Culture Plays Critical Role in M&A Deals

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Culture Plays Critical Role in M&A Deals

By Melissa Kress - 10/17/2017
People fitting puzzle pieces together

CHICAGO — The convenience store industry has been a hotbed of merger-and-acquisition activity over the past few years. Questions about portfolio size, technology integration and distribution certainly come about in deals, but another area that is crucial to the conversation is culture.

"The best strategies that an organization puts forward are going to go away if the cultures are different," said Joanne Loce, managing partner of Fortify Leadership Group.

Often used but seldom understood, culture was the focus of the "Navigating Culture in Organizations Growing Through Acquisitions" education session at the 2017 NACS Show. According to Loce, who moderated the panel, culture is shared visions, values and beliefs; is longstanding and a foundation of running the business; and is not easily recognized by those inside the organization.

When it comes to integrating culture during an acquisition, she said companies pay attention to the culture in due diligence, but often under-plan in the execution.

Steps to align company cultures, she noted, include:

  • Evaluate opportunities and understand risks;
  • Plan a path for cultural integration;
  • Clearly communicate new expectations;
  • Make choices that align to value creation;
  • Institute checks and balances to keep the integration on track; and
  • Celebrate success. 

 

"Culture drives behavior and plays a major role in innovation and customer service," said Natalya Fater, vice president of human resources at Nouria Energy Co., adding that acquisitions may even succeed or fail based on culture fit.

"Culture must be part of the acquisition process," she said. "It is crucial that human resources is at the table."

Worcester, Mass.-based Nouria was founded 28 years ago with one site in Auburn, Mass. With roughly 116 convenience stores and 49 car washes today, the company closed two acquisitions in 2016: J&S Oil, with 175 employees, in April and F.L. Roberts & Golden Nozzle Car Wash, with 450-plus employees, in October. The moves doubled Nouria's size in one year.

The goal with each acquisition, according to Fater, was to retain the best talent; not just the physical assets. Starting off on the right foot was key to integrating the workforce. To do that, she said, it was important to:

  • Establish clarity and transparency;
  • Acknowledge the impact the situation will have on employees; and
  • Emphasize new opportunities.

 

"Communicate, communicate, communicate," Fater said. "Overcommunicate, if possible. It will pay off in dividends."

Wallis Cos. also had a big year on the acquisition front in 2016. The Cuba, Mo.-based company completed its largest acquisition since it was founded in 1968 with its deal for friendly competitor U-Gas and Dirt Cheap, which was owned by the Taylor family.

In all, Wallis has made 10 acquisitions in its history to build a 65-store portfolio today, according to former CEO Rachel Wallis Andreasson, who now sits on the board of directors.

Even before the transaction for the U-Gas and Dirt Cheap business, Wallis held 13 town hall meetings to keep employees informed of the process.

"If you can have the transparency up front, it sets the stage," Andreasson said.

Once all the I's were dotted and the T's were crossed, Wallis did not make any changes for 90 days. That decision, according to the former chief executive, gave the company a chance to prove who Wallis was, establish a culture, and bring together the best of both companies.

In addition, customers did not notice an ownership change, she explained.

"To be successful, you have to communicate and translate your culture and your strategy," she said. "You can have the best-laid strategy but if your culture is not as strong as your strategy, you will not be successful as a company."

The 2017 NACS Show took place Oct. 17-20 at McCormick Place in Chicago.