Mergers and acquisitions are a science unto themselves: from defining an acquisition strategy, to negotiation, due diligence and implementation, the steps are many and each merit their own definition and exploration. But in the midst of all this complexity, how can one take control of the emerging culture, that elusive element that so frequently decides the success of these endeavours?
The story of how Quaker Oats flunked the acquisition of Snapple is a well-thumbed reference point in the world of M&As. In the spirit of brevity, and for those of you unfamiliar with the tale, here’s what happened:
- 1993: Quaker paid $1.7 billion for Snapple
- 1997: Quaker sold Snapple to Triarc Beverages for $300 million ($1.4 billion loss)
- 2000: Triarc sold Snapple to Cadbury Schweppes for around $1 billion ($700k gain)
It’s the very definition of a cautionary tale. In the space of a mere four years, Quaker managed to knock an eye-watering $1.4 billion off the value of a well-loved and well-performing brand… and in the space of just three years, Triarc managed to revive what was seemingly a dead duck into a sellable, respectable proposition once more.
So the question is: how did Quaker get it so wrong… and Triarc so right? As is so often the case, the answer is widely regarded to be down to a single element: the cultural dimension of how each acquiring company went about their business.
As John Deighton of Harvard Business Review writes in his illuminating account of the fiasco:
“There is a vital interplay between the challenge a brand faces and the culture of the corporation that owns it. When brand and culture fall out of alignment, both brand and corporate owner are likely to suffer.”
At The Storytellers, our key focus and belief is that it is only by working to engage the entire employee base of a company in a shared culture that true, lasting change is possible. Our experience of working with companies going through M&As has shown us that there are three key emotional aspects to how employees can be engaged at the very beginning of life together, in order to lay the foundations for a healthy post-merger culture:
One of the hallmarks of our narrative methodology is how we start our stories. Our experience overwhelmingly tells us that there is rarely a better substitute for a resoundingly positive start to the stories our clients tell – and this is arguably never more important than in the case of a merger and acquisition.
At the most basic level, there are fears that need to be dispelled. One company has ceded power and autonomy to another, one leadership team bows to the other. In these circumstances, it is so important to simply start by pointing out that not only is everything going to be just fine – it’s actually about refocusing everyone’s emotions on the huge opportunity to be part of something bigger and better, in scale, shared expertise and potential.
In the case of Quaker and Snapple, it seems that the circumstances got the better of Quaker. The acquisition of Snapple was largely a defensive one. With only one other brand in its beverage portfolio (Gatorade), Quaker was threatened by larger players with greater powers of economy of scale – as Leighton puts it, for Quaker the acquisition was a matter of ‘corporate survival’.
So it’s easy to imagine a distinctly un-celebratory beginning to the Quaker era at Snapple. Far from being framed as an opportunity for everyone to be part of something bigger and better, the feeling was one of Snapple being subsumed into a wider tactical battle, and one that they had little personal ownership of.
So start the journey on a positive note and show that everyone can take part in this shared success – by starting with a tone that speaks of immense potential, you at least make it possible for those heights to be reached.
Step 2: Recognition
It is particularly crucial to ensure that the leadership group of both companies (particularly those who have been acquired) are clear that just that they are valued, but to qualify why they are valued. Not only does this explain the reasons for the acquisition in the first place – it also establishes a positive, accepting culture that shows a desire to create a new culture that is greater than the sum of its parts.
In the case of Quaker and Snapple, it seems the case that this kind of approach and attitude was sorely lacking. Quaker already had a great success story in Gatorade: a company whose sales they had taken from $100 million to $1 billion over ten years through a textbook marketing approach. However, Snapple were a far different proposition, a different brand, and a different culture entirely. Far from recognising the culture and assets that the acquired Snapple had to offer, the leadership team at Quaker set about implementing much the same approach that had previously paid dividends at Gatorade with little regard to the differences in the two companies.
By going through the initial step of visibly recognising what is worthy and valuable from both the acquired and acquiring company, it is possible to begin to glimpse a new, shared world together.
Without recognising the values and culture of the acquired company, not only do host companies risk missing out on taking the best parts of the acquired company along with them, they also risk alienating the employees of that company. So often we speak with clients whose M&As of the past continue to haunt their corporate culture. Moving forward together and responding to new challenges, even years after the acquisition has happened, can become almost irrevocably bogged down in grudges quietly held for years.
Get it right first time – reassure everyone that they are a key piece of the puzzle, and that their expertise and knowledge are valued. You won’t regret it!
Step 3: Expectation
The final part of this emotional curve marks the end of the beginning. Having firstly celebrated the merging of two great cultures, and recognised the value, expertise and capabilities that each company will bring to the table, it is now important to set a tone of expectation – as well as to clarify what the specific expectations are, for each half of the new entity.
Again, any M&A is likely to be fraught with apprehension around the process of fully integrating. By firstly celebrating the possibilities, recognising the worth that everyone is bringing to the equation, it is possible to speak frankly and confidently about the shared expectations that set the tone for how everyone now moves forward.
Positioning the expectations at this point in the newly acquired company’s emotional journey is far more likely to elicit positive reactions. It sets a tone of open and honest communication, and when open and honest conversations can be facilitated to deepen understanding about the detail of these expectations, so much the better.
In the case of Snapple, it is interesting to note how Triarc took a very sensitive approach to setting expectations of the new regime. Where Quaker came in with a prefab solution to problems that weren’t Snapple’s to begin with, Triarc immediately set a very different tone, bringing back a beloved character from previous marketing campaigns and moving with a speed and freshness that resonated with Snapple’s founding spirit. As Triarc CEO Mike Weinstein put it: “If we’d had a very structured process, forms to fill out, analyses to do, we’d have seen the risks, and we’d never have moved. Instead, we were able to move quickly, capture an early success, get the distribution channel excited again, and get the retailers back to believing in the brand.” The response was a huge turnaround in sales fortunes, and a renewed sense of belief in what Snapple stood for
Clearly not every post M&A situation will require such a response, but there is a clear lesson – when setting new expectations in the post M&A world, be sure to consider the prevailing brand culture that you are setting those expectations within.
Every merger and acquisition will be different; have its own dynamic, its own challenges and opportunities. There is a clear lesson from case studies such as the Snapple-Quaker one: estimate the importance of culture at your peril. But behind this, we know that there is a simple, effective way to ensure that at least everyone is engaged in the new, shared journey that is beginning. By celebrating the opportunity, recognising all parties, and setting clear expectations, you give your M&A the best possible chance to move in a positive, fruitful direction.