Rock Products

FEB 2018

Rock Products is the aggregates industry's leading source for market analysis and technology solutions, delivering critical content focusing on aggregates-processing equipment; operational efficiencies; management best practices; comprehensive market

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38 • ROCKproducts • February 2018 MERGERS C an we start using the word "syn- ergy" again with a straight face? Nearly all mergers and acquisitions look great on paper. But according to recent Harvard Business Review report from 2017, the failure rate for mergers and acquisitions (M&A) sits between 70 percent and 90 percent. It's the stuff that doesn't show up on a spreadsheet that can derail an integration. North American aggregate producers wrapped up a year of moderate growth in 2017 (despite extreme weather conditions) and began to see a much-improved business and regula- tory climate. Last year alone brought historical deals for top aggregate pro- ducers: Vulcan Materials (Aggregates USA), Martin Marietta (Bluegrass Mate- rials) and CRH (Ash Grove Cement). The industry, on the heels of the third longest recovery since the Great Depression, is flush with significant available liquidity in which to fund more acquisition-related growth. If these deals follow historical patterns, however, there will be some shortfalls in meeting expectations. Executives know instinctively that cor- porate culture matters in capturing value from M&A. In a 2013 survey by Mercer M&A Consulting Services, 50 percent said that "cultural fit" lies at the heart of a value enhancing merger, and 85 percent called its absence the key reason a merger had failed. But 80 percent also admitted that culture is hard to define. Hardly surprising then that most exec- utives feel more comfortable dealing with costs and synergies than culture, despite the potential of culture to enhance or destroy merger value. The Way We Do Things Around Here The essence of culture is reflected in a company's leadership style, its approach to innovation, how decisions are made, and its internal vs. external focus. Merging companies that have conflicting working norms risk frustra- tion among employees, hampering the success of the integration. But if some- thing can't be seen, can it be managed? Not unlike a personality assessment, the matrix in Exhibit 1 arranges common profiles of business culture into quad- rants that highlight how organizations tend to go about their business. High culture clash can be expected between the diametrically opposed cultures, such as the "Collaborate" and "Com- pete" organizations. Common ground can be found in adjacent quadrants. To see how this analysis works in prac- tical terms, consider the recent merger of construction materials companies. The analysis showed that: • Company A had a patriarchal leader- ship style, driven by the owners and managers of this old, family-run busi- ness. Employees looked to the owners for vision and leadership and felt an Tackling the Culture Conundrum Synergy: Syn·Er·Gy, Noun: Putting People, Companies and Ideas Together to Make an Even Bigger Mess. By Ryan Brown Exhibit 1: The Organizational Culture Assessment Instrument (OCAI) based on research by Robert E. Quinn and Kim S. Cameron (University of Michigan).

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