Ideal Outcomes

What Private Equity Overlooks in M&A 

By Jason Richmond, CEO and Chief Culture Officer at Ideal Outcomes, Inc. 

It’s not all about the numbers. People count. People matter more. That’s the advice I give all the time to private equity companies when they’re masterminding mergers and acquisitions. While their focus is on P&Ls and the balance sheet, I emphasize that just as important, if not more important, is corporate culture.  

A financial strategy is not enough—there needs to be a culture strategy. And private equity would be well advised to place greater value on the power and performance that can occur when companies are brought together in a way that secures a cohesive, harmonious workplace.  

As I write in my book Culture Spark: 5 Steps to Ignite and Sustain Organizational Growth, “The word marriage is thrown around a lot when the coming together of two corporate entities is discussed. But the bitter truth is that there is often not much love involved, and ugliness of divorce frequently enters the picture. While 40% to 50% of marriages between people don’t survive, astonishingly, numerous studies show that anywhere between 70% and 90% of corporate marriages end in failure.” 

It’s important to get it right. One study found that 47% of employees leave within a year of an M&A and 75% leave within three years while McKinsey analysis shows that when handled effectively M&A can be responsible for driving 75% of growth. 

EY reports, “Within academic literature, there is a body of research on ‘the culture factor’ and findings offer a compelling case that increased focus on culture can significantly enhance M&A outcomes. However, M&A decision makers rarely engage in cultural assessments before implementation, with performance and value creation restricted right from the start.” 

Here are some strategies for PE firms to consider. 

Conduct Cultural Due Diligence 

Before any deal is signed, private equity firms need to conduct thorough cultural assessments along with the traditional financial due diligence. Understanding the cultural dimensions of both the acquiring and target companies can highlight potential challenges that might arise post-merger. 

Cultural due diligence can involve interviews with key personnel at various levels; surveys and focus groups with employees, reviewing company documents, policies and communication materials; and observing workplace dynamics and interactions. 

Develop a Cultural Integration Plan 

This plan should outline how to bring together differing corporate cultures in a way that respects both sides and seeks to build a new, unified culture. It should include training programs, team-building activities, and regular feedback mechanisms to ensure the integration is progressing well. 

Engage Leadership 

Leadership plays a crucial role in setting the tone for integration. Leaders should be visible champions of the new, combined culture, demonstrating through actions and communications the importance of a unified approach. 

Monitor and Adapt 

Cultural integration is not a one-off task but a continuous process that can take several years to fully embed. Regular surveys, meetings, and forums can help gauge the health of the cultural integration and provide insights into areas that need additional focus. 


As human beings we are often resistant to change of any kind. Our work environment where we spend so much of our waking hours is no exception. It can be an extremely emotional time and therefore leaders need to take time to explain what’s happening…and why…clearly and honestly. Leaders will have had advance notice and time to prepare whereas the announcement is likely to be a shock to rank and file employees. Help them understand and appreciate the “why.” 

Seek Buy-In 

Once a merger or acquisition has been announced, give everyone the opportunity to proactively shape the culture. In doing so you are more likely to achieve buy-in, keep employees engaged and motivated during the change—and hopefully for the long haul. 

Put it in Writing 

One key element my team and I have discovered in working extensively in the M&A arena is that there is a failure to create clearcut written polices and procedures to help guide the desired culture. These must be formulated and disseminated so there are no misunderstandings.  

Make the Tough Calls 

In an M&A situation, tough people decisions have to be made. Some employees and even senior executives may no longer have a role. The negativity associated with a reduction in staff is a significant hurdle that has to be overcome. That’s why you need an effective communications strategy. You  need a clear and consistent message to show the remaining employees what’s in it for them. 

Why Being the Same Isn’t the Game 

It would be understandable to believe that two companies with very similar cultures would be a match made in heaven. But research shows that’s not always the case. Private equity should be aware, says EY, that cultural similarities can create blind spots in which cultural nuances are missed. And if companies are too much alike there might be a lack of diversity of thought in the new organization. 

Good vs. Bad 

Becky Kaetzler, a leader in McKinsey’s M&A practice, says, “We often see companies come together that are complementary but different in their cultures, and this can be a good thing or a bad thing depending on how you manage it.” 

For instance, one company may have a top-down decision-making culture while the other’s is consultative and process-driven—a situation that’s common when large companies acquire smaller startups. 

McKinsey leaders have written, “While recognizing differences, it is important not to exaggerate them or think of them as differences between ‘good’ and ‘bad’ cultures: companies can succeed equally with quite different cultural strengths, and aspects of each culture can be brought in during the transition.” 

Culture Cannot Be an Afterthought

Make cultural assessments part of your due diligence before the transaction happens. Based on the M&A objectives reach an alignment on the cultural archetype that will maximize the return on investment in the new enterprise. Start with the end in mind. 

Private equity firms should balance the hard financial metrics with the softer, yet crucial, aspects of corporate culture. By prioritizing cultural integration, firms not only enhance their chances of M&A success but also build stronger, more cohesive companies. Getting the culture side of M&A is absolutely essential. The focus needs to be on the human element, helping individuals let go of the past and look forward to and embrace the future.