When I first started buying businesses, I assumed financials were the most important part of the equation. Revenue, margins, debt load, and cash flow all felt like the ultimate indicators of success. Over time, I discovered that while numbers tell you whether a business has been profitable in the past, it’s the culture and the people that determine whether that business will thrive in the future.
The longer I’ve been in acquisitions, the more I’ve realized that deals rarely fail because of a single bad quarter or a temporary market dip. They fail because of fractured teams, toxic leadership, or cultures that resist change. Conversely, the businesses I’ve acquired that flourished weren’t just financially strong; they were built on healthy cultures and resilient people.
In this article, I want to share how I evaluate culture, why people matter more than spreadsheets, and the lessons I’ve learned about long-term success after a deal closes.
Culture as the Invisible Balance Sheet
Culture doesn’t appear in financial reports, but it acts like an invisible balance sheet. It influences retention, productivity, innovation, and ultimately profitability. When I meet with employees during diligence, I’m not just gathering information, I’m observing. I watch how they interact with each other. I listen to how they describe their work. I pay attention to their energy and whether they talk about the company with pride or resentment.
A strong culture feels aligned. People understand their roles, respect leadership, and believe in the company’s purpose. A weak culture feels fragmented, with confusion, mistrust, and disengagement lurking beneath the surface.
The quality of culture will predict the quality of results more reliably than almost anything else.
Why People Stay or Leave After an Acquisition
One of the most revealing patterns I’ve observed is how employees respond to a sale. In some companies, people embrace the change, excited about new opportunities. In others, employees begin planning their exits the moment ownership shifts.
The difference usually comes down to two things: trust and alignment. If employees trust leadership and feel aligned with the direction of the company, they stay. If they don’t, they leave, and when key employees walk out, value evaporates quickly.
I’ve learned to pay close attention to retention risk. I identify who the critical employees are, and I consider what motivates them. Sometimes it’s money, but often it’s recognition, growth opportunities, or simply stability. I make it a priority to meet with these individuals personally, not to interrogate them, but to build a relationship and show that their contributions are valued.
Leadership Style of the Seller
Another factor that heavily influences culture is the seller’s leadership style. Some owners are empowering, delegating responsibility, and trusting their teams. Others are controlling, making every decision themselves, and micromanaging employees.
When leadership is controlling, culture suffers. Employees may become passive, waiting for instructions instead of taking initiative. In these cases, the transition after acquisition can be especially challenging. Removing the owner often leaves a vacuum that nobody knows how to fill.
I’ve learned to ask direct questions about leadership style. I also watch closely for signs during site visits who answers questions, who takes initiative, and who looks to the owner for approval before speaking. These subtle signals reveal more than any formal answer ever will.
Signs of a Strong Culture
Over time, I’ve developed a list of signals that suggest a business has a strong culture. These include:
- Employees who speak positively about leadership even when leadership isn’t present.
- Clear communication channels and consistent meeting rhythms.
- Low employee turnover and long tenures.
- Pride in the company’s reputation and work.
- Openness to change rather than fear of it.
When I see these signs, I know I’m looking at more than a business, I’m looking at a team that can carry the business forward.
Signs of a Weak Culture
Likewise, there are red flags that warn me that culture is fragile:
- High turnover, especially in key roles.
- Employees are unwilling to answer questions honestly.
- Rumors, blame-shifting, or hidden resentment.
- Lack of clear accountability or ownership of tasks.
- Visible exhaustion or disengagement in employees.
When I encounter these signals, I don’t automatically walk away, but I know the acquisition will require cultural rebuilding. That requires time, energy, and investment, which I factor into my decision-making.
Why Culture Predicts Adaptability
One of the reasons culture matters so much is adaptability. No matter how strong a business looks today, markets evolve. New competitors emerge. Technology shifts. Customer preferences change.
The businesses that survive and thrive are those with cultures that embrace adaptation. If employees are encouraged to innovate, if leadership supports new ideas, and if communication is open, the business can pivot when needed. On the other hand, a rigid culture that resists change will eventually crumble, no matter how profitable it looks today.
How I Integrate Myself Into Existing Culture
Buying a business means stepping into an existing culture, not creating one from scratch. I’ve learned that how I introduce myself to employees sets the tone for everything that follows.
I make it a priority to communicate early and often. I explain who I am, why I bought the business, and what I see for the future. Most importantly, I listen. I ask employees what they love about the company and what frustrates them. By showing respect for their perspectives, I earn trust more quickly.
I also avoid making sweeping changes immediately, unless absolutely necessary. Sudden shifts in culture create fear and resistance. Instead, I focus on building relationships, understanding the rhythms of the team, and making gradual improvements.
Why Retaining Key People is Critical
Every business has individuals who carry disproportionate weight. They may not always be in leadership positions, but they hold knowledge, relationships, and expertise that the company depends on.
Before closing, I make it a point to identify these individuals and consider retention strategies. Sometimes that means offering stay bonuses, but often it’s about creating growth opportunities, recognizing their contributions, or providing reassurance about stability. Losing one key person can be more damaging than losing ten average employees.
The Cost of Ignoring Culture
I once evaluated a business with excellent financials but ignored the warning signs of cultural dysfunction. Employees were disengaged, leadership was autocratic, and turnover was high. I convinced myself the numbers would overcome these problems. They didn’t.
Within six months of acquisition, multiple key employees left, customer service suffered, and revenue declined. That experience reinforced that ignoring culture is one of the costliest mistakes a buyer can make.
Why Culture and People Drive Long-Term Value
When I look at my most successful acquisitions, they all share one trait: strong cultures and engaged people. Those businesses not only maintained their profitability, but they also grew beyond what I expected because the teams were capable, motivated, and aligned.
Ultimately, businesses are human systems. Culture determines whether those humans work with pride and energy or with resentment and apathy. Financials may win you the deal, but culture wins you the future.
My Framework for Evaluating Culture in Acquisitions
Here is how I evaluate culture systematically:
- Employee Interviews – Talk to staff across all levels, not just leadership.
- Observation – Watch interactions during site visits for clues of alignment or dysfunction.
- Turnover Analysis – Review historical retention rates and reasons for departures.
- Leadership Assessment – Study the seller’s management style and its impact.
- Communication Flow – Evaluate how information moves through the organization.
- Cultural Red Flags – Identify patterns of disengagement or resistance to change.
This framework doesn’t guarantee success, but it gives me the clearest possible picture before I make a decision.
Final Thoughts
Over the years, I’ve come to believe that culture and people are the ultimate deciding factors in whether an acquisition works long term. I can fix processes, improve marketing, or restructure financing. But rebuilding a broken culture is one of the hardest challenges in business.
When I review a company, I prioritize culture as highly as I prioritize cash flow. Because in the end, it’s people who deliver results. It’s culture that sustains growth. And it’s respect for those realities that has allowed me to turn acquisitions into long-term successes.
I continue sharing insights on acquisitions, private equity, and real estate on DrConnorRobertson.com, where I document the lessons I’ve learned building businesses that thrive long after the deal is signed.