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Blog / Aug. 14

Worried About M&A Culture Clashes? First, Take a Hard Look at Acquisition Drivers

Noel Goggin

A recent RetailWire discussion post posed the question, “Are post-merger culture clashes inevitable?”

The topic was relevant due to the fanfare surrounding Wal-Mart’s $3.3 billion acquisition of Jet.com and the anticipated culture clashes between the two organizations. That speculation had gained steam when the Wall Street Journal published the article “It’s 5 O’Clock Somewhere—Unless You’ve Been Acquired by Wal-Mart.

It’s a cheeky title – discussing Wal-Mart’s ban on Jet.com’s weekly happy hour – but the crux of the article is a complex, weighty topic. How does a company deal with post-acquisition culture clashes? Will the “secret sauce” that made a company an attractive acquisition target be nullified shortly after the ink dries if the two organizations cannot see eye to eye? Or what problems will occur if, as in many cases, the culture of the acquirer is imposed, in a top-down manner, on the colleagues of the acquiree?

Indeed, it’s a much bigger problem than the office liquor being labeled contraband.

But instead of solving for these challenges, which is no easy task, what if more companies went into M&A deals and evaluated cultural fit as yet another key factor in the due diligence? And, no, not just a box to check, but a real, thorough evaluation that includes “human factors” like how each company talks about its reason for existence, its commitment to customers and the community, and how talent is rewarded and managed.

“Our strategy is not about being a rollup. An acquisition we pursue would have clear value such as creating market access or acquiring technologies that are important to our customers.”
– Aptos CEO and Culture Leader Noel Goggin

If you think you’ll get laughed out of the boardroom for turning the conversation away from EBITDA, market cyclicality and accounts receivable to discuss the softer side of M&A, consider this:

According to a Harvard Business Review report, the failure rate for mergers and acquisitions sits between 70 percent and 90 percent.

Let that sink in for a minute, and think about the time, hard dollars and resources invested in those transactions, which ultimately failed.

And consider this: A Hay Group study found that only 27 percent of business leaders analyzed the cultural compatibility of the firms to be merged. A shocking 70 percent of senior executives interviewed believed that it was too difficult to obtain intelligence on the corporate culture and human capital of M&A target companies.

Now, ask yourself: Do you think there’s a connection between failed acquisitions and the lack of energy and investment in assessing cultural alignment during the M&A process? You can bet there is.

This is a topic that is near and dear to my heart and quite timely, as Aptos recently announced its planned acquisition of TXT Retail.

Let me share with you a critical takeaway from my letter to customers announcing this acquisition:

“Given the culture synergies of Aptos and TXT Retail, and based on our success in integrating past acquisitions, we are confident that this acquisition will cause no disruption to your business.”

Why are we so confident about the success of this acquisition, especially when the failure rate for M&A is so high? Well, for many reasons, but to a large extent because we conducted cultural due diligence at every step of the M&A process to an exhaustive degree before signing on the dotted line.

And what we found at TXT Retail is the same commitment to customers, each other, the community and the retail industry that makes up the backbone of our culture at Aptos.

Conducting cultural due diligence is not a new strategy for Aptos. We thoroughly assessed culture during our previous acquisitions (ShopVisible, QuantiSense, BT Expedite), and each of those acquisitions has been a tremendous success – for all parties – including customers and colleagues.

The Aptos and TXT Retail teams wasted no time getting to know each other and bonding following the acquisition’s announcement.

Our confidence in the TXT Retail acquisition is also extremely high because the decision was made with our customers’ needs in mind. At our 2017 North American customer conference, I reiterated that our M&A strategy is not about being a rollup. An acquisition we pursue would have clear value such as creating market access or acquiring technologies that are important to our customers. The acquisition of TXT Retail achieves both in spades.

In my 25 years of retail software leadership and having been involved in over a dozen M&A deals, I’ve learned a few things, but I don’t think any lesson is as critical as this: Culture matters. People matter. And for Aptos, that manifests daily in how we strive to Engage Customers Differently.

We are thrilled at the chance to join forces with TXT Retail and their 300 retail specialist colleagues who have the same relentless focus on serving customers, creating solutions to retail’s toughest challenges and working together in the trenches.

Of course, there’s heavy lifting yet to do, operational alignment, product strategy, go-to-market plans … but with our cultures aligned and customer-first drivers motivating the acquisition, there is nothing we can’t accomplish, together.

And in case any TXT Retail colleagues are wondering, Aptos will not be banning Happy Hour.