Women in Deals: Three big ideas to overcome cultural challenges in deals

Earlier this month, we joined nearly 50 leading female executives across three cities to discuss the impact culture has on mergers and acquisitions (M&A). The gatherings were part of PwC’s Women in Deals series, which has been developing leaders and building relationships amongst female dealmakers since 2019.?

Attendees had observed?culture-related value leakage in many different forms.? Some were from founder-owned businesses that struggled to thrive within a larger, more complex acquiring organization. Others were part of companies that lost value as an acquirer integrated a business so quickly it didn’t realize what it was breaking.?

We’ve leveraged key insights from these discussions, combined with our experience in helping leading companies overcome similar challenges– and have centered on three big ideas for dealmakers to consider as they move from the theoretical to the practical in culture and deals.?

? I. Include culture in diligence?

Culture is critically important to preserving deal value, yet often there is a missed opportunity in diligence to learn more about the target’s culture. Early on, dealmakers need to identify the cultural traits that fuel success and will be important to preserve. They also need to determine traits that might conflict with the acquiring organization’s culture or create challenges in value creation or synergy plan execution.?

There is an opportunity in diligence to uncover what matters to the organization, what leadership values, and what’s going to be important to preserve to achieve the deal thesis.?

Many clients wonder how to get meaningful insight into an organizational culture during diligence. What we have learned over the years is 1) it’s amazing what people will tell you if you just ask, and 2) the chance to share their points of pride in the culture and organization they built is often the leadership team’s favorite part of the diligence process.??

II. Reset & focus on behaviors with the biggest impact on deal value?

Working on an integration can be a full-time job for most leaders and employees. Simultaneously, these same leaders and employees are also continuing in their day-to-day roles. With limited bandwidth and when moving fast, there are often early missteps or misunderstandings that can slow down decision-making, teaming and alignment if not quickly addressed.???

What you say, how you say it, and what you emphasize in those early meetings and conversations are so critical to building trust quickly. We’ve found a lot of value in spending the time in an IMO kick off to bring awareness to cultural similarities and differences to begin the dialogue. One exercise we often use is presenting a spectrum of two cultural traits and having integration leads from both organizations “vote with their feet”. We can then ask how these show up and begin to draw a quicker understanding of behaviors that are different and where they’ll need to evolve to move faster together.??

For example, a few questions we might ask to quickly assess similarities or differences and how they show up in each organization, may be:?

• Are there single points of accountability or does decision-making tend to happen by consensus? (single points of accountability vs. Consensus)?

• Do interactions within the organization tend to be cordial and polite, or is there acceptance of conflict? (polite vs. Acceptance of conflict)?

• Is the organization focused more on its external strategy and customers or internal operations? (customer focused vs. Internal operations)?

• What is the organization’s attitude toward risk? (comfortable with risk vs. Risk averse)?

• What is the organization’s attitude toward cost? (lean mentality vs. Abundance mentality)?

• Does work get done via informal relationships or formal chains of command? (relationships vs. Formal chains of command) ?

This provides a good start and should be complemented by looking through the synergy or value creation plan and identifying which initiatives have a large behavioral component so you can isolate where value may be at risk of behavioral differences and ways of working are not addressed.??

Most importantly, it’s getting to a focused set of behaviors that matter, and greater understanding by leadership to role model and signal where and how you want the organization to evolve.??

? III. Pilot & scale?

When companies want to move from assessment to driving a cultural evolution, they often jump to an enterprise –wide, top-down mandate.? A more effective approach is to start with a pilot designed to address a specific behavior. You can then launch the pilot, monitor and measure impact, and adjust as needed before scaling it across the organization. This allows for fit-for-purpose interventions and quick wins and momentum to build off of so it feels different and real vs. Theoretical.???

For example, with a financial services company, we found that they would not constructively raise concerns or challenge someone in a meeting -- but instead would raise questions outside them causing many “meetings after the meetings”. Consequently, it took the leadership team many cycles to make decisions. This approach trickled down throughout the organization and was a critical impediment to transformation.???

We developed pilots, starting with the CEO and their leadership team meetings where, after a presentation to the team, the CEO would call upon individuals for their feedback. The CEO would then give verbal affirmations and validation when someone would constructively offer challenges in the meetings.? And then these leaders would continue the chain by running meetings this way with their own team.??

While the momentum of driving faster decision-making and acceptance of conflict in a meeting started by the leadership team implementing new behaviors in a meeting, it was also reinforced through compensatory and non-compensatory incentives to reinforce the change. A few mechanisms included:??

• Verbal recognition and validation from the CEO????

• Verbal recognition and validation from other leaders when they saw their own team members bringing greater constructive candor to discussions.???

• Peer-to-peer recognition, in which a nomination system was set up where a person could notice the demonstrated behavior and share it in meetings or with their leader.???

• A financial reward system in which peers had autonomy to award $25 and $50 cash rewards when they made a submission and described the behaviors that they observed. This empowered teams to reward each other without a long approval process.??

Dealmaking is a complex undertaking in which plenty of things can go wrong. Misaligned company cultures are one of the most obvious potential stumbling blocks to creating value from M&A. But navigating these complexities is possible. For more information on how our team can help, reach out to any of the team members below:?

• Carrie Duarte Steele, Partner, Human Capital Value Creation?

• [email protected] ?

• Mironda Ross, Partner, Deals Transformation?

• [email protected] ?

• Maria Alberico, Partner, Deals Transformation?

• [email protected] ?

• Myra D’Souza, Managing Director, Talent Value Delivery in Deals?

• [email protected] ?

• Robyn Lahlein, Managing Director, Deals?

• [email protected] ?

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