact of cultural integration issues, respondents differed only slightly between the American and European surveys. In the American survey, forty-four percent of respondents reported that between US$1 million and US$5 million was lost or not realized in a significant transaction their organisation had recently undertaken, with nearly one quarter estimating that it was over US$5 million. In the European survey, forty-three percent of respondents reported that between 1 and 5 million was lost or not realized in a recent significant transaction, with nearly 30 percent estimating that it was over 5 million.
"Cultural integration has a significant impact on the benefits of deals for organizations," said Elisa Hukins, the leader for cultural integration in Mercer's M&A global consulting business. "According to several of our clients, the impact of cultural integration can be much greater when the synergies lost, as a result of cultural misalignments over time, are factored in. We are working with one organization that estimated that it's failure to quickly manage conflicting cultures early on "cost" them hundreds of millions of dollars of lost revenue over a three year period."
"Our research confirms that organizations are starting to turn this tide by developing processes, tools and capabilities aimed at reducing the risks and taking advantage of the opportunities presented by organization culture before, during and after a deal closes. Significantly, organizations citing a more positive impact of culture in recent major transactions were those that had invested in implementing structured cultural integration processes and programs from as early as the due diligence phase."
According to Bob Bundy, Mercer's M&A global leader, the key is to start making assessments of cultural differences that will affect deal value as early as possible during the initial consideration of a deal. "It is remarkable just how much information we are able to gather and analyze even without 'touching' the target," said Mr. Bundy. "Using non-invasive methods, we are able to inform senior teams about just how differently the two organizations operate and behave, and identify potential challenges and risks to deal success. This information is invaluable to factor into purchase considerations, including the purchase price and the cost of successful integration."
Although 72 percent of survey respondents cited culture as an important contributor to creating value in M&A transactions (with nearly one third stating that it is critical), the survey highlighted the fact that many organizations were not well-prepared to effectively manage cultural integration issues. While nearly one quarter of companies are moving towards developing a more formal cultural integration process, 68 percent still do not regularly use a systematic approach to identify gaps between organizational cultures.
Another challenge identified by survey respondents was the lower levels of executive engagement in leading M&A-related cultural change. Only 37 percent of organizations surveyed said that they had invested to some extent in developing managers with the expertise to understand and lead cultural change, with 28 percent indicating that they have invested very little or not at all. Additionally, many organizations may not have the right people leading the changes required for cultural integration. While HR professionals were viewed as being key culture change champions, only a quarter of senior executives were reported as co-leaders of cultural integration efforts in their organizations.
Mercer's survey showed several positive developments in the M&A cultural integration arena. "Some organizations that are focused on driving higher levels of value faster from their transactions are taking actions to address cultural integration issues more proactively," said Ms. Hukins. "In fact, over half indicated that they plan to invest more heavily to improve the management of cultural issues in deals in the short term. As our survey shows, not doing so can have a tangible and dramatic negative financial impact, and especially in the current climate, maximizing and accelerating value from each and every transaction is critical."
Notes for Editors
The survey was conducted among 119 companies across more than 17 industry groups, with 76 percent of respondents headquartered in the US and 19 percent in Europe. A full copy of the survey report is available upon request via email at GLOBALM&A@mercer.com.
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
# posted by SBasefsky : 8:13 AM
