Compatibility of culture chief pre-merger concern

Companies looking to merge should bring in identity consultants at the very start of the process to assess the cultural side of the move, which is often the cause of failure in mergers, say leading industry figures.

At the Fourth International Corporate Identity Conference last week, Landor Associates managing director Adrian Day said, when considering a merger, companies think of the fit in primarily financial, operational and product terms. Landor sponsored the event.

But the cultural fit between the two companies is extremely important and the widespread failure to address the issue adequately is largely responsible for the high failure rate of mergers, said Day last week.

“Companies should use culture-match as an important pre-merger process. Why not marry together companies with similar identities, because [in some ways] that is much more likely to work than assessing it on whether they have, say, complementary skill sets,” says Day.

Enterprise IG chairman Terry Tyrrell says, as the distinction between the hard properties of rival brands – such as price and distinguishing features – continues to blur, its people (the culture), are becoming more important in the brand.

“The people are the brand. If the values of the company are not embedded in them, then it is doomed. So if the staff [of a newly merged company] do not have a clear idea of its identity, they cannot communicate it and the brand suffers,” says Tyrrell.

“Organisations are not yet looking at mergers in cultural terms. Advisors only look at the hard, tangible factors. But I think compatibility of values or cultures will eventually become one of the top two or three priorities when considering a merger,” Tyrrell adds.

Day argued that identity consultants are best placed to assess the cultural impact of a merger and to manage the evolution of a new culture, since this is just an extension of what they already do.

“Mergers are the ultimate identity crisis. Staff worry they are going to lose their culture or identity more than anything else,” added Day at the conference.

He cited the merger between Leeds Permanent and Halifax building societies in August 1995, as one which has been successful because the cultural fit was suitable and carefully managed. Leeds Permanent lost its name and identity when the companies merged (DW 7 April 1995).

“The main reason we merged was because of the cultural links between the two companies. We were both honest, northern and large employers,” says a Halifax spokeswoman.

See News Analysis, page 8