Merging More Than Metrics: The Critical Role of Culture in Mining M&A
The mining industry is experiencing a wave of mergers and acquisitions as competition for assets and capital intensifies. While these deals promise benefits, realising the full potential of ‘1+1 equalling more than 2’ is a complex endeavour. At the heart of successful integration lies the often-overlooked factor: cultural alignment.
While consolidation may present challenges to recruitment and search firms like MPI, it undeniably reshapes the industry landscape. By streamlining operations and fostering a more competitive environment, M&A can liberate talented executives, accelerate the decline of underperforming entities, and ultimately elevate industry standards.
However, the true value creation lies in the successful amalgamation of corporate cultures. This is an area demanding greater attention and strategic focus.
With nearly five decades of experience in the mining industry, spanning both operational mining leadership and executive recruitment, my perspective on mergers and acquisitions is practical more than theoretical. While the financial metrics and strategic synergies of such deals are paramount, the human element often proves to be the most significant determinant of success or failure.
Combining two businesses is far more intricate than adding an extra fleet of trucks or attaching an extra train carriage. MPI’s own history offers a rich tapestry of experiences in these matters: from divesting business units to navigating the challenges of public ownership, acquiring competitors, and learning from the pitfalls of a failed merger.
Success with M&A needs to demonstrate that ‘1+1 equals more than 2’, but achieving that is not as simple as making 10 per cent of the combined workforce redundant and reducing your head office rent.
Humans, that most fickle piece of machinery
To create true leverage success, you must combine the hearts, minds and motivations, and continue to extract discretionary effort from that most fickle piece of machinery, a human being.
This requires attention and it requires it very early on in a merger journey.
Prepare for cultural friction
M&A creates a lot of change, and people who have spent time in other places can challenge established cultures and cause friction with established ways of thinking.
This isn’t necessarily bad, but if it isn’t addressed early in a merger process, the friction will result in wasted energy from people:
- Not relating to each other
- Feeling as if they are pulling in opposite directions and, if left unchecked long enough...
- Actively undermining the other side.
In extreme cases, the leverage gained from reduced overheads is more than consumed by the destruction of discretionary effort resulting from the cultural friction described above.
As part of our own journey at MPI, we have used professional external facilitators and the consistent message is cultural alignment is not achieved by simply telling people what the new culture is. It is about giving ground and agreeing on ‘the great bits that got us here’ and ‘what we need now to get us there’ — all with the goal of achieving a new shared vision. It requires everyone to have the opportunity to contribute so that everyone feels they own a piece of the new way.
If you don’t do this, the money you seemingly saved by reducing your combined workforce by 10%, for example, will have been wasted. If the 90 per cent of people left behind all feel they have at least 10 per cent less buy-in, then you have gone backwards a long way.
Consider the upside
Let’s say you reduce costs by 10 per cent but the energy from a new shared bigger vision with enhanced cultural alignment sees everyone give 10 per cent more discretionary effort; you will have created a powerhouse.
I’m an engineer, hence my reliance on numbers to demonstrate my point. But if I’m being totally honest, I am probably also trying to prove to myself there is value accretion in the process we have regularly invested in at MPI.
If your growth strategy is in any way supplemented by M&A, I wish you all the best in delivering tangible shareholder value.
From where I sit, a lot of the leaders of the successful mining companies of today are young enough to want to drive this next round of activity. They are also just old enough to have experienced the mistakes their bosses made in the previous round of resources M&A, when substantial shareholder value was lost.
I trust we will do better this time around.