Singapore - If companies want to succeed in a merger and acquisition, they need to realise both parties' corporate culture will not remain static. But instead, it will merge to form a new company DNA.

In the economic downturn, mergers and acquisitions are on the upswing, as companies look to buy companies on the cheap. But intangibles such as culture and change of mindset are key in determining whether the company would have a successful M&A, says Israel Berman, managing director of Hay Group’s Asia Region and Building Effective Organizations practice.

While people issues were one of the lowest items on due diligence that prospective companies looked at, Berman feels that such climate is changing, with more CEOs paying more attention to the prospective company's culture. He cites a Singapore client that was recently deterred from a new acquisition due to corporate cultural differences, despite how good the numbers looked on paper. 

In addition, Berman says that the cultural uniformity in the case of Japanese or Korean conglomerates is starting to alter as well. One of the signs to that is with non-Japanese executives on the board of Japanese companies. "Asian countries that want and should play a global role need to start thinking globally. It is not about exporting Asia, it is about thinking globally."

Hence, even for parent companies that are buying new companies, the corporate culture would be altered to include the recently acquired company as well. Parent companies also have to "recognise the contribution of the acquired new entity and give them the needed pride to live with the new situation." But companies which ignore the people issues may end up making insensitive mistakes such as disrespecting cultural norms, which may make it harder for the acquired company to accept the new situation.

"You can't just tell them, 'For now on, forget what you were, you're here.' They will leave, and you lose all that you thought you were buying. The intangible assets that you buy is what companies tend to lose the lose the quickest," he adds.