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Acquisition: An Identity Crisis

By James Gairdner

Speaking to successful entrepreneurs recently I have been struck by the diversity of approaches that they have taken to, and the resultant emotional experience of, working with an acquiring party. For many the reality of selling their business is a period of moving from master of all you survey to working for some-one else. Whilst the tensions this creates at an individual level are obvious, I have become interested in how one might best navigate the broader challenge of integrating one organisational culture with another. This preoccupation seems important in a world flush with uninvested capital and the likelihood of significant M&A activity as we emerge for the wastelands of lockdown.

For the acquiring parties there are two schools of thought. The first promotes rapid and often fairly brutal integration of all systems, processes and product lines. In essence, subsuming the acquired business into the larger acquiring party. The second promotes an arms length relationship where the two organisations coexist leveraging the benefits of each others systems. Ironically dissatisfaction with the latter state often leading to the former approach some time in future. One of the challenges is that people are often not honest or perhaps not clear on the reasons for the acquisition. Even when they are, they can often be derailed by unconscious motivations of which by definition they are partially aware. By example, consider the case of an entrepreneurial digital start up that is acquired by a larger, more conservative enterprise. At the point of transaction much is made of the ability of the latter to learn from the speed and agility of the former, and the former to take advantage of the scale and access afforded by the size of the latter.

"It is as if the acquisition is less about creating something new and more about the removal of a threat. So what might one do if one is facing such a transition?"

What follows is often the undermining of the culture of the acquired party and a gradual, at times raw transition towards the more conservative culture of the acquiring party. It is as if the acquisition is less about creating something new and more about the removal of a threat. So what might one do if one is facing such a transition? The first thing to say is that we live in an imperfect world. Some acquisitions may deliberately be positioned in one way, with an underlying and very conscious desire for a different outcome. In addition, this field is also fraught with the dangers of CEO hubris and narcissism. In this light, it is little wonder that very few large scale mergers and acquisitions actually realise the value that was initial forecast. Putting this to one side, if we assume that some acquisitions are formulated to promote generative outcomes, how might one ensure that they achieve said outcomes?

Encouragingly, the solution is perhaps less complex than some may have us believe. Revolving as it does around a series of conversations with key stakeholders about the kind of organisation they wish to build, and how they might work together to co-create it. It is worth remembering that what is being attempted here is not simply the merging of two inanimate entities, but the bringing together of two identities. As with any significant individual identity transition, such as midlife or adolescence, this will ultimately result in the creation of something new, which is informed by that which went before but is not it. It will also likely require renegotiation of the psychological contracts that govern individual contribution to the combined entity and the network of relationships that support the system. What may be helpful is the adoption of a Twin Track Approach.

Working individually as two entities to consider the true motivations for the acquisition and what sort of entity they wish to create, what they wish to honour (retain) as part of the process and what they are happy to alter (change)? and crucially what this might require of them? Then coming together to share perspectives, develop a common sense of direction, and align on ways of working together that will form the foundations for the new culture.

Indeed, the approach will itself act as a strong symbol for the way things get done around here. This may then involve further iterations or the creation of echoes through the levels of both organisations, seeking to define how eachpart of the whole comes together. Understanding the psychodynamic theory, this makes logical sense, but often it is suggested this may take too much time.

Perhaps this is why quicker, more rational solutions prevail. I think this is an illusion, as whilst more rational solutions may provide a sense of pace, they do little to address the very human issues inherent in these identity transitions. This often means that whilst on paper the acquisition has been completed successfully, in reality it hasn’t even begun.

The challenge it seems to me is that the sooner we see these issues as human rather than mechanical problems, with all the messiness and complexity inherent in human experience, the more likely we are to seek solutions that work with the mess rather than those that seek to paper over the cracks.


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