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Abstract
While much debate exists regarding the success or failure of mergers and acquisitions (M&A) as a means to competitive advantage, the common denominator centers on cultural compatibility; yet its definition and the important underlying tenets for successful "organizational marriages" remain elusive. This conceptual paper provides evidence to substantiate and outline the critical dimensions of cultural compatibility, or incompatibility, providing clarity to the elements of "culture" that could lead to successful M&A. Using the highly autonomous environment of professional service firms (PSFs), the paper proposes that the dimensions of an adaptive organizational culture, combined with the psychological safety provided by the organizational support from leadership, will lead to improved post-merger integration (PMI) process outcomes. While an adaptive organizational culture has been found to lead to positive individual-level and organizational-level outcomes, leadership must caution on the frequency of change in an organization to allow for effective post-merger integration and other coincidental transformational firm transitions.
Keywords: organizational culture, perceived organizational support, post-merger integration, professional services industry, mergers and acquisitions
CEOs in the architect/engineer/construction (A/E/C) industry continue to look to mergers and acquisitions (M&A) as a critical growth strategy to meet business objectives. Yet, concerns regarding cultural compatibility and the resulting conflict that can occur during the integration process are prevalent amongst a variety of publicly and privately owned firms, including those backed by private equity investors (AEC Advisors, 2019; Environmental Financial Consulting Group, 2020; Hembrough, 2019). More specifically, leaders in this professional services industry continue to question how cultural compatibility should be viewed and, importantly, what leadership constructs positively impact the post-merger integration process within the acquirer and target dyad.
The professional services industry is of tremendous size, earning approximately US $2.0 trillion in annual revenue, with the A/E/C industry subsector in the United States earning nearly $339 billion in revenues annually (International Trade Administration, 2019). At the same time, a record level of merger and acquisition activity took place in 2018 (534 transactions), the result of multiple drivers, including ownership succession and technology-driven strategies, as well as divestitures from larger companies looking to focus on specific markets and services (Parsons, 2019). Thus, improved means for addressing cultural compatibility to maximize individual and firm-level outcomes in professional service firm (PSF) M&A transactions is paramount.
The scholarly...