Business Culture Differences: Building Bridges

Culture fit can make or break a business deal, yet many buyers and sellers overlook its importance. In this episode, we explore how cultural differences impact business transactions and why finding the right fit goes beyond financials. We discuss real-world examples, the role of intermediaries in identifying potential mismatches, and how communication styles shape negotiations. Whether you're selling your company or looking to buy, understanding culture fit can be the key to a successful transition.

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TRANSCRIPT:

Welcome to Integrated Insights with ICCG. For more than 30 years, our team has partnered with small business owners to prepare for and navigate the business transaction process.

Pull up a chair as we share stories and insights from our experience on all sides of the M &A table. All right, and Welcome back to another episode of Integrated Insights. I'm your host Michael Hefner and I have the founders of ICCG with me,

Grant McQuilkin and Dave Parker. Today we're going to be talking about culture in businesses and the impact that they can have on a business transaction. So to get started today,

how does ICCG help buyers and sellers find a culture fit for the other side of the table? - Well, I think part of it is you said,

how are we supposed to find the culture fit? And I think it's really important for anyone selling their businesses. Someone's got to help you find the right culture fit. And sometimes buyers and sellers are trying to do a transaction themselves.

And I think one of the, one of the, this is one of those kind of non, well, I would say non -monetary, but it can be huge monetary consequences. But oftentimes they don't think about when they're out.

Well, let me start back. We have sellers of businesses say, well, we're just gonna handle it ourselves. And I think one of the things they can miss easily is, are you gonna find someone with the right culture fit? So, I think part of our responsibilities in intermediaries is to come in and ask the right questions early on of both the buyer and And that becomes a really important piece of this,

you know, when you're selling your business. You're not just selling it. Very rarely, when you find a business owner who's saying, "Oh, I just want to give my money and leave," right on the heels of, "I want to sell my businesses,

I want my people taken care of, I want my products represented well, I want, you know, all these different things." Well, all that has to do with culture. And it's one of those things you don't think about very often.

Yeah, I think it's not always the first thing that we look at because we're looking at a revenue model fit, a financial and expectation fit.

We're looking at all those other things, but culture fit definitely is a huge deal. I remember we were in the process of selling a pretty good sized blue collar company and this guy walks in who's a potential buyer and he's got tasseled shoes,

really nice jacket on and leads with his Wharton MBA qualification. We're like, "I'm not sure how this is going to work in that." And So sometimes it's obvious,

but when you're looking at the culture of the business itself, it's not just in the principles, it's also in the actual people that are doing the day -to -day inside of the company.

What's the culture like in that particular scenario? So in some ways, it's not where you start, but it can be where you end, right? It can be a deal breaker, but not necessarily a deal maker. Yeah,

I mean, look, you can have the best culture fit. But if it's not going to accomplish the financial goals of the of the buyer and the seller, then it's not going to work. Instead of asking a leading question here in,

I'm just going to say, how does a business owner's respect for the values of the other side of the table affect the success of the transaction? Yeah,

I think you know, when you deal with business people, you can pretty much know it's not okay on this deal,

this guy is going to respect other people. He either respects other people or he doesn't. And so, You know Dave and I over the years have tried to get to know people and If they're not going to respect other people and they're just you know the center of the universe and the world falls around them It's going to be difficult not just for them to buy a business,

but it's going to be difficult for them to to even work with our client as well as work with us. And that's hard work.

Is running around an ego that size is difficult. And we're not gonna push a deal through, you know, just to satisfy one person.

Our goal is that all the parties win and accomplish their goals. And so it's very difficult when you have a person like that. And we'd rather not deal with people who are just all about themselves.

And I think that's, you know, typically, you're grants, right? If you find this from a buy, right? So if you have a buyer who doesn't respect other people, it's just, it's just not going to work. You know, we don't want to deal with them,

honestly. And one reason we And we kind of interview potential buyers way before our sellers. If we're representing a seller, we're going to interview these different buyers and we're going to pick up pretty quickly if the world revolves around them.

And I think the same thing, a lot of business owners listen to these podcasts and I think that they need to understand also that the world doesn't revolve around them either and a buyer picks up on that pretty quick.

Now the difference is, The difference is if someone, and we've represented buyers before, or sellers before, who pretty well think that the world revolves around a lot of them,

and so if that's the case, we can normally work our way through that as long as they're leaving the business, because I'll guarantee you,

if that's the case, their people want them gone too. Their people are tired of attitude as well. You don't, you don't have people, we very rarely have written people that have a really kind of an arrogant attitude that they're,

that when we talk to employees and stuff, they're like, yeah, can we get them out pretty quick or her out pretty quick? Yeah. The difference is a buyer is coming in to buy. That's just a little bit different,

different scenarios. So, but yeah, we, we, we do like, we love it when we find buyers who, you know, who, who who really like the same thing. You know, we find a lot of buyers now who don't want to deal with brokers or intermediaries or advisors that have attitudes either.

So, and there's a lot of them that do, yeah. - So Dave, you talked there about a little bit how we can kind of weed out some potential buyers on the front side and just kind of see that they're not that fit before even bringing them to our client.

and we quarterback a lot of that communication throughout the deal process. So once we get into a deal, even if it can be, you know, a fit to where we actually bring it to our client,

how do some cultural differences influence the communication styles that we're quarterbacking during a deal? - Well,

again, I think Grant alluded to it a little bit just with, you know, coming in with the, leading with your MBA, Harvard, your Harvard MBA and your Tassel shoes. The other dead giveaway of the PE groups are coming in with the nice creased jeans and the jacket.

That's the other PE giveaway. In fact, we had one of our guys walk into a medical facility to talk with some potential buyers or sellers. And they got done,

they said, "We thought you were just one of the other PE groups because you look like the rest of them." And our guy had learned a lesson there, right? They had dealt with people before. That's very stereotypical and not actually very accurate.

But I think that the attitudes coming in are really important. Yeah, I would say, you know, coming from, you know,

I wasn't born in the United States. And so, and so coming over here, there are cultural differences between nationalities and between even areas of the US.

So if you've got a guy from the West Coast, for example, going to buy family uh it's a it's a culture kind of clash and what Dave and I find ourselves being as interpreters we're we're trying to because we we obviously um have I mean Dave is on the on the west coast you know we're in in Texas but we've got we've got we've had dealings we've owned companies on the east side of the U .S.

and so we kind of know a little bit and we understand a little bit of the language of the different places. We've also both lived overseas and so we know what different cultures are and how difficult it is really for a person not raised in the U .S.

to communicate, you know, in a language that of their first language growing up. And so, you know,

just being the interpreter from a standpoint of making sure that everybody understands what people are trying to say, not what necessarily is what is coming out of their mouth is super important.

And it's not making excuses for anybody. It's just, it's making sure that they understand what they're getting into, so there's no surprises and there's no misunderstanding and then therefore unmet expectations.

So a lot of what we do, even just, you know, like I said, from the city to the country or vice versa, there's some interpreting that we do. Buyers and sellers,

both there's this apprehension and there's also this assumed distrust at the beginning. You know, everyone's, what do they want from me? What are they trying to get out of me? Where have I missed,

you know, where am I leaving a dollar on the table? Where about, you know, everyone's got that. And it takes a while to break that down. And I think one of the things I learned years ago, and it was out of the context of business,

it had to be, it had to do in foreign missions. And it had to do with just sitting down. And it was a real simple book about warm cultures and cold cultures. And, you know, the United States is kind of divvied up that way too.

You go down the South, this is really, it's not, it's not across the board, but there are, there's cultures that tend to be a little bit more friendly and warm. I mean, I live in Seattle,

they call it the Seattle freeze to where, you know, people don't talk to each other that much and just kind of, you know, especially when it's so dark and it's like March comes, the son comes out and comes out of their homes talking to each other.

But, you know, you, but you've also got climates. You go, you go to Nashville. Everyone knows everybody. I mean, you know, or they pretend like it. And there's no, you know, we, we see this or never forget this,

uh, this call we had with one of our businesses that we were selling. We had a, we had a really great attorney and he was Southern and he loved to talk about baseball And he,

everything was like, well, how about them Dodgers? How about them, how about them Texas Rangers? And we were dealing with attorneys that were in New York and they weren't having it.

They could care a less about baseball. They would kind of go on and they was like, get down to business. And, you know, we of course were paying by the hour. So I was like, let's move it on. Let's move it on. Let's not,

we're paying by the minute here. So, but even you even notice it in that so all that to say is I think what we can do is help educate, we can pick up on those nuances at the beginning and help educate both sides.

Hey, this seller loves to catch up on things. This seller would like to know, he wants you to know about his family and let them know because sometimes people come in guarded and they're like all business,

especially on the buy side and and we can also tell our, you know, educate our buyer or our seller and say, "Look, you know, not every buyer's wanting to sit down and talk about family all day long.

You know, they want to get down to the brass tacks and talk about the business." So, it's just that, again, there's part of the value of having, you know, people who've been around the block a few times is intermediaries with buying or selling.

There's also, There's also a lot of challenge when you have people that assume that, for example,

we had a client who was absolutely brilliant, but he is a small town, Texas self -taught,

self -made guy Who is who you know is is again just brilliant and these pe groups come in and are you know just they think the guy is a country bumpkin until they see what he does and so it is it particularly younger pe group guys you know they think that they know everything and they can teach people anything.

And really, it doesn't matter what age you are, if you have that attitude and you're just not teachable, then there's no humility there. And what we always say,

Michael, humility looks good on everybody. And so we just try to make sure that everybody understands the expectations of the conversations and we interpret Some of the sharper edges we try to shave off and prepare people for conversations,

so the conversations are fruitful and they're able to communicate properly. For business owners looking to either exit their company or considering the purpose of the company soon,

how can they bridge the cultural gaps to facilitate a smoother transaction? We talked a lot about the communication piece already, but what else can they do to make sure that the transaction goes smoothly?

Well, one of the things I would say is invite the conversation invite the conversation between buyer and seller Early on or as soon as they meet oftentimes buyers has not met with a seller but we we do these things called management meetings where But once the indication of interest in IOI is issued,

if we're going after and we might have several of those coming on one business, then we would hold management meetings with selected IOI candidates for the LOIs.

And we would normally have a virtual meeting with the buyer and sell our first time they've met and We facilitate that and we script those meetings, we script those questions and everything.

And I think it's really a great time to talk for a seller to ask questions like how have transitions gone with other businesses that you've bought?

Tell us about some of those. What went wrong? What didn't go so well? And why is that? And kind of dig in along with us and why did that not work? can typically you find a lot of it are cultural reasons and people need to understand what they're buying and so shame on them if they don't ask the right questions to figure out the cultural fit but at the same time a seller needs to understand who he's selling to

and if they're malleable enough to buy a business and shape themselves to that culture until if they decide that it's that it's better to move that culture to a different culture,

but that takes time and leadership and it just doesn't happen by coming in and demanding anything, right? You have to lead people through that and that is a process that takes place.

We've done it in our companies, we've really screwed it up in a couple of our companies and we've done well in a couple of them. Yeah, just a financial analogy, right?

So, if you have one company that has a completely different pricing structure for their product than the other company, that is basically a similar company,

similar product, but for whatever reason, they're completely different price points. Then smashing those two companies together,

You're either going to lose half your customer base because you are charging way more right now or you're going to lose half your revenue because you're going to have to lower your price for the other guy's customers,

right? And so, it's similar in the case of corporate culture, philosophy of And, you know, we had two companies that operated separately,

one always bought new equipment every couple of years. The other company had a full -time mechanic that repaired the equipment until that thing was,

you know, 10 years old. And so there's a completely two different philosophy of operation, And you got to make sure that when you combine those companies,

if you do choose to combine the operations, that they can work together and you're going to have to lead and make a decision on which way you're going to go. Management style.

Some people are the boss and some people are their employees' best friends. I know those are sort of But well,

then there's dictator, dictator would be the extreme. Yeah, the reality of it is, is that the new, the new company will have to establish what they're going to be like and not just let it happen.

Because if you put those two cultures together, it's going to be like oil and water and they're never really going to combine no matter, unless you lose a lot of people in the process.

Yeah. Yeah, we always have great appreciation for a buyer who appreciates and wants to know the culture. And we experienced this with a sale a little over a year ago where the buyer,

the head of the group, that wasn't necessarily doing all the communication stuff, they just wanted to come in and take the seller to lunch, which we apprehensively agreed to because of the circumstance.

And he just wanted to find out about it. They just wanted to have this and vice versa, the seller wanted that as well. And they just had a big time. They just went out, as they say in Texas, they just had a big time out for lunch one day and learned all about each other and came back and,

you know, best buddies. Well, that relationship was able to weather some tough negotiations because they had established a quasi friendship.

Right. And it wasn't a fake. It wasn't a fake thing. It was like, I really want to, I really want to understand you. I really want to know about you before I buy your company because it tells me a lot about your company.

And he picked up on everything you needed to pick up on. You know, he knew all the land, well, I'm not saying they're landmines, but if they're landmines, he'd pick up on them. So So let me go back and let's let's unpack that story grant you were telling about the two companies one of the old equipment in the newer You know the buyer before we in this thing,

but So my recollection this is many years ago as the first one of the first companies We bought and then we started tucking in a couple other companies and the one we bought was a 35 year old Company in the transportation industry and it was Is there something that's more blue than blue collar.

It was it was it was bright blue collar. Grand I we learned a lot because let's just say we weren't exactly blue collar we learned a lot about leadership during that.

But we also learned a lot about their culture and they there was a it was a 24 hour dispatch situation everything was manual. These people had been there they were they were like family they had been there for years.

They were, whatever is above, rough around the edges, it was rougher around the edges. Sweetest people in the world. But they just,

you know, and not super educated, but street smart. And then this other company had, was, and then this building was,

I mean, had been remodeled after remodeled. And then we remodeled, I mean, it was just remodeled upon. So they were like, you know, panel walls and small office and old chairs. And they said in 24 hour,

24, they're telling what went on in that place. But the other place was a newer location, had just been recently finished out, new computers, nice chairs,

break room. I mean, just the opposite. And we decided, I think we discuss this a little bit in one of the other podcasts, but we decided it would be a great idea to put these companies not just together operationally,

which we kind of did from an entity standpoint. We thought, brilliant, we'll save. If we just pull the dispatches together and hand over the phones about eight o 'clock at night,

we just have to cover the cost of dispatch out of one location and they could do And let me tell you what what grant how long did it last two months three months overnight it did not last and it just I mean I'm not even sure what how to say or why they couldn't pick up the phone and call the other place and give but I mean it was like no no we're giving the calls to our people and we're giving the call you

know just it just wasn't working and we just you know, these guys sat us down and said, look, you know, the manager sat us down and said, culturally there's such different places.

We need to separate the dispatches. And honestly, it cost, but it was the best thing financially we could have ever done. And culturally, it was the best thing we could have ever done. And,

you know, from a motion standpoint, it's probably the best thing we could have done for everybody, right? Did I pick up that And is that my recollection? - But I mean, it wasn't just the dispatch.

It was all over that company. I mean, you know, the four full -time mechanics on the one end and the part -time mechanic on the other end,

but the massive equipment turnover and cost that goes along with not being able to repair all that equipment. And, you know,

operator retention was different. All the metrics were different because of the philosophy of operations. And I would tell you that,

you know, there's still an argument today on what's better, you know, which model is better. But the reality of it is, is that, you know,

Putting it and expecting the same thing to happen at both places was just not going to happen in that particular industry for sure. And in a lot of industries,

everybody on Wall Street or who's a white -collar guy looks at these blue -collar industries and says,

"Man, it's so fragmented. There's such a great opportunity just to consolidate this industry. And there's probably a really good reason why it's not consolidated,

which let them find out pretty quickly when they do the big, you know, yeah, that industry that we're talking about actually had a big consolidation that then blew apart.

Remember that? Yeah. Grant, you just used the term operational philosophy. I think that's a great synonym for business culture, right? It's what you do and why you do it.

So, yeah, so that's all the time we have for today. Grant, Dave, thanks for joining me. See you guys next time. And that wraps up another episode of Integrated Insights with ICCG.

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