How to Fix M&A Failures: Align People & Culture

Mergers and acquisitions (M&A) are often hailed as a catalyst for business transformation, growth, and value creation. Yet, despite the promise of increased market share and expanded capabilities, many M&A ventures fail to deliver their expected outcomes. The leading culprit? Misalignment of people and culture.

Through an insightful discussion featuring experts Andrew Phelps, CFO of Active Payroll, and Shivani from Lace Partners, this article delves into the essential role of the people agenda in ensuring M&A success. Whether you're a founder or entrepreneur in the mid-market space, this guide offers actionable insights to navigate the complexities of M&A with a people-first mindset.

Why M&A Efforts Fail: The Overlooked Role of People and Culture

M&A initiatives are often treated as financial transactions, focusing heavily on deal value, cost synergies, and operational efficiencies. While these metrics are vital, they fail to account for the intricate human dynamics at play. As Andrew Phelps aptly pointed out, "An acquisition can look really attractive on an Excel sheet, but unless the people aspect is addressed, success is far from guaranteed."

Cultural misalignment, lack of employee engagement, and poor communication during and after the transaction can lead to operational inefficiencies, talent attrition, and ultimately, deal leakage - where the anticipated value of the deal is lost.

The Three Phases of M&A: Before, During, and After

To navigate M&A successfully, businesses must approach it as a three-phase journey: before, during, and after. Each phase has unique challenges requiring thoughtful strategies, particularly when it comes to the people agenda.

1. The "Before" Phase: Laying the Foundation

Key Objectives:

• Understand the "deal thesis": What are you buying or selling, and why?
• Assess the cultural and leadership dynamics of the target company.
• Validate the financial baseline and operational maturity of the business being acquired.

Pitfalls to Avoid:

• Ignoring cultural due diligence. As Phelps noted, "Culture, leadership, and capability are integral to the success of any acquisition."
• Overlooking employee sentiment in the early stages, which can cause anxiety and disengagement among staff.

Actionable Strategies:

• Conduct comprehensive cultural assessments alongside financial due diligence.
• Clearly define what success looks like - both financially and operationally.
• Plan for integration costs and timelines to avoid unpleasant surprises later.

2. The "During" Phase: Executing the Deal

Key Objectives:

• Validate the deal thesis and ensure operational and cultural alignment.
• Communicate effectively with employees to minimize uncertainty and foster trust.
• Execute the transition quickly to maintain momentum.

Pitfalls to Avoid:

• Failing to manage employee anxieties. Silence during this phase can lead to rumors, dissatisfaction, and even attrition.
• Overlooking the importance of leadership in communicating the vision behind the acquisition.

Actionable Strategies:

• Prioritize transparency. Frequent and honest communication - whether in town halls, Q&A sessions, or one-on-one discussions - helps to build trust.
• Create a transition team that includes key leaders from both organizations to oversee the integration process.
• Actively engage employees to support a smooth transition.

3. The "After" Phase: Integration and Value Creation

Key Objectives:

• Integrate people, processes, and systems seamlessly.
• Retain and engage key talent to preserve institutional knowledge and maintain performance.
• Deliver on the promised value of the deal through efficient execution.

Pitfalls to Avoid:

• Losing sight of employee engagement post-acquisition, leading to operational inefficiencies or value erosion.
• Failing to address cultural gaps, which can create friction between teams.

Actionable Strategies:

• Establish quick wins to demonstrate progress and boost morale.
• Align leadership teams to build a unified organizational culture.
• Use tools like employee engagement surveys (e.g., Employee Net Promoter Score or ENPS) to gauge sentiment and identify areas for improvement.

The Critical Role of Leadership in the M&A Process

One recurring theme in the conversation was the importance of leadership in driving M&A success. Both Phelps and Shivani emphasized that the CFO, CPO (Chief People Officer), and CEO must work in tandem to address financial, operational, and cultural aspects of the deal.

Leadership must go beyond transactional decision-making to focus on building trust, aligning goals, and fostering a shared vision. According to Shivani, "Role modeling by leadership and transparent communication are critical to ensuring employees feel valued and engaged during times of change."

Measuring Success: Tangibles and Intangibles

While financial metrics like revenue growth and cost savings are often used to measure M&A success, the people perspective requires different metrics. Success in this area can be gauged by:

• Employee Retention: Have you retained key talent post-acquisition?
• Engagement Levels: Use ENPS surveys to track shifts in employee sentiment over time.
• Cultural Alignment: Are teams collaborating effectively under a unified set of values and goals?
• Customer Experience: Is the acquisition delivering value to customers without service disruptions or quality compromises?

By combining these people-focused metrics with traditional financial indicators, businesses can gain a holistic view of their M&A performance.

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Key Takeaways

• Start with a Clear Deal Thesis: Define what you are buying and why, and validate this with both financial and cultural due diligence.
• Engage Early and Often: Communication is critical throughout the M&A process to reduce employee anxiety and build trust.
• Prioritize People and Culture: Align leadership, retain key talent, and address cultural gaps to ensure a smooth integration.
• Measure Employee Sentiment: Use tools like ENPS to track engagement and identify areas of concern.
• Quick Wins Matter: Demonstrate progress early in the integration phase to build momentum and foster collaboration.
• Leadership Alignment is Essential: CFOs, CPOs, and CEOs must work together to address financial and people-related challenges.
• Focus on Operational Maturity: Understand the investment required to integrate the acquired business effectively.

Conclusion

M&A success is not just about financial gains or operational synergies - it's about creating a cohesive, high-performing organization that brings out the best in its people. By emphasizing the importance of culture, leadership, and employee engagement, businesses can avoid common pitfalls and unlock the full potential of their acquisitions.

As Andrew Phelps wisely noted, "You only make one first impression." Whether you're acquiring a business across borders or expanding into a new market, a strong people strategy is the key to ensuring a successful, transformative M&A journey.

Source: "What does M&A get wrong about people and how can it be fixed?" - LACE Partners, YouTube, Feb 5, 2026 - https://www.youtube.com/watch?v=R-Kii5rHpn4

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• Why Team Alignment Matters for M&A Readiness
• Employee Engagement During M&A Leadership Transitions
• Why Culture Gaps Cause M&A Failures
• Checklist for Post-Merger Culture Integration