...MANAGING CULTURAL INTEGRATION IN CROSS-BORDER MERGERS AND ACQUISITIONS Daniel R. Denison, Bryan Adkins and Ashley M. Guidroz ABSTRACT Cross-border M&A has become one of the leading approaches for firms to gain access to global markets. Yet there has been little progress in the research literature exploring the role that culture may play in the success of these ventures. Poor culture-fit has often been cited as one reason why M&A has not produced the outcomes organizations hoped for (Cartwright & Schoenberg, 2006). Cross-border M&A has the added challenges of having to deal with both national and organizational culture differences. In this chapter we review the literature on cultural integration in cross-border M&A and provide a framework designed to help manage the integration process throughout the M&A lifecycle. This framework presents culture assessment and integration as a crucial component to reducing poor culture-fit as a barrier to M&A success. Mergers and acquisitions (M&A) have become a central part of most corporate growth strategies, and an increasing portion of that M&A activity now spans national borders. Indeed, beyond a certain scale, one might say that all M&A is now cross-border M&A. For example, even a merger Advances in Global Leadership, Volume 6, 95–115 Copyright r 2011 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1535-1203/doi:10.1108/S1535-1203(2011)0000006008 95 96 DANIEL R. DENISON ET AL. between two large...
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...MANAGING CULTURAL INTEGRATION IN CROSS-BORDER MERGERS AND ACQUISITIONS Daniel R. Denison, Bryan Adkins and Ashley M. Guidroz ABSTRACT Cross-border M&A has become one of the leading approaches for firms to gain access to global markets. Yet there has been little progress in the research literature exploring the role that culture may play in the success of these ventures. Poor culture-fit has often been cited as one reason why M&A has not produced the outcomes organizations hoped for (Cartwright & Schoenberg, 2006). Cross-border M&A has the added challenges of having to deal with both national and organizational culture differences. In this chapter we review the literature on cultural integration in cross-border M&A and provide a framework designed to help manage the integration process throughout the M&A lifecycle. This framework presents culture assessment and integration as a crucial component to reducing poor culture-fit as a barrier to M&A success. Mergers and acquisitions (M&A) have become a central part of most corporate growth strategies, and an increasing portion of that M&A activity now spans national borders. Indeed, beyond a certain scale, one might say that all M&A is now cross-border M&A. For example, even a merger Advances in Global Leadership, Volume 6, 95–115 Copyright r 2011 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1535-1203/doi:10.1108/S1535-1203(2011)0000006008 95 96 DANIEL R. DENISON ET AL. between...
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...‘M&As: why don’t people ever learn from the mistakes of others? by William Richards Introduction Over the years, mergers and acquisitions research has identified the importance of leadership and workplace learning as critical determinants of M&A activities and outcomes. However, surprisingly little systematic attention has been paid to conceptualising or studying the impact and effect of either leadership styles or learning on the success of M&As – either in the academic or in the practitioner literature (Cartwright and Cooper, 2001) Although scholars and practitioners recognise that acquisitions frequently fail to live up to their potential (Larsson and Finkelstein, 1999), the impact of leadership on the outcomes of the acquisition process and the learning that takes place, has not been well developed or even widely recognised. A review of scholarly and practitioner focused writing on M&As suggest that while much has been written on the actual M&A process, others have only occasionally noted the critical importance of leadership and learning in the success or failure of M&As. Even in those cases where the leadership impact has been acknowledged, past work on M&As has neither examined nor proposed any details concerning what constitutes what learning that actually takes place during M&A or how it makes a difference. A review of academic and practitioner literature on M&A reveals that discussion of the primary determinants of M&A process and outcomes rarely ever...
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...Rationale/Motivation Over the past two decades, cross-border or international mergers and acquisitions (IM&As) have become the favored method of foreign direct investment (FDI). The form shows that IM&As go both ways: toward developing countries and from them, reshaping the world’s economic boundaries. Trends notwithstanding, researchers suggest that, overall, the expected financial benefits of M&As are often not recognized. The highest rate of failures has been linked mainly to the fact that “M&As are still designed with business organization and financial fit as primary conditions, leaving psychological and cultural issues as secondary concerns”. While as new countries start out into the free-market economic system, paying attention to cultural factors in IM&As is becoming essential. The wider cultural gap and the current trend of IM&Asbetween developed and developing countries increases the urgency of understanding the effects of civilization on the dynamics of IM&As and on issues such as corporate organization and local adaptation strategy. The present research is designed in response to this shortcoming. It examines the effects of culture on the outcome of IM&As and the variability of these effects during the different phases of an IM&A. The research focuses on the international aspect of cultural conflicts—the differentiating factor between domestic mergers and acquisitions (M&As) and IM&As. It measures success from an organization’s internal perspective, comparing...
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...MERGERS & ACQUISITIONS Ajit Kumar Mumbai, India Abstract Human Resource Management in Mergers & Acquisitions Organizations of all sizes and across all industry sectors are increasingly looking to M&A to support their global growth strategies. The primary objectives for M&A’s are to cut costs, broaden market shares or take advantage of each other’s synergies and most typically to accelerate growth. Yet several studies indicate that more than half of all M&A deals fail to meet management’s strategic, operational and financial objectives. The crux of the matter lies in the excessive focus on financial due diligence, risk assessments. Quite often, the people factor, i.e. issues that relate directly to people as workforce management and cultural integration, are left out of the due diligence process creating major challenges later during integration. In the past, HRM was expected to provide support in postintegration efforts, as well as increased business focus and knowledge to ensure that the full value of M&A deals is realized. For organizations, it important to believe in the fact that People are its key assets. However, today we realize that, mastering the softer issues is the hardest part of integration and has the strongest influence on an M&A’s long-term success. HRM professionals are expected to be ready to manage the people, opportunities and the risks associated in these transactions. Managing organizational change and business / culture integration requires...
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...MANAGEMENT’s PIVOTAL ROLE in MERGERS & ACQUISITIONS Ajit Kumar Mumbai, India Abstract Human Resource Management in Mergers & Acquisitions Organizations of all sizes and across all industry sectors are increasingly looking to M&A to support their global growth strategies. The primary objectives for M&A’s are to cut costs, broaden market shares or take advantage of each other’s synergies and most typically to accelerate growth. Yet several studies indicate that more than half of all M&A deals fail to meet management’s strategic, operational and financial objectives. The crux of the matter lies in the excessive focus on financial due diligence, risk assessments. Quite often, the people factor, i.e. issues that relate directly to people as workforce management and cultural integration, are left out of the due diligence process creating major challenges later during integration. In the past, HRM was expected to provide support in postintegration efforts, as well as increased business focus and knowledge to ensure that the full value of M&A deals is realized. For organizations, it important to believe in the fact that People are its key assets. However, today we realize that, mastering the softer issues is the hardest part of integration and has the strongest influence on an M&A’s long-term success. HRM professionals are expected to be ready to manage the people, opportunities and the risks associated in these transactions. Managing organizational change and business...
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...TABLE OF CONTENTS EXECUTIVE SUMMARY 3 MERGERS & ACQUISITIONS 4 DISTINCTION BETWEEN MERGERS AND ACQUISITIONS 5 TYPES OF MERGERS AND ACQUISITONS 7 Horizontal Merger 7 Vertical Merger 7 Co-Generic Merger 7 Conglomerate Merger 7 RECENT EXAMPLES 8 REASONS FOR MERGERS AND ACQUISITIONS 10 Growth of the company 10 Synergy 10 Diversification and expansion 11 Elimination of competition 11 × REASONS WHY MERGERS AND ACQUISITONS CAN FAIL 12 No common vision 12 Weak leadership and poor governance 12 Poor strategic fit 12 Cultural and Social Differences 13 Incomplete and Inadequate Due Diligence 13 Poorly Managed Integration 13 Overpaying the target company 13 Changing market condition 13 ARTICLE STATING REALITIES OF M&A for HR 14 SUCCESS MANTRA for M & As 15 Cultural integration 15 Change Management 16 Management resources 16 Role of HR in M&A’s 18 Three Stage Model of Mergers and Acquisitions 21 Stage 1-Pre-Combination (HR Issues): 21 Stage 2-Combination and Integration (HR Issues): 22 Stage 3: Solidification and Assessment (HR Issues): 22 Role of the HR Department in M&A Activity 23 INDUSTRY EXAMPLE – Schnieder 26 Challenges due to acquisitions 26 Industry Example – MTS 29 Conclusions 30 At the Company Level 30 At the HR Level 31 REFERENCES 33 EXECUTIVE SUMMARY Mergers and acquisitions, as a means of rejuvenating and restoring business, have become increasingly popular...
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...MBA Class of 2013 Concentration in Finance and Financial Institutions Corporate Development: Managing Acquisitions and Partnerships (A Management Perspective) Professor: Maurizio Zollo E-mail: maurizio.zollo@unibocconi.it Office: Via Roentgen, 1 - 4-A1-09 Phone: 02 5836 2525 Teaching assistant Emanuele Bettinazzi emanuele bettinazzi@phd.unibocconi.it Learning Objectives: Acquisitions and partnerships have become fundamental tools to manage corporate growth. No company today can afford to rely exclusively on organic development processes to fill its strategic gaps. However, realizing the expected value through external growth has proved to be far from obvious: value is being destroyed just as frequently (and copiously) as it is being created. In this course, we will discuss the factors leading to success and failure in corporate development processes, focusing on four different but interdependent set of questions: • When should acquisitions be preferred to partnerships (or vice versa) in the implementation of a given strategy? • How should the value potential and the risks connected to a given development opportunity be assessed? • How can the potential be translated into actual value creation through appropriate design and execution choices in the post-transaction phase? • What are the barriers to learning how to manage corporate development processes and how to remove them to ensure a rapid development of the required capabilities? The course is designed to cater...
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...analysis of the corporate strategy of FedEx Corporation relates to three specific issues in the corporate strategy case. The first issue is a critical analysis of the global express transportation and logistics industry. The second issue discusses about the mergers and acquisitions in transportation and logistics industry. The final issue is a critical review of the performance of FedEx in the events leading to the January 2000 reorganisation. In the first section, the global express transportation and logistics industry is an attractive sector based on the fundamentals of the sector given in the five forces analysis using Porter's framework. There are large barriers to entry, there are minimal substitutes that exist, industry is relatively disciplined, and the power of buyers and suppliers are mixed. FedEx is well placed in the sector given its core competencies and dynamic capabilities relating to its management and the functional areas of marketing, human resources and information technology and systems. In the second section, gives a brief knowledge about the benefits and limitations of merger and acquisition strategies in this industry. This also describes how effective was the 1998 Caliber System acquisition and where did it led the company do in its further years. In the final section, it is noted that FedEx performed poorly within its sector and given its capabilities, the firm was expected to have been more proactive in moving past its poor performance. Nevertheless...
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...Change and Culture Case Study I Elizabeth McCarthy HCS/514 April 1st 2013 Kendra Slatton, RN, MSN, CDE Practitioner Faculty University of Phoenix Online Change and Culture Case Study I For more than four decades, mergers have engrossed researchers. They are enticed by the increasing frequency and failure of mergers. Mergers and acquisitions are both precarious and complex. As they become more common, researchers are captivated in the inclusive effect a merger has on the internal and external cultures. From the initial announcement, to the long process of integrating the companies, researchers examine the changing dynamics of the parties involved. Those parties range from economies to individuals. Financial institutions and industrial corporations use mergers to increase profit and reduce cost. One outlook on mergers is that they provide quick opportunities to obtain new knowledge and resources. Conversely, for other employees thrill, gambling, changes, growth, anger, disposition, greed, and uncertainty altogether accompany a two party unification. The commonality of failure or weak performance of companies that undergo a major fusion leaves little to desire and unlimited skepticism. Lower-level employees are overcome with worries of personal threat, job insecurity, organizational change, and loss of personal identity within a new-pooled company (Miczka, & Größler, 2010). David Thyser agrees by stating, “Studies on M&A...
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...Critically Analyse the impact of Change Management and M&A’s on the dynamic business environment Contemporary Issues in Management Joshua Travers Submitted for: BA (HONS) BUSINESS STUDIES BOURNEMOUTH UNIVERSITY Date of submission: 13th December 2013 Joshua Travers i7943443 Introduction The author has interpreted the dynamic business environment to be all of the factors, both internal and external, which influence the function of a business. Internal factors include items such as the company's products or services, employees, assets, and marketing. External factors include competitors, stockholders, customers, and economic conditions (Investor Words 2013). This essay will explore how the two issues addressed in the title can impact the central theme; the employee. Failure of engaging with the employee has been highlighted as a major cause to why 70% (Keller and Aiken 2008) of change and 50% (Sher 2012) of M&A efforts fail. This common pitfall suggests that both of these issues impact heavily on the employee and vice versa. The author aims to critique change management and merger literature to provide an extensive view of these issues in the business environment. Once the relevant context is set, the essay will focus towards the employee perspective of these two issues and will apply significant theory to a range of recent examples within the realm of these topics. Change Management Change management can be defined as “the process of continually renewing...
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...operations on a relatively co-equal basis * Acquisition: a strategy through which one firm buys a controlling, or 100% interest in another firm with the intent of making the acquired firm a subsidiary business within its portfolio. After acquisition, management of the acquired firm report s to the management of the acquiring firm * Takeover: a special type of acquisition when the target firm did not solicit the acquiring firm’s bid for outright ownership * Friendly acquisition: the management of the target firm wants the firm to be acquired * Unfriendly acquisition (hostile takeover): the management of the target firm does not want the firm to be acquired (direct negotiations with the firm’s owners; tender offer; bear hug) Explain the popularity of acquisition strategies in firms competing in the global economy * There are seven reasons why acquisitions in firms competing in the global economy work * Increased Market Power: * This is the primary reason for acquisition * If a firm achieves enough market power, it can become market leader * Example: AT&T acquisition with T-Mobile made them in the lead with market share in w-ireless service providers * Also, not only would their market share increase, but their customers would increase by 1/3 and all cell towers and wireless spectrum that t-mobile had would also turn to AT&T * Horizontal Acquisition: the acquisition of a company competition in the same industry...
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...Essentials of Strategic Management Authors: David Hunger & Thomas. L. Wheelen Book Review by Asik Kathwala © www.hrfolks.com All Rights Reserved 1 The Essentials of Strategic Management “The Essentials of Strategic Management” provides us with a short, concise explanation of the most important concepts and techniques in strategic management. It is a rigorous explanation of many topics and concerns in strategic management. These concepts are clearly explained by citing various examples. Precisely the book deals with the following. • A strategic decision-making model based on the underlying process of environmental scanning, strategy formation, strategy implementation and evaluation and control. • Michael Porter’s approach to industry analysis and competitive strategy • Functional analysis and functional strategies. R & D and R & D strategies which emphasize the importance of technology to strategy and product-market decisions. • Executive leadership and succession, reengineering, total quality management, MBO and action planning. • Social responsibility in terms of its importance to strategic decision making. © www.hrfolks.com All Rights Reserved 2 Basics concepts of strategic management The study of strategic management Strategic management is the set of managerial decision and action that determines the long-run performance of a corporation. It includes environmental scanning (both external and internal), strategy formulation (strategic or long range planning)...
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...Telephone : (608) 298-0058 Mobile : (608) 692-2000 e-Mail : lcross@bus.wisc.edu or lj_cross@msn.com Office : Grainger 4281 Office Hours : 4 - 6 (before scheduled classes) by appointment Course Description and Objectives Few leaders would disagree that a firm’s performance is directly linked with their chosen strategy and their ability to implement that strategy. Traditionally, books and articles on strategy have focused on the development of a strategic plan, based on situational and competitive analyses and forward-looking forecasts. In today’s world, these traditional methods are no longer sufficient to address rapidly changing environments and the challenge of executing global strategies. This course will explore the latest research and management techniques for developing a comprehensive integrated strategic plan and for managing implementation of the plan in dynamic environments. The key objectives of the course are: • To provide a clear understanding and framework for dynamic strategic analysis and formulation. • To establish clear relationships between strategy formulation and...
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...INTERNATIONAL BUSINESS MACHINES (IBM) International Business Machines (IBM) is a leadingcompany in global technological products and services. It specializes in services, software, systems, fundamental research and related financing. This mix of businesses and capabilities together provide integrated solutions to the company’s clients (ibm.com). IBM Business Strategy In keeping with the business strategy perspective, an organization’s competitive advantage lies in its ability to produce or get resources and competences, "take a strategic position in a market and implement a competitive strategy that takes into consideration the opportunities and threats in the external environment” (Porter, 1980). Applying a business strategy that is coherent increases competitive advantage by influencing organizational outcomes and creates superior performance. IBM has successfully incorporated this perspective. The 2014 Annual report states that IBM’s strategy continues “to be one of innovation and a constant drive to deliver higher value for our clients”. This global strategy is positioned on three pillars: data, cloud, and engagement. Pillar 1 - the company will use data to transform industry and professions. It reads: “We are making markets by transforming industries and professions with data”. According to IBM data is increasing capability, rapidity and diversity in an exponential manner and is emerging to be a novel global natural resource. It has embraced data as the...
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