Examining the effects of transformational leadership and culture during mergers

Mergers and acquisitions (M&A) are becoming more and more common practice in business, but have varied results. M&As are at the forefront in the biotech industry as firms look at ways to increase their pipeline or grow sales to improve shareholder value. Since R&D expenditures among biotech firms is high with a limited amount of success, what better way to improve success rates by acquiring another firm who has been through the R&D process. This study will review an M&A that occurred three years ago between two biotech firms, one a privately owned Canadian firm acquired by a larger publicly traded US firm. Studies show that while M&As may be popular, the opportunity for their success is lackluster. The stress generated from M&As directly impacts performance and, in turn the success that the M&A was expected to generate. Many companies focus on financial outcomes when trying to develop synergies or explain and repair issues that arise during an M&A while missing the resource with the most important impact on firm performance, employee performance outcomes. This study examines whether culture shifts occur post M&A, & whether those shifts are towards the acquiring firms’ culture. The study has identified that two culture types in particular negatively impact employee performance outcomes. Employees should have increased stress post M&A de to these culture shifts. The study finally examines transformational leadership (TL) perceptions between each firm as a variable to reduce stress caused by M&A by minimizing culture differences between two firms. This study found that culture shift did in fact occur at the acquired firm and that those shifts were not towards the acquiring firms perceived dominant culture types. In fact the shift was towards stronger hierarchy and market culture types. We therefore expected post stress results to be significantly higher, it was not. We then found that while the acquiring firm perceived TL to be extremely high, the acquired firms’ perception of TL were not significantly lower which could conclude that TL aided in mitigating high expected stress results