12/18/2004 06:07:00 PM 
mergers and 2005
With most mergers, one brand usually wins out over the other, with the weaker one becoming subsumed into the stronger one. There are business books full of case studies of cultural clashes, wars and battles over turf and identity which is often the reason that 50% of mergers fail.
The AOL and Time-Warner merger has now become a classic case study.
According to Caltech. "Errors in judgment when merging large corporations can be colossal, as in the recent $40 billion loss suffered by culturally-polarized Time-Warner and AOL. Is it really a surprise that market analysts tightly focused on the additive value of the two company's assets failed to predict the problems inherent in marrying a culture of tradition and a vertical chain of command, with a culture of youth, spontaneity, and lateral power distribution?".
hr specialist predicts in 2002 that the AOL merger will work!
Some observers conclude that cultural clashes are the biggest problem for mergers and the leading cause of failure. For the recently announced mergers, much of their future success will be dependent on cultural management and internal branding.
culture is a big issue for cingular's ceo
peoplesoft and oracle are opposite cultures
buttoned down sprint vs. loose nextel
Caltech have even conducted studies to show how mergers adversely impact efficiency, precisely because of the cultural issue.
caltech and culture clash
Consultants Accenture, go as far as recommending that cultural due diligence is performed prior to mergers.
accenture's case for cultural due dilligence
Developing a strategic vision and communicating it clearly to internal audiences first is critical. Most efforts here are half hearted at best with companies so desperate to show their expensive new face to external audiences, they forget that internal culture is the most important thing. While the vision might be articulated, these efforts often lack the educational follow-through to make sure all employees are "on board". Instead of seeing these efforts as branding and marketing, they become subsumed into HR and training and consequently often get lost.
Companies need to be as big, bold and confident with their internal audience communication as they are with Wall Street. Thinking of internal communication as a brand problem and coming up with smart communication solutions to solve it, can help.
Diageo is a great example of a merger done right. It created a new entity that was allowed to develop its own distinct culture, resulting a company that's stronger in vision and scope, than the single entities. This happened because the cultural management was executed in a very smart and disciplined manner.
diageo merger mini case study
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