Corporate culture is the way an organization views itself, or its written and unwritten policies and procedures. Experts urge that in order to get a good organizational fit, one should look at its own corporate culture and try to acquire similar companies. One thing that can tear a merger apart is the attitude of “us versus them”. This attitude is the reason of failure for most of the mergers. It is believed that if culture is the problem in a merger, it can have overwhelming effects on the newly formed company.
According to Paul Temple Organizational fit is “the match between administrative practices, cultural practices and personnel characteristics of the target and acquirer. It influences the ease with which two organizations can be integrated during implementation”. It is believed that the major reason for the failure of mergers and acquisitions is the clash between corporate cultures.
There have been more than a few acquisitions which did not come up to the mark due to the conflict of corporate culture of the firms involved. For instance, in the year 1994, Quaker Oats purchased Snapple Beverage Co. for a total cost of $1.7 billion but the Snapple business was sold off after a period of three years for a loss of $1.4 billion. The main reason of this failure was the conflict between the corporate cultures. Quaker had an extremely focused, mass-market working approach and on the other hand Snapple’s style was eccentric, commercial and tilted towards its distributors.
Another example of the failure of merger due to problems with cultural integration can be seen in the case of Daimler-Chrysler. The merger of Daimler-Benz and Chrysler became a straight out clash between the business cultures of the two firms. The differentiation in corporate culture of the firms involved was the main reason for the non success of this alliance. While the management style of Daimler-Benz’s was more of a formal and planned out sort, Chrysler’s management was more tilted towards a stress-free, unrestrictive style. Additionally, the views of both the firms on key factors, for instance pay scales, benefits and travel expenditure, were completely different from each other. As a result the company’s shareholders had to bear the burden of the collision.