Why cultural friction derails M&A value

Acquiring a company is often tough enough – but the integration two distinct organisations comes with a new set of barriers which can delay returns on investment. Kin&Co’s co-owner and director, Emma Woodhead White, explains why cultural friction can undermine M&A performance.

Why is culture important in M&A?

Culture is one of the most overlooked parts of M&A because the deal process is so consuming. Leaders are rightly focused on the financial, legal and operational mechanics of bringing two businesses together, often while continuing to run the day job. What’s often forgotten about is the human experience of change.

It’s easy for culture to slip down the priority list because it feels less tangible than contracts, systems or structures. The irony is that culture is often the glue that determines whether all that work ultimately creates value. It is the single biggest factor determining whether teams can align quickly, make the right decisions under pressure, and maintain momentum toward the business’ commercial goals.

Culture isn’t just about whether people “get on”. It’s much more fundamental than that. In an integration, culture shows up in a host of different ways. Whether leaders trust each other, whether people share information, whether teams stay close to customers and whether talented people choose to stay. When uncertainty is high, inevitable during an M&A process, those behaviours can either accelerate value creation or slow everything down.

We see this in our work all the time. What makes or breaks an acquisition, and, in fact, any transformation, is rarely the plan alone. Success ultimately depends on the cultural context and human conditions surrounding the change. When organisations make culture a think-first priority and invest as much energy in the human transition as they do the operational one, M&A transformation becomes something people actively drive, rather than something they simply endure.

How does cultural friction affect performance after an M&A?

Research shows that 65% of acquirers report cultural issues hampered value creation after their last deal. This happens due to the psychologically ‘unsafe’ environment that is created when culture protection isn’t considered during and post M&A.

You see more “wait and see” behaviour, more duplication, more escalation, and far more energy spent on internal politics rather than business outcomes.

At Kin&Co, we often see this start to hamper engagement and productivity. In an integration, employees are being asked to do lots of new things that disrupt their usual way of working, like making high-stakes decisions, adopting new ways and systems of working and collaborating with unfamiliar teams. In tandem, they are worrying about their own role or status and the future of the company.

This is something that has a measurable commercial cost. Businesses should be looking closely at three things: key talent attrition, customer behaviour and productivity. If critical people start leaving, you lose knowledge, relationships and momentum. If service or customer focus slips, you see it in satisfaction, repeat business and advocacy. If teams are unclear or disengaged, output drops, decisions slow, collaboration weakens and innovation becomes harder. None of those things may sit neatly under a “culture” line in a report, but together, they show whether cultural friction is eroding deal value.

It’s something we stay very close to when supporting businesses through acquisitions. A leader at a specialist insurer recently told me how, during its acquisition by another insurance firm, the post-deal period was a live environment that had to be nurtured.

Through continuing to share best practice, spot risk, innovate and bring energy to the integration, we saw its culture thrive long after the deal had been made. Their HR team recognised that prevention of these behaviours only happens when trust, leadership clarity and psychological safety are prioritised first-hand.

In moments like this, the practical culture guardrails really matter: clear leadership messages on what is changing and what is not; managers equipped to listen properly to concerns; safe routes for people to raise risks early; and explicit expectations around how teams should collaborate, make decisions and share expertise through the integration. Without those guardrails, people can easily retreat into caution.

What do leaders tend to miss during due diligence?

Critical cultural issues. This is because the warning signs rarely arrive neatly labelled as "culture." Cultural erosion often hides in plain sight through resignation patterns, customer complaints, or the way senior people behave under pressure, for example. You have to connect the dots to see the risk.

Leaders need to look much harder at the culture of the acquiring business, not just the business being acquired. Due diligence often puts the target under the microscope, but far less attention is paid to whether the acquiring organisation has the leadership clarity, pace, trust and humility needed to get the best from the business it is buying. Bureaucracy, power struggles and “this is how we do things here” thinking can then slowly destroy the very value the deal was meant to unlock.

For me, good cultural due diligence is less about asking “are we similar?” and more about asking “where will our differences create energy, and where will they create drag?”

That is where CEOs matter enormously. In any transformation, people take their cues from the top.  How the CEO talks about the deal, how honestly they acknowledge uncertainty, how quickly they align their leadership team. That approach has a trickle-down effect. If the CEO treats the acquisition as a takeover, people will protect themselves. If they treat it as a shared value creation opportunity, leaders and teams are far more likely to stay open, collaborative and focused on performance.

Working with DERTOUR UK, for example, we focused on building stability, trust and belief in leadership ahead of the acquisition, which helped the organisation make change more effectively. That is the kind of insight leaders need earlier - a clear view of the behaviours, risks and strengths that will determine whether integration is successful.

How does uncertainty during integration change employee and leadership behaviour?

In M&A, people are often being asked to perform at their best while worrying about their role, status, team, identity or future. When that fear is not addressed, people can move into what we call “survival mode”.

Leaders are not immune to this. In fact, uncertainty can make leadership teams more controlling when they could use the opportunity to be more open and transparent about business decisions. Often we see power struggles, micromanagement and competing narratives emerge when leaders haven’t aligned on what the integration is really trying to achieve.

Here, we commonly see a shift into “fight, flight, freeze or fawn” responses - all very human reactions to fear, but commercially damaging if they become the operating rhythm of the integration.

That is why we talk about creating safety before certainty. Leaders won’t always have every answer on day one, but they can be honest about what is known, what is still being worked through and how decisions will be made.

What should acquirers prioritise in the first 100 days?

Acquirers need to prioritise the conditions for performance. People can handle difficult news much better than they can handle a silence vacuum. If leaders don’t fill that vacuum with clarity, trust and direction, people will fill it with rumours, fear and self-protection.

Practically, I would focus on three things. First, give people a clear story that goes beyond the financial logic of the deal: why are we coming together, what value are we here to create and what should feel better for customers, teams or the market as a result? Second, define the critical behaviours leaders need to role model from day one - how decisions will be made, how challenges will happen, how differences will be used well. Third, involve teams in solving real integration problems, rather than making change feel like something being “done to” them.

We saw the power of this with Renantis and Ventient Energy, who co-created a new purpose and culture ahead of their merger to form Nadara. Their CEO, Toni Volpe, said that giving people the chance to participate created “energy and momentum” that helped the business perform strongly in its first year.

Why should culture be treated as a commercial performance lever, not a people initiative?

In M&A, the strategy only becomes real through people’s behaviour. The deal thesis might promise growth or market expansion, but at the end of the day, it’s the people who will retain customers, adopt new systems and build trust with new colleagues. If those behaviours cease to happen, the commercial case starts to weaken - which is why strategy sets direction, but culture dictates execution.

Calling culture a “people initiative” makes it sound optional, or owned by HR. It is not. Culture is the soil the deal has to grow in. If the conditions are poor, even the strongest strategy will struggle to take root. Delayed synergies, loss of market momentum, unplanned costs and reduced investor confidence - these are all hard commercial risks directly impacted by culture.

A mindset shift I would like to see more acquirers make is that culture is not the bit you tidy up after the deal. It must be spotlighted early on, managed throughout and treated as a strategic lever that helps protect value, accelerate integration and turn the promise of the transaction into business performance.