Rene Robichaud, The Malibu Group
As a CEO of two public companies each with revenues of approximately $1 billion, Rene Robichaud is well-sanctioned to discuss the importance of corporate culture.
Below, he elucidates on Peter Drucker’s assertion that “culture eats strategy for breakfast” in order to highlight the critical role of a healthy corporate culture in creating value.
Corporate culture is not easily defined. Most businesspeople know it when they see it in action, but how would you define the corporate culture of a company you are looking to acquire? Below is a simple culture framework in order to get started:
1. Define the company’s values: standards they will not dip below for any reason.
2. Define the company’s beliefs: ideas about how the business world works best.
3. List the company’s habits: regular activities and relationships that flow from their beliefs and values.
Overall, a healthy corporate culture is more stable than a smart strategy in a dynamic economy. In the M&A arena, there are several studies that show most acquisitions fail to create long-term wealth for the buyer because:
1. The acquirer paid too much.
2. The strategy of combining acquisitions with a “platform” company (the initial acquisition made by a private equity firm in a specific industry or investment type) meant to enhance revenues and control costs did not work.
3. The culture of the acquiree never meshed with the culture of the acquirer, resulting in the loss of key people, customers and value.
If the selling company’s management team can properly describe its successful culture, the acquirer’s integration process will have a higher probability of achieving the synergies that make a deal work. Considering this, you may want to go through this culture definition process if you are thinking of harvesting one of your divisions or companies in order to help the acquirer get more comfortable with the deal.