View
216
Download
0
Category
Preview:
Citation preview
Intercultural Aspects of Mergers & Acquisitions
Seite 2
Foreword
As part of the international degree course “Baltic Management Studies”
at the University of Applied Sciences in Stralsund, we, the students Carolin Boden,
Elisabeth Guth, Nelly Heinze and Sarah Lang, wrote this work as a part of the
course “Intercultural Leaderships and Teams” under the guidance of Prof. Dr.
Jürgen Rothlauf. In our second semester we were given the possibility to choose
one of the suggested topics of the subject area “intercultural management”. This
assignment is supposed to challenge the students’ ability to write in a scientific
manner and is also a preparation for the final bachelor thesis, which is to be
written in the eighth semester of the curriculum.
We decided to choose this topic because mergers and acquisitions (M&A) has
become a mundane expression, used daily in the media. In order to operate
successfully in a global economy, corporations have become transnational and
have to perform at a multinational level. Therefore, we decided to analyze M&A in
a cultural context. After explaining the importance of intercultural management, we
gave an insight about the terms merger and acquisition to establish a background
for our further work, the cultural analysis. In order to get an own impact and to be
able to assess the real situation, it was necessary to conduct a study on this topic.
We created a questionnaire with 10 different questions dealing with the importance
of intercultural management for M&A transactions which was sent to consultant
companies and experts working in the field.
We would like to warmly thank everyone who took the time to participate, made
comments and even provided us with additional material or offered assistance!
Since we have promised to treat the data anonymously, we cannot thank any
company by name, but we would like them to know that their help has been greatly
appreciated. Moreover, we also want to give a special thanks to our mentor Prof.
Dr. Jürgen Rothlauf, who kindly offered advice and greatly helped us during the
consultations.
Intercultural Aspects of Mergers & Acquisitions
Seite 3
May our assignment be one small brick on the long road of creating effective
cultural understanding and a help for estimating the real importance of the cultural
background while the M&A process.
Intercultural Aspects of Mergers & Acquisitions
Seite 4
Table of Contents
Foreword ............................................................................................................ 2
Table of Contents .............................................................................................. 4
1. Study on the importance of intercultural training in case of international
M&A................................................................................................................. 5
1.1. Introduction ............................................................................................ 5
1.2. Analysis of the Questionnaire ................................................................ 7
1.2.1. Question 1) What is the most common reason for M&A? ................ 7
1.2.2. Question 2) When companies consider Mergers & Acquisitions, how
would you rate the importance of the “strategic fit”, the “financial fit”
and the “cultural fit” of the companies? ............................................. 9
1.2.3. Question 3) Do cultural differences often prove to be an obstacle? ..
...................................................................................................... 11
1.2.4. Question 4) Please rate the importance of intercultural management
in case of international Mergers and Acquisitions. .......................... 12
1.2.5. Question 5) Which activities are most often used for intercultural
training? .......................................................................................... 13
1.2.6. Question 6) How much time is usually scheduled for intercultural
training? .......................................................................................... 16
1.2.7. Question 7) Would you consider the intercultural training as sufficient
in most cases? ................................................................................ 18
1.2.8. Question 8) When would you recommend starting with the training?
...................................................................................................... 18
1.2.9. Question 9) What is the most common reason for the failure of
Mergers and Acquisitions? .............................................................. 20
1.2.10. Question 10) How would you rate the influence of cultural
misunderstandings on the failure of M&A? ...................................... 22
1.3. Conclusion ........................................................................................... 23
Intercultural Aspects of Mergers & Acquisitions
Seite 5
1. Study on the importance of intercultural
training in case of international M&A
1.1. Introduction
In order to create an impact and to be able to assess the real situation, it was
necessary to conduct a study on this topic. We decided to contact experts in this
field: People who deal with M&A on a regular or even daily basis but are not
directly involved with the companies. Consultants offer their services to companies
conducting mergers or acquisitions and experience and are likely to know about
problems that often occur and might be able to rate the importance of intercultural
training for M&A and also evaluate the influence of intercultural misunderstandings
on the failure of M&A. Moreover, there are people who analyze transactions but do
not consult other companies directly. Since they are not “personally” involved in an
M&A they would also have a more objective opinion.
We created a questionnaire with 10 different questions dealing with the importance
of intercultural management for M&A transactions. In order to make answering our
questionnaire as simple as possible for the people involved the questions were
included in an PDF file with the option to check boxes, fill in information, save data
and even send it back automatically. For consulting companies/experts in German
speaking countries we had a German version available. This questionnaire was
then send via email to a number of different consulting companies all over the
world, which were at least to a certain degree specialized on M&A consulting. The
addresses were obtained from the internet. Of course we also included a covering
letter in which we kindly asked the recipients to sacrifice a few minutes of their
time to answer our questionnaire, explained who we were and also offered to
share our results. The reactions to our request were quite different. Certainly, one
has to consider the fact that many companies receive a vast number of emails and
have to cull so that we did not receive any answer at all in most cases.
Intercultural Aspects of Mergers & Acquisitions
Seite 6
However, the replies we got were generally very positive. Some people showed a
great interest in our study, shared helpful comments, attached some additional
documents and even offered help and assistance. We greatly appreciate that and
would like to thank everyone for that. Most people who filled in the questionnaire
were also interested in receiving the results. We also got a few answers that they
would not deal with that specific topic or would not feel qualified enough to answer
our questionnaire. Generally, the response rate was higher for consulting
companies who also consult on or deal with intercultural affairs rather than only
strategic and financial matters.
In our first attempt we contacted around 70 companies/people but only received
four completed questionnaires and we therefore decided to send around a kind
reminder a few weeks later. Since this number was not sufficient at all for a
statistical analysis and evaluation we sent it to other people and consulting
companies. We also filled in contact forms and asked to be allowed to send them
our questionnaire. Finally, we started a third attempt in the beginning of August.
Generally, the response rates for the second and the third attempt were
comparably higher than for the first one. In the end we received 22 completed
questionnaires. Mainly consultants participated but also two professors from
different universities who deal with the topic as well as intercultural experts.
We would like to warmly thank everyone who took the time to participate!
Intercultural Aspects of Mergers & Acquisitions
Seite 7
On this map the list of countries and the individual number of returned
questionnaires can be seen:
Figure 1: List of participating countries1
1.2. Analysis of the Questionnaire
1.2.1. Question 1) What is the most common reason for
M&A?
Before focusing on the importance of the (inter)cultural part of Mergers and
Acquistions, we wanted to examine why companies choose Mergers and
Acquisitions as a strategy.
Generally, the decision is rather based on economic than on personal reasons2
and no manager would conduct an M&A out of philanthropic motives to save
1 Own illustration
Intercultural Aspects of Mergers & Acquisitions
Seite 8
another profitless company from bancruptcy. The aims of the shareholders, who
are more interested in an increased company’s value, are also different from the
managers’, who are focused on an increased income and power as well as a safe
job.3
A majority of almost 60% of our recipients opted for “Gaining a better market
position” as the most common reason for M&A transactions. Acquiring or merging
with another company allows the two parties to combine their market shares.
Moreover, when both companies have been working in the same field, the number
of competitors is reduced by the transaction and in case companies have not been
competing, new market shares in a new field/area can be gained.
“Maximising profit” is also related to this, since a better market share should also
result in a higher profit. However, reduced cost, e.g. administrative, production and
personnel, combined skills and technologies, economies of scale,4 etc. can
contribute to a higher profit. In our questionnaire, more than 20% chose this
option.
“Others” came third with 13.6% and this includes “growth” as well as a
combination of factors.
Less than five percent thought the “integration of new product ranges” to be the
most common reason. An example for this consideration might be the acquisition a
company which has already developed a product (range). This could be more
cost-effective than developing similar products.
No-one thought “promotion of new technologies” to be very important for the
initiation of new M&A transactions.
2 Merger and Acquistion Market is thriving, Westchester County Business Journal, Vol. 39 Issue
32, p. 6, 2000, New York 3 Glaum, M.,/ Hutzschenreuter, T (2010).: Mergers & Acquisitions – Management des externen
Unternehmenswachstums, p. 55, Kohlhammer, Stuttgart 4 Mergers and Acquistions, International Value Addes Researchers, JN Heerlen, found at:
http://www.i-var.com/images/pdf/mergers%20and%20acquisitions.pdf [viewed 2011/08/31]
Intercultural Aspects of Mergers & Acquisitions
Seite 9
We are aware of the fact that the individual reasons for M&A are as diverse as the
companies themselves, however, the result shows that they are generally initiated
by the aim to raise the profit and strengthen and improve the company’s economic
situation.
Figure 2: Question 1) What is the most common reason for M&A?
Others:
- There is no single answer that applies to all cases
- Growth
- Different visions, methodologies and strategies
1.2.2. Question 2) When companies consider Mergers &
Acquisitions, how would you rate the importance of
the “strategic fit”, the “financial fit” and the “cultural
fit” of the companies?
This second question was meant to analyze the importance of the cultural fit of
companies considering a merger or acquisition in comparison to the traditionally
more business-related factors, strategic and financial fit. For all three options our
respondents could choose between “Very important”, “Important” and “Less
important”.
59,1%
4,5%
22,7%
0,0%
13,6%
Gaining a better market position
Integrating new product ranges
Maximizing profit
Promotion of new technologies
Others
Intercultural Aspects of Mergers & Acquisitions
Seite 10
The strategic fit describes the similarities between the companies, matching goals5
and common experiences but also on the relatedness in terms of product
markets6. Financial fit refers to financial concepts of both sides and the analysis of
the financial and the profit situation, what would also be relevant for the Financial
Due Diligence.7 Will these concepts fit together or will the discrepancy be too big?
The cultural fit describes the degree of compliance of values, practices8, beliefs,
attitudes and behaviors between employees and the organization9 but can be also
used for the different organizations in M&A. A Cultural Due Diligence can help
identifying the own as well as the other culture, show similarities and reveal
potential risk factors.
Figure 3: Question 2) When companies consider M&A, how would you rate the importance of the
strategic, financial and cultural fit of the companies?
5 http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-14 [viewed 2011-08-31]
6 Haagedorn, J. Duysters, G. (2002): The Effect of Mergers and Acquisitions on the Technological
Performance of Companies in a High-tech Environment, Vol. 14 Issue 1. London: Technology
Analysis &Strategic, p.70 7 Glaum, M., Hutzschenreuter, T (2010).: Mergers & Acquisitions – Management des externen
Unternehmenswachstums. Stuttgart: Kohlhamer, p. 124-125 8 http://www.grosse-hornke.de/glossar.html [viewed 2011-08-19]
9 http://www.eventrecruitment.com.au/articles/mice%20DEC07%20Recruitment.pdf [viewed 2011-
08-19]
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
80,0%
90,0%
Strategic Fit Financial Fit Cultural Fit
86,4%
50,0%
27,3%
13,6%
50,0%
40,9%
0,0% 0,0%
31,8%
Very important
important
Less important
Intercultural Aspects of Mergers & Acquisitions
Seite 11
The strategic fit was considered “very important” by the vast majority of 86% and
the rest opted for “important”. Whereas none of them rated neither the strategic
nor the financial fit as “less important”. For the latter the opinions were
homogenously distributed between the first two options.
For the cultural fit the situation looks different, since it was considered “less
important by almost one third. The majority chose “important” and around 27% the
first possibility.
Therefore we can conclude the cultural fit is generally appraised less important
than the financial and especially the strategic fit. The importance of the strategic fit
was also a result of the CEO Survey: Mergers and Acquisitions (1997) conducted
by Bain & Company during the Business Week Symposium of Chief Executive
Officers in the USA10. 94% of all respondents considered the strategic fit to be a
very important factor for the success or failure of an M&A transaction.
1.2.3. Question 3) Do cultural differences often prove to be
an obstacle?
Even though many companies do not consider the cultural fit as important as the
strategic and financial fit – or even far less important, the experts agree that
cultural differences prove to be an obstacle when conducting an M&A. Less than
10 percent chose “No”.
10 http://www.bain.com/publications/articles/ceo-survey-mergers-acquisitions-the-1997-business-
week-symposium-of-ceos.aspx [viewed 2011-08-19]
Intercultural Aspects of Mergers & Acquisitions
Seite 12
Figure 4: Question 3) Do cultural differences often prove to be an obstacle?
That already shows that there must be a contradiction between the companies’
considerations beforehand and the situation during the M&A process when these
cultural differences might result in slowing down the process or maybe even
bringing it to a halt.
1.2.4. Question 4) Please rate the importance of
intercultural management in case of international
Mergers and Acquisitions.
We then asked the respondents to rate the importance of intercultural training
during international mergers and acquisitions on a scale from 1 (very unimportant)
to 6 (very important). Less than ten percent thought intercultural training to be
quite or even very unimportant (1-2). One third chose 4 and 5 and the majority of
almost 60 % considered it to be very important.
90,9%
9,1%
Yes
No
Intercultural Aspects of Mergers & Acquisitions
Seite 13
Figure 5: Question 4) Please rate the importance of intercultural management in case of
international Mergers and Acquisitions.
An average score of 5.09 was achieved, which shows that overall our respondents
assess the intercultural training as very important. This also shows a discrepancy
between the results of the second question which shows that the cultural fit is
considered often rather less important by the companies. Intercultural training
could, however, help improving the cultural fit by creating an understanding and
acceptance.
1.2.5. Question 5) Which activities are most often used for
intercultural training?
(More than one answer possible)
Intercultural training involves a number of different activities, from rather passive,
like briefings, to more participative ones, e.g. role plays.11 Generally, a distinction
can be made between information-, culture- and interaction-orientated training.12
However, which ones do companies choose during a merger or acquisition? Since
11
Rothlauf, J. (2009) Interkulturelles Management, 3rd edition, München: Oldenbourg, p. 302 12
Ibid
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
Rating of the importance - Average rating: 5,09
4,5% 4,5% 0%
18,2% 13,6%
59,1%
1 (very unimportant)
2
3
4
5
6 (very important)
Intercultural Aspects of Mergers & Acquisitions
Seite 14
in most cases more than one training method is employed, it was possible to tick
more than one answer.
The activities which seem to be used most often are staff briefings. Of course they
can differ in length and intensity but it is generally a lecture from an expert or/and
superior informing the staff about things that might change and things one has to
take care of when dealing with people from the other culture. The staff might also
get the chance to raise questions. Almost 70% of the recipients chose staff
briefings.
Intercultural team buildings came second with a difference of approximately five
percent. When companies merge or one company is acquired by another, this
often results in people from different cultures having to work together in teams.
Like everywhere else cultural differences can lead to misunderstandings and a
stagnation of work. Intercultural team buildings aim at helping teams to find
similarities, to understand their differences, to overcome their disagreement and to
find a common ground on which to base the teamwork. In the end, the team
should be able to work more effectively- and productively and use intercultural
synergy effects.13 This form of intercultural training is far more participative since
people work directly together with people from other cultures.
Respectively 50% opted for coaching for managers and skill training for
intercultural communication and negotiation as often used activities. The former
aims at training the people who have to deal with the other side first and
intensively in order to agree on the terms of the contract and find a common goal
and strategy. If they fail the whole transaction is most likely to fail as well.
Therefore they might be the first ones to receive intercultural training specifically
adapted to the upcoming challenges and their background. Moreover, language
lessons can be involved. The latter acknowledges the obstacles and different ways
that communication and negotiation can be for the success of an M&A. In order to
13
http://www.kwintessential.co.uk/cultural-services/articles/intercultural-teambuilding.html [viewed
2011-08-29]
Intercultural Aspects of Mergers & Acquisitions
Seite 15
resolve conflicts and find agreements, it is necessary to create shared
understandings. Nike Carstarphen also called conflict resolution “the art and
science of relationship building and agreement building.” 14
Less than one fourth of the people questioned thought role plays to be among the
most popular intercultural training activities for M&A transactions. Situations which
might occur when dealing with people from the other company can be trained,
explanations, why the counterpart would react in a certain way, can be given and
the appropriate behavior can be practiced. This might involve apparently obvious
things like greetings and small talk. Afterwards real-life situations can be handled
more easily and confidently.
Less than ten percent chose the option “others” and listed intranet, e-learning,
language and mobility as intercultural training activities. Of course the intranet and
e-learning offer many possibilities for self-studying and the opportunity to broaden
one’s mind and gain more knowledge for interested people apart from the
compulsory training. However, the effectiveness depends on people’s self-
discipline and maybe even their willingness to spend their free time on that.
Language training is a very important point which might also be integrated into
other activities, e.g. the coaching for managers. It is necessary to have a common
basis of communication but also to have at least a basic knowledge of the
counterpart’s mother tongue, especially for executives. The term “mobility” might
involve a number of different activities but in this case it is most likely to be a visit
of the other company in order to gain a first-hand impact.
Only one person (4.5%) thought that there are no intercultural training activities
used for most international M&A.
One can conclude that for the vast majority of international M&A transaction some
kind of intercultural training is deployed. Despite the fact that certain activities, e.g.
staff briefings seem to be used rather frequently, the specific choice of intercultural
training methods used has to be adapted to the individual needs and prior
experiences of both companies. Most training methods are also most likely to be
14
Carstarphen, N. (2004): Intercultural Communication and Diplomacy, Slavik, H. (Ed.). Malta: Diplo Foundation, p. 177
Intercultural Aspects of Mergers & Acquisitions
Seite 16
deployed separately for each side instead of combining them, like for intercultural
team buildings.
Figure 6: Question 5) Which activities are most often used for intercultural training? (More than one
answer possible)
Others: intranet, e-learning, mobility, language
1.2.6. Question 6) How much time is usually scheduled for
intercultural training?
Intercultural training cannot only differ in the choice of training methods but also in
the length of time scheduled for it. Similar to the prior question there would be no
answer suiting all cases. However, we wanted to determine a generalized result.
We only obtained 21 answers, since one person stated it would be impossible to
give a universal answer. When “none” was chosen for question 5, there would be
also “none” for this question.
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
68,2%
22,7%
63,6%
50,0% 50,0%
9,1%
4,5%
Staff briefings
Role plays
Intercultural team buildings
Coaching for managers
Skill training for intercultural communication and negotiation
Others
None
Intercultural Aspects of Mergers & Acquisitions
Seite 17
Almost 50% of our recipients estimated the training in most cases to last up to one
single day. Less than 30% chose up to one week and 19% opted for more than
one week. There was a remaining approximate five percent resulting from
question 5 for “none”.
Figure 7: Question 6) How much time is usually scheduled for intercultural training?
A length of up to one day or even only a couple of hours seems to rather short and
indeed a minimum duration of three days is actually suggested by experts.15
Training which lasts one day or less is most likely to be rather superficial and does
not offer any real possibilities for reflection and further coaching.
Most certainly, intercultural training is expensive for the companies and during that
time staff and manager cannot fulfill their normal duties and there is no need for
every single employee to receive intensive intercultural training. However, once
people are involved in the M&A transaction and have to deal with “the other side”
the money invested in their intercultural training will be far less than the loss in
case of a failure of the M&A due to cultural misunderstandings.
15
Guo, X. (2008): Intercultural training models for U.S. businesses in China, p. 24, ProQuest
Information and Learning Company, Ann Arbor
47,6%
28,6%
19,0%
4,8%
≤ 1 day
≤ 1 week
> 1 week
None
Intercultural Aspects of Mergers & Acquisitions
Seite 18
The more the languages and cultures are different, the more time has to be spent
on intercultural training, and vice versa. It also depends on previous trainings and
experiences with these cultures of the companies.
1.2.7. Question 7) Would you consider the intercultural
training as sufficient in most cases?
We furthermore wanted to find out whether the intercultural training during most of
the M&A transaction would be sufficient to prevent unnecessary cultural
misunderstandings.
An outweighing majority of more than 80% did not consider it to be sufficient. This
also relates to the prior question where also almost 50% opted for an average
length of the intercultural training in the companies of up to one day, despite the
fact that three are advised by experts.
Figure 8: Question 7) Would you consider the intercultural training as sufficient in most cases?
1.2.8. Question 8) When would you recommend starting
with the training?
There are several possibilities when to start the intercultural training, since the
M&A transaction can be divided into three different phases: Preparation -,
18,2%
81,8%
Yes
No
Intercultural Aspects of Mergers & Acquisitions
Seite 19
Transition - and Integration Phase16. The terms Pre-Merger -, Transition - and
Post-Merger Phase can also be found.17 When would the experts recommend
starting with the intercultural training?
The majority of almost 64% recommends starting the training during the
preparation phase. In this phase an analysis of the own company and the
competitive environment is conducted and a strategy, criteria and the aim are
developed.18
The transition phase includes contacting, negotiating, evaluations, the Due
Diligences and the conclusion of the contract.19 Approximately 14% of
respondents would start the intercultural training in this phase.
For the last phase, the integration phase, about 22.7% advise to start the training
only then. It involves the merging of the different organizations, corporate cultures,
leadership styles, etc. The integration process is especially difficult and crucial for
the success of the deal.20 Now the rest of the staff, not only the executive
managers, is also involved.
Figure 9: Question 8) When would you recommend starting with the training?
16
Rothlauf, J. (2009) Interkulturelles Management, 3rd edition, München: Oldenbourg, p. 97-98 17
Bischoff, J. (2007) Nachhaltiges Change Management, Keuper, H., Groten, H. (ed.). Wiesbaden: Gabler Verlag, p. 64 18
North, K., Blanco, A. (2003): Wissen fusionieren – Wie Wissensintegration den Erfolg von Mergers & Acquisitions unterstützt, in: New Management, Vol. 4/2003, p. 37-38 19
Ibid. 20
Ibid.
63,6% 13,6%
22,7%
Preparation Phase
Transistion Phase
Integration Phase
Intercultural Aspects of Mergers & Acquisitions
Seite 20
One can conclude that it would be best in most cases to start the training during
the preparation phase. It might not be necessary to conduct staff briefing on
intercultural issues but it would be important to train the managers negotiating and
executing the deal and later involve the rest of the staff.
1.2.9. Question 9) What is the most common reason for
the failure of Mergers and Acquisitions?
M&A transactions can be a great success and result a higher turnover and
advanced or even new market share but it can also turn out to be quite the
opposite. Therefore it is important to analyze the reasons for the failure of M&A to
then evaluate the importance of cultural misunderstandings and maybe even the
lack of intercultural training. Naturally, the specific circumstances are different for
every merger or acquisition but it is necessary to generalize. We offered five
different options as well as the possibility to add an own one.
The two least important factors were financial problems, which were not chosen at
all, and personal difference was only considered to be influential by approximately
ten percent of all respondents. Of course, personal differences of the executive
managers who were supposed to be cooperating were meant. They could not
overcome their aversions and find and work for a common goal. Nevertheless,
these issues seem to be solvable for the majority of companies. However, different
economic goals and cultural misunderstandings seem to play a much more
important role and almost 30% opted for one of these two options.
The remaining third chose “Others”. The additional answers given can be summed
up as unfulfilled goals and expectations, a discrepancy between the strategies
which turned out to be too big and a combination of factors.
Intercultural Aspects of Mergers & Acquisitions
Seite 21
Figure 10: Question 9) What is the most common reason for the failure of Mergers and
Acquisitions?
Others:
- Different visions, methodologies and strategies.
- different long-term goals
- Paying too much
- Planned synergies not achieved
- A mix of many factors. The frequent failure to address the cross-cultural fit, as
closely as the legal and financial aspects, contributes immensely.
- different understanding of organizational culture in both sides which is
included CM
- Strategic misfit
Despite the fact that intercultural issues seem to be considered less important than
other factors in beforehand, it seems to play a decisive role for the failure of M&A.
It is not the single reason and our recipients do not agree on one but “Cultural
misunderstandings” rank among the two often chosen options.
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
35,0%
27,3%
9,1%
0,0%
31,8% 31,8%
Different economic goals
Personal differences
Financial problems
Cultural misunderstandings
Other
Intercultural Aspects of Mergers & Acquisitions
Seite 22
1.2.10. Question 10) How would you rate the influence of
cultural misunderstandings on the failure of M&A?
It has already become clear in the result of the ninth question that culture
misunderstandings have an impact on the failure of M&A. Since it does not
necessary have to be the main reason but might be the final straw, we asked our
respondents to rate the importance of cultural misunderstandings on the failure of
M&A on a scale of 1 (unimportant) to 6 (very important).
No-one chose one and only approximately 15% (4.5% respectively 9.1%) opted for
2 and 3.That already shows that almost 85% must have consider it quite to very
important. The options 4 and 5 received 27.3% each and the influence was
considered very important (6) by almost one third of the people.
Figure 11: Question 10) How would you rate the influence of cultural misunderstandings on the
failure of M&A?
This results in a average rating of 4.67 and one can conclude that cultural
misunderstandings can have a severe influence on M&A transactions. Therefore
intercultural training can contribute to a more successful deal and maybe even
0%
5%
10%
15%
20%
25%
30%
35%
Average score 4,67
0%
4,5%
9,1%
27,3% 27,3%
31,8%
1 (unimportant)
2
3
4
5
6 (very important)
Intercultural Aspects of Mergers & Acquisitions
Seite 23
prevent a failure. So far the topic generally has not been sufficiently
acknowledged.
1.3. Conclusion
After the analysis of the ten questions it becomes obvious that the majority of the
experts we asked agree that intercultural aspects have not yet been received
enough attention by most companies conducting an M&A. These transactions are
mainly initiated due to economic reasons and cultural aspects, mainly the cultural
fit is generally considered to be less important than the strategic and financial fit.
Nevertheless, cultural misunderstandings and the lack of intercultural awareness
can influence the progress of the transaction and in the end maybe even
contribute immensely to its failure.
Due to the fact that our number of participants was limited, we do not claim our
results to be universal, however, we received filled-in questionnaires from all over
the world and a clear tendency can be seen. Moreover, there are studies, which
came to similar results and emphasized the importance of culture.
An often cited study by KPMG (1999) found out that 83% of all cross-border M&As
failed to produce any benefit for the shareholders and over 50% actually destroyed
value’’. When looking for possible reasons researchers interviewed around 100
senior executives involved in international M&A and it was revealed that cultural
differences were mentioned as the “single biggest cause for the failure”. 21
Between 2002 and 2004 Lodorfos and Boateng conducted 32 interviews with
senior managers of 16 European large scale M&A deals in the chemical industry
and also found out that culture “plays a key role in the integration process and
21 Brannen, M., Peterson, M. (2009): Merging without alienating: interventions promoting cross-cultural organizational integration and their limitations, Journal of International Business Studies, Vol.40. East Lansing: Academy of International Business, p. 469
Intercultural Aspects of Mergers & Acquisitions
Seite 24
consequently the overall success of the M&A”. Moreover, ignoring the issues can
lead to severe problems.22
For quite a long time culture has been considered as a disturbing factor for M&A,
however, it also offers a lot of potential. Different experiences, methods and
knowledge come together and can, if managed properly, create a decisive
competitive advantage.23
Crucial for the success of the cultural integration is not a high number of
similarities, since even M&A between apparently similar partners fail24 - an often
mentioned example here is the case of Daimler and Chrysler25 - but the
identification of conflict potential and their consideration during the integration
process26. A study conducted by the Deutsche Gesellschaft für Personalführung
(German Association of Personnel Management) on the topic “Personnel
management in M&A project” in 2007 also showed that the economic success of
M&A especially depends on the “existence of an integration strategy, the project
management experience of the project leader as well as the preparation for the
cooperation with the new colleagues of the staff by working timely in mixed teams.
They also highlighted that the indicators and factors of success for national M&A
projects conform in a large part with those for international ones. However,
integrative measures are more likely for international projects.27 Even though we
concentrated our research for the study on international projects, it becomes clear
that the issue must not be ignored for national M&A.
22
Boateng, A. , Lodorfos, G. (2006): The role of culture in the merger and acquisition process, Management Decision, Vol. 44, Emerald Publishing Group Limited, Bingley, p. 1408 - 1411 23
Köppel, P. et al. (2011): Zu viele Fusionen scheitern - M&As trotz unterschiedlicher Unternehmenskulturen zum Erfolg bringen, M&A Review. Munich: GoingPublic Media AG, p. 109 24
Ibid. 25
http://www.midwestacademy.org/Proceedings/2009/papers/Matthes_35.pdf [viewed 2011-09-01] 26
Grosse-Hornke, S, Gurk, S. (2009): Erfolgsfaktor Unternehmenskultur bei Mergers & Acquisitions, FINANZ BETRIEB, Volume 2/2009. Düsseldorf: Fachverlag der Verlagsgruppe Handelsblatt GmbH, p. 100 - 104 27
Geighart, C. et al. (2007): Befragungsergebnisse der DGFP e.V. zum Thema „Personalmanagement in M&A-Projekten“, Praxis Papiere 2/2007. Düsseldorf: Deutsche Gesellschaft für Personalführung e.V., p. 31-32
Intercultural Aspects of Mergers & Acquisitions
Seite 25
Finally, neither should one make the mistake to blame intercultural problems for
every M&A failure and nor should the topic be over- or underestimated. It is
important to find the right balance between strategic, financial and cultural
aspects. The first two can also cause the project to fail. However, more careful
consideration is generally given to them.
Recommended