City Hive: Overlooking culture fit risks M&A success

Investment firms risk the long-term success of takeovers if they overlook corporate culture as part of the M&A process, according to industry advocacy group City Hive.

In a report titled Promises and Pitfalls: Finding good client stewardship amid investment M&A, the industry thinktank argued the culture and values of both parties involved in a merger need to be deeply understood to ensure the long-term success of the combined business, amid heightened corporate activity in the sector.

“Mergers, acquisitions and changes to business structures are continuing apace across the investment industry, driven by the need to consolidate, acquire assets, or to access new markets or strategies,” said Mandy Kirby, co-CEO of City Hive and author of the report, 

See also: Culture will trump strategy for wealth and asset managers

“The pressure to demonstrate value for money is only increasing,” she added. “Understanding what is important about the process helps the directly and indirectly involved parties to make better decisions about their business relationships and asset stewardship.

“This is particularly relevant as the UK’s consumer duty, a lens through which M&A-driven product changes, fee structures and service models are viewed, will continue to shape operations.”

According to the report, M&A that hasn’t taken into account the cultural impact can lead to talent attrition, high costs, uncertainty and lower trust internally that translates into how the businesses function and deliver.

In January, City Hive announced signatories to its ACT corporate culture framework has risen to 40 firms representing £13trn in assets under management.

This article first appeared on Portfolio Adviser