Will L’Oreal’s Body Shop deal be worth it?

Questions have been raised about the cultural compatibility of French cosmetics giant L’Oeral and UK retailer The Body Shop, which have announced plans to merge in a deal worth £652m.

Around 70% of corporate mergers fail to achieve their objectives due to factors such as cultural incompatibility, clashes of leadership styles and HR approaches, according to management consultancy Hay Group.

It said unifying the contrasting people cultures and management styles of a French corporate giant and a UK-based company whose culture – and business and operating model – is inextricably based upon a strong ethical trading stance may prove tough.

Deborah Allday, consultant in mergers and acquisitions integration at Hay Group, warned that the two companies have a very small window of opportunity – usually a year or less – in which to make the deal a success.

“It will be interesting to see how these two companies handle the merger of two very different corporate cultures,” she said.

Successfully merged firms tend to undertake careful culture and climate due diligence to identify gaps between the organisations, and the strengths and weaknesses of each, Allday said.

They also develop specific strategies and processes for key people issues, including assessment, selection, reward, performance management and communications.

“All mergers face similar strategic challenges around their people and their culture,” said Allday. “If they don’t get these things right – and quickly – then whatever the financial cost of the deal, L’Oreal may be asking if The Body Shop was worth it.”

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