When George S. Dadas was looking to expand Insurance Partners Agency Inc.’s footprint across Northeast Ohio, he identified a number of promising potential acquisitions.
But when it came time to pull the trigger, the president’s decision was ultimately based on culture. “The key to merging two distinct cultures is to first understand the culture of the acquired company,” Dadas says. “I would not go forward with a company that had vastly different cultural differences. You cannot put a round peg into a square hole.”
In the precarious realm of mergers and acquisitions, a clash of cultures can turn any deal into a dud. To avoid such calamity, Dadas says it’s important to spend as much time evaluating the value structure and internal relationships of a potential acquisition as you do studying its strategic plan and 10-K.
To develop this understanding of culture before acquiring Lorain-based Humphrey & Cavagna Insurance Inc. earlier this year, Dadas spent as much time as possible with the company’s management team.
“Spend a lot of time with their key people,” he says. “You talk to them about every aspect of their business. You talk to them about employee issues, about customer issues, about how they present themselves in the marketplace. You get to know their whole history.”
Dadas also suggests reviewing the company’s brochures, promotional materials and especially its customer list.
“You know there’s that saying that birds of a feather flock together,” he says. “You can tell by the makeup of their customers whether there may be a fit or not.”
Once you’ve done your due diligence and signed off on the deal, that doesn’t mean it’s time to forget about culture. On the contrary, managing a successful cultural transition is often the most challenging aspect of any acquisition.
Dadas says one of the best ways to promote a smooth transition is to share your company’s culture with the acquired company with as much passion as you spent gauging theirs.
“We try to set regular times that I and people from my management team will actually spend a day or two a week in the acquired company ... just so we get to know them and they get to know us,” he says. “We share our stories and our history. We share with them our slogans. We share the mission statement with them. We want them to understand the whole company culture.”
In addition to taking some of his 54 employees to them, Dadas also brought the acquired employees to his own offices.
“We’ll have lunch and bring those folks into the office so they can meet their other coworkers from other offices and get to know everybody,” he says.
The company has also implemented a partner program to strengthen those relationships even further.
“When you take over a company, you’re instilling your computers, your automation, your systems and your procedures; it can be overwhelming,” Dadas says. “But if you partner people up one on one, they develop a good friendship, and they don’t have to feel like they have to go to a management person and look like an idiot because they’re not getting it.”
If you practice due diligence on the front end and follow through with as much effort during the transition, you greatly increase your chances for a successful acquisition.
“If you’re doing the right due diligence prior to an acquisition, you’re usually going to be better off because the things that attracted you to them bleed into your company — those new ideas, the new methodologies, the enthusiasm of the people that are looking for great opportunities,” Dadas says. “Those things are all very powerful.”
Reaching the resisters
In his quest to expand Insurance Partners Agency Inc.’s reach across Northeast Ohio, George S. Dadas has over-seen a number of acquisitions.
The company president’s insistence on due diligence during the targeting phase and that attentive follow-up takes place after the acquisition usually result in a smooth transition. Still, there have been a few resistant employees along the way.
“Yes, it happens,” he says. “It’s inevitable.”
To mitigate the negative effect of these resisters, Dadas offers the following suggestions.
- Confront the problem. “What we do is meet with that
person and talk to them about
our observations. We know
they’re struggling, maybe we
see that they’re struggling, or
maybe they don’t have the best
attitude. We’ll let them know
these things, and we’ll let them
know what we really need and
expect from them.”
- Give them time. “If they are really working at it, and you can
see that they’re making
progress, then I’ll keep the
string out a long time.”
- Don’t be afraid to pull the plug. “People need to know that
somebody that is not going to
cooperate, is not going to fit in
and is being destructive to themselves and maybe to others, isn’t
going to survive. If they’re interfering with the process and
interfering with other people’s
progress, then I’ll deal with it
HOW TO REACH: Insurance Partners Agency Inc., (800) 229-5266 or www.inspartners.com