WHITE PAPER - SOFT SKILLS FOR HARD DEALS

SOFT SKILLS FOR

HARD DEALS
Copyright © 2021 MergerWare All rights reserved.

INTRODUCTION
M&A deals are both potentially rewarding and difficult to navigate. While you may have every item
in place, failing to give culture and values their due “diligence” may work against you. Corporate
philosophies often collide during a merger, therefore soft skills are required to manage the
expectation of buyers and sellers.
We at MergerWare have laid down a roadmap that will help you answer the most critical questions
Are you killing a potentially good merger by failing to integrate two cultures?

How does one make sure that differences in culture and philosophy don’t disrupt and disturb the
deal process?
"Culture eats strategy for breakfast" - this quote by Peter Druckers is almost universally accepted by
every M&A practitioner but what we fail to understand is that Culture eats strategy for breakfast
only when the
firm lacks “soft side” skills at the top.

Hence, the cultural dimension of a deal cannot be underestimated. It is an indispensable cog in the
dealwheel. Yes, deals are about employing best practices and drafting the right strategies but
there’s more to it.

Much more.

M&A DEALS ARE ABOUT THE

PEOPLE BEHIND THEM
Any productive deal stems from an

integration that does not fail to account

for the human-side of the dealmaking

process because after all no matter how

professional and rational we may perceive

ourselves to be-at the end of the day, we

are fundamentally human in every sense

of the word. Humans who find

themselves in emotionally charged and

difficult situations, might not be able to

bring their most rational side to the

forefront.

Culture is the fulcrum around which

assessments and negotiations are made.

Style, pace and time are a function of how

well both sides understand each other’s

needs, a large part of which comes from

understanding each other’s culture.
This paper sheds light on

how culture can impact

negotiation, how it can

impact post-merger

integration and how you

can leverage soft skills to

tap into value maximization

and avoid setbacks along

the way.

MAKING A DEAL WORK REQUIRES

SOFT SKILLS, BUT WHY?
Negotiations are about hard facts and data but they are also
about interactions and interpersonal
relations.

Studies have proven time and again that individuals value trust
and respect more than they value
exact financial returns.

Thus, it becomes increasingly important to give weight to what
people want and what are
acceptable ways for them to achieve it.
Scouting for these synergies will help you smoothen out any
deal
process.

Afterall, it’s just a game of expectations and deliverables.
So, we talk a lot about cultural integration, how
culture is
generally neglected in M&A deals and
how it is so crucial

BUT WHAT REALLY IS CULTURE?
Culture can mean different things to different people and different companies. Culture is
perceived as something
original, something unique, you may call it the DNA of the firm. It
is this set of values, characteristics and behaviour that
every employee knows and is
known by.

To lay down a definition, culture consists of the long-standing largely implicit shared
values, beliefs and assumptions
that influence behaviour, attitudes and meaning in a
company/society.

And just as we mentioned, culture has a sense of uniqueness to it. To consolidate this
definition, we can assign some
key aspects that define the culture of any organization.
CULTURE IS IMPLICIT

It is practically impossible for even the best expressionists to define the
culture of their organization. It’s
something that you live through, something
that you experience as you enter the office, the way you
interact, the way you
work, all of these subtilities ultimately culminate into the culture of an
organization.
It is hard to describe it and even harder to put it on paper. It
transcends beyond description.
CULTURE IS IMPACTFUL

Culture has a profound impact on how people behave and how people
understand their
own actions. As a result, culturally influenced beliefs and
actions feel right to people
even while the implicit underpinnings of their
actions may be perceived differently by
the other side. Most of the times, such
mismatch is unintentional but can cost one
dearly.
CULTURE IS RESILIENT

People feel comfortable in their own cultural environment, and when they are
exposed
to a new set of values and beliefs, they need to consciously
acknowledge them - an act
that is almost alien for any employee. Countries
across the globe have different cultures
- a direct implication of which is the
mismatch of reading behaviours and hand gestures.
Since these refined
nuances are difficult to keep in control or change immediately, it
helps to
acknowledge and be aware of the differences to ensure that the transaction

goes forward in the direction that you foresee for it

DIFFERENCES AMONG CULTURES, COUNTRIES

AND ORGANIZATIONAL STRUCTURES
The differences among
cultures are
best
represented by

differences in authority
and
perception. In some
cultures, and
countries
(mostly western), juniors

are encouraged to come
forward
and share their
views but for
others
(Eastern) seniority is

expected to come forth
with
important view and ideas.
Some cultures try to avoid

confrontation and they
maintain
diplomacy in their
statements.
Instead of a
direct “No”, a “I will
think
about it” is used.

Understanding what the
hidden
meanings and
interpretations each
phrase
entails in the cultural

context can help save time,

steering you clear of any uncertainty
and ambiguity.
While in some cultures
and
countries, family -
owned
businesses are
regarded highly due
to
their rich history and a

continuing legacy, some
other
countries
associate nepotism with

incompetence and even
categorize
it as
unethical.
Confrontation
Authority Nepotism

MAKING SENSE OF CULTURE
Hofstede insights is a great tool that you can use to compare countries across a set of
metrics like: Power distance,
individualism, masculinity, uncertainty avoidance,
indulgence and balance between long- and short-term goals.
Just by looking at the history of a country, you can understand a lot about the
evolution of their culture and its
implications as applicable in the current global
scenario. This would help you anticipate how people might behave
during
negotiations and how they would like you to behave.
CULTURAL DIMENSIONS EXPLAINED
For the ease of analysis, we can classify world cultures into three broad categories: -
Honour culture (Lat-Am)

Face culture (Asia)

Dignity culture (Europe/USA)

This distinction is based on the idea of self-worth.

MAKING SENSE OF CULTURE
In Honour and Face culture, family ties and reputation are central to the self and this sense is
reflected externally as well.
However, when we come to Dignity culture, more emphasis is laid on
the individuals (these individuals do not attach the
perception of others to their own image) as
opposed to the society at large.

In the Dignity culture, heated debates are not considered personal, but business as usual and
autonomous decisions are
regarded highly-something that is not natural for the other two cultures.

These three broad cultures differ strikingly when it comes to dealing with
For Honour and Face cultures, personal reputation and expertise is closely linked to transaction

failure.

Imagine sitting at a round table, the Honour and face cultures come with their self-worth at stake.
Every statement can
be linked back to point directly to how they think of themselves and how they
position themselves both in the
negotiation and the conversation. Opposingly, The Dignity culture
views transaction failure as a part and parcel of
business that is not necessarily linked with an
individual’s competence.

Consider this situation to be synonymous with a card game. If you end up losing, the way you are
perceived and treated
depends on the culture you belong to. For the Dignity culture, the loss is just
seen as an unfortunate event and even
though you played to the best of your abilities, you did not
win. However, for the Face and Honour culture, losing is
personal. It can be attributed to some
internal factor that led to the event of a loss.
“Transaction Failure”

100%
These three broad cultures differ

strikingly when it comes to dealing with

“Transaction Failure”

DIVING DEEP INTO

CULTURAL SPECIFICATIONS
USA South America Russia
They work for a

win-win solution.
They are particularly

convivial.
They frequently engage

in strong emotion-

loaded discussions.
Constructive discussions

are encouraged.
Building trust and

confidence is a big part

of the deal process.
They have a

confrontational style.
They are all about
figures
and facts.
However,
creative
solutions are also

welcome
They appreciate
and look
for moments to
establish
personal relations.
Their strategy is

characterised by smart

moves, similar to a

chess game. They don’t

pay as much emphasis

on reaching a win-win
solutions.
Detailed attention is also

paid to how the other

side views and phrases

their achievements and

contributions.
They take their word

seriously and expect

others to do the same.

Word = commitment
Wealth and power are

considered important

and it is completely

normal to show it off.

DIVING DEEP INTO

China Japan Middle East
They place great
emphasis
on the value of
time.
Just like the Chinese, the

Japanese too avoid
direct
confrontation
Negotiation is like a well

charted play. They are

responsive to and

rewarding of ideas that

resonate with them
They avoid direct

confrontation/conflict.
Japanese are always

punctual and arriving

late is looked down upon
Discussions can be

lengthy and time

consuming.
The Chinese believe in

clarifying everything and

hence discussions are

generally filled with
questions.
Silence holds great

meaning for the
Japanese
(Silences
and pauses give

the time to think)
Due to the extensive

and long drawn nature

of negotiations,

patience
becomes a
necessity
They try to match

seniority levels (If your

team has a lot of juniors,

they wouldn’t care to

seat seniors from their side
as well)
They respect seniority

(Thus, including a lot of

juniors on your side
may
not be the best
strategy
since a
concomitant lack
of
seniors on their side

would mean that there

is no definite authority

that can take decision on
the spot)
Wealth and power are

considered important

and it is completely

normal to show it off.

DIVING DEEP INTO

India Europe
The Indians are agile and the discussions

are always guided by multiple

negotiations, one should always pay

attention to the details.
Europe is all but coherent or
consistent
within culture. Even if
some practices
converge, each
country has a distinctive
style
Indians avoid direct confrontation (Even

a yes can mean many things).
Eastern Europe reflects ideals
influenced
by 40+ years of
communism. Quick
money is seen
as a lucrative offering in
Eastern Europe.
UK is closest to US. Scandinavian
are
very strict on ethics. Time
definition is
not as strict and
relations are more
important in
Southern Europe.
They appreciate creative solutions and

initiative.

WHAT IMPACT DOES CULTURE HAVE ON POST

MERGER INTEGRATION?
Effective decision making

different decision-making styles can lead to
slow decision-making, fialure to
make decesion, or failure to implement decesion.
Leadership style

A shift in leadership style can generate turnover among

employees who object to the change.
Ability to change

Unwillingness to implement new strategies. Unwillingness
to work through the
inevitable difficulties that are a normal
implication of the process.
Team work

Merged companies will create interfaces between functions
that come from
each legacy company, or new functions that
integrate people from both legacy
companies.

DECODING AND SOLVING THE CULTURAL

DILEMMA-WHAT CAN YOU DO?
Make culture a major component of the change management
workstream.

Identify who “owns” corporate culture and have them report to senior
management.

Insist that the Cultural Work focuses on the tangible and the measurable.
Consider the
strengths of both existing cultures, not just the weakness.
Implement a decision-making
process that is not hampered by cultural
differences.

Build the employee brand with a view toward how it will be understood
by employees.

Put people with cultural change knowledge and experience on the teams.

that define the key interfaces in the new organizational model.

Communications + Specific intercultural training.

Regular reporting to senior management.

The steering committee must address hard issues and set real, factual

examples.

Align taking the best from both cultures.

Tangible and simple key decision factors.

Retain Key employees.

ADAPT ADAPT ADAPT
Do your homework - consider upcoming deal
negotiations
from a cultural perspective as well.
Everything can be perfect
but one wrong gesture, one
triggering word can break the deal
and leave you
empty-handed. Prepare to avoid facing such a

circumstance.
Cultural gaps can never be eliminated so accepting
them,
respecting them and finding ways to favourably
bridge is an
effective way to tackle
the cultural dilemma.
Before having a strong reaction to a particular
situation in the
conference room, take a step back
and rationally analyse the
discussion and argument,
factoring for cultural gaps.
As countries open up and firms gain global experience, cultural frontiers are not as defined as

they once used to be. However, keep in mind that when an organization or an individual is faced

with difficult decisions or a do or die scenario, cultural references dictate decisions since they are

deep-rooted in a person’s configuration.

REFERENCE
MergerWare Corporation
10 St James Ave Flr. 11
Boston, MA 02116,USA
CONTACT US
https://www.mckinsey.com/business-functions/organization/our-insights/organi
zational-culture-in-mergers-addressing-the-unseen-forces

https://www2.deloitte.com/us/en/pages/mergers-and-acquisitions/articles/cultu
ral-issues-mergers-and-acquisitions.html

https://www.pwc.com/us/en/services/deals/culture-merger-acquisition-integrati
on.html

https://www.fticonsulting.com/—/media/Files/us-files/insights/articles/bridging-
cultural-divide.pdf

https://www.youtube.com/watch?v=NUXRXAaAd64&t=3s
For queries, mail us at info@mergerware.com

WHITE PAPER - SOFT SKILLS FOR HARD DEALS

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