Here’s a refreshing shift: a $26.2bn deal with a heavy emphasis on culture.(BBC)
A wise move. So few merger and acquisition (M&A) deals include culture as part of due diligence, and even fewer have a prenup agreement built-in to protect culture.
Disney-Pixar so far looks like a rare success story as a result of its agreement on similar lines.
It matters very much. A sense of belonging is a powerful motivator and enabler of smooth collaboration and fast innovation – all vital for both these companies.
But belonging can also harm businesses and mergers. Lots of research has been conducted around this, by the likes of KPMG, Deloitte, Bain, Hay and HBR, all concluding that around 80% of mergers fail to create value, and up to 50% actively destroy value.
The prime cause of this? Failure to consider the impact of culture.
That’s why we recommend always including culture as part of due diligence in the matchmaking process.
In the uncertainty post M&A, with the notions of victor and vanquished, the sense of belonging to the old business can become a siege mentality. Culture becomes a fortress, as teams put up shield walls, causing decision making to become constipated, a refusal to integrate and isolationism.
Hilary Scarlett, Author of ‘Neuroscience for Organisational Change’ explains why:
“The threat response means that blood flows away from our prefrontal cortex – used for thinking, decision-making and emotional control – and goes to the parts of the brain that prepare us to ‘fight or flight’.
At the very moment when organisations need their people to be focusing and thinking clearly, the impact of change and uncertainty on he brain is having an entirely opposite effect.”
Fear plus uncertainty plus big data multiplied by $26.2bn equals…? (Time)
We have examined the cultural and commercial impact in more depth in our recent report ‘Tackling the challenges of mergers, acquisitions and integration’. Drop us a line if you’d like a copy.
Cultural compatibility is crucial. The commercial goal of the acquisition is to accelerate the growth of both businesses, as much as exploring overlaps between them.
This deal brings together the world’s leading professional cloud with the world’s leading professional network. Enough to make Orwell and Huxley wince. Apart from the implications of big data for users and world citizens…
What does it mean for employees
What do they belong to now?
How do the tribes connect?
In which ways are they interdependent and independent?
Microsoft hasn’t had a great track record in retaining a sense of belonging in acquired companies, with concerns that Yammer’s much loved culture was eaten up.
But Satya Nadella, Microsoft’s relatively recent CEO, is credited with bringing a new style of leadership and greater respect for the value of culture.
One of the risks can be a haemorrhage of talent – losing the vital assets of intellectual capital. That’s why reassuring employees about belonging, so as to keep their cool and enthusiasm, is critical.
LinkedIn and Microsoft have published their CEO’s emails (the traditional internal banner-raiser for M&A) to their employees , around 9,700 and 118,500 respectively – both stress the importance of culture and independence.
Satya Nadella, Microsoft’s CEO, said:
“I wanted to share with you how I think about acquisitions overall. To start, I consider if an asset with expand our opportunity… And does this asset align with our core business and overall sense of purpose?”
“This deal brings together the world’s leading professional cloud with the leading professional network… LinkedIn will retain its distinct brand and independence, as well as their culture which is very much aligned with our.”
“So far, what I’ve learned about the LinkedIn team is how much our cultures share many of the same attributes. We both care deeply about individual and collective growth, and find deep meaning in the work we do to make a difference in our world. Together we’ll do just that.”
See full letter here
LinkedIn CEO Jeff Weiner said:
“Ten years ago, had you asked me about culture and values I would have rolled my eyes and recited a line from Dilbert. But when I started as a CEO I began to appreciate just how important they were.”
“Culture and values provide the foundation upon which everything else is built. They are arguably our most important competitive advantage, and something that has grown to define us. It’s one thing to change the world. It’s another to do it in our own unique way: Members first. Relationships matter. Be open, honest and constructive. demand excellence. Take intelligent risks. Act like an owner.
That’s who we are. That’s LinkedIn”
“Long story short, Satya had me at ‘independence'”
See full letter here
Jeff Weiner’s note deftly shifts the focus from past to future. He reassures employees that they still belong to LinkedIn and that they still value the same culture and purpose. Then signs-off with one of LinkedIn’s cultural symbols, internal code for ‘get on with the next challenge’:
“So, here’s to the next stepping stone.
Powerful stuff. Let’s see how it plays out.