Sources of Acquisition Cultural Risk

Previous work on acquisitions, and especially on post-acquisition integration, has put more emphasis on strategic fit than on organisational and cultural fit of acquiring and target firms. Academic writings on corporate acquisitions approach the need to reassure employees in this stressful situation and to enlist their commitment to the new organisation. Yet cultural compatibility is frequently noted to be critical to the success of acquisitions in practice. Superior practice is exemplified by ARA Services, a company that — according to its CEO, William S. Fishman — has acquired over 300 companies and ‘maintained over 80 per cent of the acquired management through these years’. ARA’s criteria for evaluating acquisition candidates is a balance of traditional business criteria and people criteria. We select the candidate firms very carefully on the basis of their record of growth, record of performance, record of earnings, their reputations for integrity and good business practice, and very importantly, the quality of their management. We determine whether the personalities of the acquired company and ours will match. All marriages were not made in heaven and all acquisitions are not made in heaven. We’ve walked away from many acquisitions because we felt that the management of the company was not likely to be a good partner for us, nor we for them. (Directors and Boards 1984, 13)