Private equity has been on a buying spree. Bolt-on acquisitions, platform builds, roll-ups across logistics, healthcare, professional services, and beyond. Deal teams have gotten faster and more disciplined about diligence, synergy modeling, and financial integration. What most of them have not gotten faster or more disciplined about is culture.
That gap is expensive. Research from EY finds that 70 to 90 percent of M&A transactions fail or underperform against expectations. Furthermore, in Bain & Company’s 2023 M&A Practitioners’ Outlook Survey, nearly half of respondents cited cultural fit or management team integration as a primary reason deals fail. And yet culture is still treated as the soft variable: the thing you address after the deal closes, if you address it at all.
The blind spot in most integration plans
Most PE-backed integrations run into trouble for a specific, avoidable reason: there is no first-100-days plan for cultural analysis and alignment, and the incoming leader has no clear daily, weekly, and monthly plan for building one. The financial model gets stress-tested from every angle. Culture gets one slide in a hundred slide deck!
This is where PE firms consistently underestimate what is actually at stake. A deal is not two balance sheets or profit and loss statements coming together. It is two groups of people, each with their own history, norms, ritual and routines about how work gets done, being asked to become one organization. Get that wrong, and the synergies in the model are unlikely to show up in the results.
Culture is a discipline, not a feeling
There is a real methodology to understanding organizational culture. It is not intuition, and it is not a values poster on the wall. It means listening for the words people actually use to describe how things get done, documenting the patterns you hear, analyzing where the two cultures align and where they will collide, and then deliberately shaping the culture you want the combined entity to have. Most organizations, and most leaders, skip every step of this and hope it resolves itself. It rarely does.
Both sides need to feel like they belong
Every deal has an acquirer and an acquired. But the moment people on either side start to feel like winners and losers, the integration has already lost ground. People on both sides need to feel secure that the playing field is even, and that their way of doing things is respected, not just tolerated on the way to being replaced.
Build the culture with the people who will live in it
The integrations that work do not hand down the new culture from ‘the top’. They build it with the people who will actually live in it: organization-wide participation in shaping, designing, and implementing how the combined company will operate. Leaders consistently underestimate how much financial performance rides on this. A healthy, aligned culture is not a nice-to-have sitting next to the numbers. It drives the numbers.
What 490 job losses taught me about culture
Years ago, as a young C-suite executive in the media industry, I watched my shareholders acquire a much larger competitor, a dominant, paternalistic organization with a top-down culture and no history of listening to its own people. It had been losing market share, much of it to us. Through diligence, valuation, and the tribunal process that followed, our shareholders paid close attention to the numbers and almost none to the culture, the people, or the actual performance of the business they were buying for me to integrate, as it was part of larger conglomerate. The acquired company leadership focused on getting the sale done. But my leadership team and I focused on making sure our people and our culture stayed strong through the transition, in addition to solid financial performance and customer focus.
By the time the business was handed to me to integrate, it was close to a shell: demotivated staff, bewildered by months of change nobody had explained to them. Of the 500 people I inherited, I was able to keep about ten. The other 490 lost their jobs. We, the smaller competitor, the one that had spent the acquisition period investing in organisational cohesion: its people and its culture instead of just closing a deal, became the market leader.
I have never underestimated since how much your people and your culture determine your longevity and your success. Neither should the firms doing the deals.
Culture is the job
The next time a deal team presents an integration plan, ask where the culture plan is. Not the communications plan, the culture plan: who is listening, what they are documenting, what they are learning about where these two organizations will clash, and how the people on both sides will help build what comes next. If that plan does not exist with the same rigor as the financial model, the deal is carrying more risk than the model shows.
Culture is not the soft part of integration. It is the job.
