Mergers and acquisitions or alliances (M&A) are huge business deals that involve billions of dollars in and outside the dental industry. Despite the potential benefits of strategic alliances, it’s been found that 75-90% of M&A transactions fail. This mismanagement can lead to financial losses, destruction of value, human suffering, and residual trauma.In dentistry, it does a disservice to the hardworking professionals who strive to improve oral health and provide quality care and reinforces negative perceptions of the dental industry and dental service, leadership, or management organizations (DSO, DLO, DMO).
Practices that are deemed “troubled,” “hot,” or “underperforming” after being acquired can hurt the overall company portfolio and its growth. Research shows that a lack of cultural fit is one of the top ten reasons* M&A deals fail. It is vital to recognize the significance of embracing cultural differences because discarding them can impede employee collaboration, productivity, the feeling of inclusion, and assimilation into the new company, ultimately affecting the organization’s overall brand.
Understanding Cultural Differences in M&A
When decision-makers and stakeholders fail to consider cultural differences, they often cannot or choose not to “see” or “acknowledge” others’ perspectives. It’s not the differences that are the issue, but rather the lack of empathy and willingness to step outside one’s worldview to bridge them. Cultural audits and cultural due diligence are crucial for organizations that value their people and aim to increase and diversify their talent and patient pools. These structured assessments help measure and promote listening interviews, formulate strategies, inform onboarding training and coaching, and provide recommendations to leverage cultural differences while the vision of the acquiring (parent) organization provides the context.
Operational Challenges Post-M&A
Beyond the integration phases, operational teams face uphill challenges in turning around “troubled,” “hot,” or “underperforming” practices. Legacy employees resist change, high producers may take their foot off the gas or leave, and the C-suite may hinder progress via their inability to navigate challenges, leverage differences, and hold others accountable, leading to operational chaos.
Operational leaders hired or promoted to lead multi-location turnarounds often need to be given sufficient integration processes or cultural coaching, which overlooks the impact of cultural orientations. Hiring an external consultant with expertise in intercultural coaching can offer unbiased recommendations and training to all parties that will help facilitate the amalgamation of the best of both cultures, allowing a “third culture” to emerge.
Cultural Awareness for Sustainable Success
To ensure the success of mergers and acquisitions, it’s essential to have a thorough understanding of cultural differences. Rather than considering these differences as hurdles, they can be viewed as potential strengths that can turn M&A initiatives into avenues for sustainable success. By proactively addressing cultural orientations and bridging gaps, creating a unified and leveraging culturally diverse organizational landscape is possible. This is critical for unlocking human potential, achieving financial goals, and contributing to the oral health industry while elevating the status of dental service organizations.
*The Ten Reasons Why Mergers and Acquisitions Fail
- Overpaying: Financial misjudgments, especially in overestimating the target company’s value, can result in overpayment and subsequent financial strain.
- Hubris and Overconfidence: Overconfidence in the success of a deal can blind organizations to potential pitfalls.
- Insufficient Due Diligence: A lack of comprehensive due diligence, particularly in understanding cultural nuances, sets the stage for potential failures.
- Misunderstanding the Target Company: Inadequate understanding of the target company’s operations, culture, and market positioning can lead to strategic missteps.
- Lack of a Strategic Plan: The absence of a well-defined strategic plan can leave organizations directionless post-merger.
- Lack of Cultural Fit: Ignoring or downplaying the importance of cultural fit can result in employee resistance and integration challenges.
- Overextending Resources: Committing excessive resources without a clear return on investment (ROI) can strain organizational capabilities.
- Wrong Time in Industry Cycle: Entering the market at an unfavorable time can hinder growth and disrupt plans.
- External Factors: Unforeseen economic downturns, regulatory changes, or global crises can derail even the most well-conceived plans.
- Lack of Management Involvement: The inability of leadership to navigate challenges and hold others accountable can undermine the success of mergers and acquisitions and contribute to operational chaos (i.e., decrease in expected production, turnover.)
Sources:
https://dealroom.net/blog/reasons-why-mergers-and-acquisitions-fail
https://api.semanticscholar.org/CorpusID:166671723