The Wall Street Journal had an article called “AT&T to Keep Time Warner’s Culture.” This refers to the proposed acquisition of the media firm by the ¬†telecommunications firm. The deal is currently being challenged by the Justice Department. The article goes on to quote the CEO of AT&T saying he is “not a media tycoon” and he does not want to “screw it (Time Warner’s culture) up” by bringing them “a telephone company culture”.

Then the Journal¬†had an interview with Amazon’s second in command, Jeff Wilke. In talking about their recent acquisition of Whole Foods, he said that Amazon “works hard to respect cultures that have been successful,” but that perhaps they can “help” Whole Foods with “resources, ideas and maybe IT services that Amazon has.”

This all sounds very smart and maybe even noble, but sadly, it will probably not play out this way for one or both companies. The larger, acquiring firm almost always screws up the leadership and culture of the smaller firm they spent a lot of money to buy. AT&T has offered $85 billion for Time Warner; Whole Foods cost Amazon $14 billion.

In most acquisitions, within three years two-thirds of the senior management of the acquired firm are gone. The Chairmen/CEOs go first, sometimes immediately with a huge payout for their stock and retention bonus (often equal to three years total pay.)   Sometimes they hang around a couple years to collect an additional bonus. But Chairmen/CEOs go fast followed by their key reports. With these people goes some of the knowledge and value that the acquiring firm paid for. And after the senior leaders are gone, the culture of the company starts to fade away as well. Leadership and Culture are, after all, the flip side of each other.

Why do smart companies willingly or sometimes subconsciously change the successful culture and leadership of the firms they spend a fortune to buy?

First, the acquiring firm, by definition, is the winner in the deal. Thus, they believe that their systems, procedures, people and business strategies are far superior to the firm they just acquired. When the accounting firm PricewaterhouseCoopers took over the legendary consulting firm Booz, the PWC people felt they were in charge, regardless of the rich 100 year history of Booz.

Second, the acquiring firms have lots of staff that are dying to “help” the firm they just took over. From Information Technology to accounting to Human Resources to legal, etc. etc., there are plenty of people who just want to “help.” The building material firm, USG Corporation, acquired my old Donn Corporation which was one tenth its size. USG setup 24 committees to “help” integrate Donn into USG. Donn was a loosely structured, oral culture company with few charts and procedures. USG was much the opposite. A few years later only three of the top dozen Donn leaders remained.

Third, strategies and circumstances change rapidly in business. An old friend said that large firms can change core businesses and strategies faster than people change their underwear. Honeywell just announced that they will spin off two large business groups with $7 billion of sales, so that they can focus more on their core businesses, the remaining $30 billion. Ironically, the original Honeywell business, thermostats, will be spun off with a number of businesses that were acquired in more recent years.

In closing, having been both an acquirer and one who was acquired, I would like to wish the Time Warner and Whole Foods leaders and their culture the best of luck! Things will never really be the same. It will help if you keep in mind that your firm sold and those other guys bought. There are winners and losers in deals just like in everything.