Organizational culture and its implications on post-acquisition integration : A case study of a merger between two entrepreneurial firms

University essay from KTH/Maskinkonstruktion (Inst.)

Author: Hanna Thorwid; Niklas Vinge; [2020]

Keywords: ;

Abstract: Abstract Mergers and acquisitions (M&A) is an important economic phenomenon, utilized by companies to expand their market share and achieve rapid growth. However, studies imply that a majority of M&As fail to deliver anticipated value, which has led to a vast amount of research investigating why. Failing to integrate the cultures of the merging firms has been identified as a common cause to unsuccessful deals. Achieving scalability, namely adding revenue exponentially while only increasing costs incrementally, places high demands on an organization, including the culture. Achieving scale is a commonly sought synergy effect of horizontal merger integrations. There is however a lack of research-based advice on how to overcome cultural challenges when pursuing cross-border merger integrations, with the objective to scale. This study was conducted with a Swedish SaaS firm as the commissioning body. The firm was, at the time of the initiation of this thesis project, about to commence the post-acquisition integration with an acquired German competitor, which invited to an interesting research setting. While organizational culture is an area covered by vast research, the combination of scalability and M&A integration is not. This thesis aims to explore the intersection between M&A integration, business scalability and organizational culture. Using a mixed methods approach by combining semi-structured interviews and surveys, the Competing Values Framework (CVF) was applied to diagnose the two firms’ corporate cultures. Additional data was gathered from external subject-matter experts in the field of M&A to increase reliability and validity of the results. The results showed discrepancies between the organizational cultures of the studied companies, as well as between management and employees. What also became evident was the employees’ different opinions of the ongoing merger, with acquired firm being noticeably more negative towards it. One key finding from the study was the importance of employee buy-in when integrating two companies, both to keep momentum and to avoid employee churn. When integrating two cultures, different motivational approaches might be needed to achieve commitment from different culture types. The study further showed positive signs towards the CVF being fruitfully applied on an ongoing integration, making it a possible management tool to assess and approach cultural discrepancies in an efficient and timely manner.

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