Culture is one of the biggest M&A killers of all time. Some of the biggest deal failures in history are due to culture clashes that resulted in value leaks and destroyed companies. Bringing culture to the forefront of transactions can help increase deal success. Let’s learn proactive deal sourcing with culture in mind from Lisa Marchese, Head of Corporate Development at American Express.
“Just because something’s interesting in the market doesn't mean we will be a better owner of that company. Just because it's cheap doesn't mean we should buy it.” - Lisa Marchese
With culture being a top priority, Lisa has very clear guidelines regarding target selection. She makes sure that everyone is aligned regarding the organization’s strategy. American Express doesn’t acquire companies away from their core, and they don’t buy businesses that are unwilling to sell. Her team only focuses on acquiring companies that want to be a part of American Express, which is why they do not overpay just to convince companies to sell.
No one can assess cultural fit better than the business leaders who will inherit the acquired company post-close. Lisa uses a bottom-up approach where business leaders initiate the first conversation to explore potential partnerships with the target company. The goal is to identify if the management team is ready to be a part of American Express and a great cultural fit. If there is potential, corporate development will then become involved.
At American Express, they have a clear rule that business leaders are forbidden to negotiate prices. Only corporate development is allowed to discuss prices with the target company.
Culture is extremely important, and everyone should operate under three fundamental values: integrity, transparency, and respect. These are non-negotiable, and anything less will not be tolerated. Apart from these, Lisa and her team are massive believers in diversity and inclusion. Because of their diverse set of customers and merchants, it is imperative to have a diverse set of opinions and backgrounds in their organization.
One of the best ways to assess culture aside from thorough diligence is by sharing a meal with the leadership team. Having a meal together provides a place where everyone can be less formal so acquirers can ask more personal and direct questions.
However, nothing matters when there is no upfront alignment. The target leadership team must believe in the acquisition’s strategy. Otherwise, the deal will not work.