Why Cultural Intelligence (CQ) is the Key Skill Your M&A Team Needs to Master Right Now

According to Deloitte’s survey on merger & acquisition trends for 2019, M&A activity is once again on the rise. 79% of respondents expect the number of deals they close this year to increase, up from 70% last year. Cross-border mergers & acquisitions comprise roughly 35% of all M&A deals, and total deals have been increasing year over year. Mergers and acquisitions have become a popular business strategy for companies looking to expand into new markets or territories, gain a competitive edge, and acquire new technologies and skill sets; increasingly, companies are going abroad to meet these needs. Unfortunately, most mergers and acquisitions do not work out as planned. KPMG reports that 83% of M&A deals fail to create their intended value.

“83% of M&A deals fail to create their intended value.”

It’s no surprise that the #1 reason for failed M&A deals is C U L T U R E. Typically, this means differences in corporate culture, but for those working internationally it means differences in national culture as well.

According to the Deloitte survey (see images below), effective integration is a main factor in the success of M&A; if integration does not happen, expected ROI cannot be reached. Studies show that most effort for M&A is put in at the initial, pre-merger phase (identifying the target, negotiations, and due diligence); the post-merger phase is often overlooked. This is when actual integration takes place. Little energy is invested in more human factors like how talent is rewarded and recognized, how each company sees its purpose or “reason for being,” or how each company’s values compares to the other. Why spend all of that time and money in the pre-merger phase, if you’re just going to let it all go to waste?

The key to successful M&A in the integration phase is C O M M U N I C A T I O N! Don’t just assume all teams are on the same page; assume they aren’t.

Here are some things you can do to help manage the integration phase of a cross-border M&A:

1 - Create an Integration Toolkit for the Human Side of Things

• Have a checklist of things that need to get done - not just a Gannt chart of usual project tasks, but a list of ways to improve communications and create a cohesive culture

• Make introductions - You’d be surprised how many companies don’t even bother to introduce the newly acquired team (especially if they are in another country)

• Make it personal - Arrange a video chat so everyone can get to know each other

• Create (or modify) an internal organizational chart to keep lines of communication clear

• Designate a point person in each office (or country) to handle any basic questions - Doing this early on in the integration will help ease any possible tensions before they arise

2 - Do your Cultural Due Diligence

It’s important that your M&A and HR teams ask questions of the new company before things go too far. How do they prefer to communicate? What is their operating style? What do they value? How do their values (both corporate & national) differ from HQ? How will you manage those differences?

Time & time again, I’ve seen HQ just assume (and even outright say) that the newly acquired company is just going to have to adjust to the way things are done at HQ. “The Taiwanese company will just have to adapt to our American ways.” This is setting yourself up for failure. To be a truly global company, HQ cannot dictate the final word on all decisions, especially when having international offices. There must be a blending of cultures in order to find ways to compromise and make everyone feel heard and included.

3 - Have the Right People on your Team

When working across borders, it is imperative that the people working on the M&A team have international experience. It’s also important that your HR team has a global outlook and understands cultural differences. Ideally, all of your senior leaders are able to understand how cultures differ, and more importantly, are able to adjust their behavior and communication styles to create successful outcomes.

What do you do if your existing teams lack international experience? Hire a consultant who has the knowledge you need, or look to your internal talent. Leveraging the international experience of current team members will save costs and increase engagement.

4 - Recognize the Importance of Cultural Intelligence (CQ) & then Develop It

CQ can be defined as the ability to relate to and communicate effectively with people from other cultures. It is a competency that can be learned, and for most people, it can be done rather quickly. It enables you to successfully navigate differences from culture to culture.

Cultures can differ in many aspects of business, including:

• Decision-making

• Relationship-building

• Communicating

• Running meetings

• Negotiating

• Managing teams

• Virtual teambuilding

There are plenty of resources online to get you & your teams started, but here are some quick tips on developing cultural intelligence:

• Be self-aware

• Be comfortable with ambiguity

• Be mindful

• Be empathic

Having a high CQ will go a long way in working with those from another culture. You will be sure to garner respect by taking the time to understand those different than you.

5 - Cultural Training for Everyone

If your budget allows, offer internal cultural training to increase awareness of cultural differences and to increase CQ. One-on-one trainings may be necessary for senior leaders in the company or for those interacting often with international counterparts. However, group sessions (in-person or virtual) could be done for small and large groups, depending on your need. Perhaps your US marketing team is clashing with your Chinese team. Or maybe your German operations team is having trouble communicating with your Indian office. Half-day, 1-day, and even hourly cultural trainings can solve many issues and can teach your teams skills for teambuilding, communicating, and doing business across cultures.

As more and more companies become global, understanding cultural differences is a must. If your company is like most and is planning on increasing cross-border M&A activities this year, take time to prepare your teams and to have the right people equipped with the proper cultural knowledge. Investing in CQ can mean the difference between a failed and successful deal.

Contact me at hello@nicolebarile.com if you’d like to learn more or visit me here. #futureofglobalwork