Q.1 What are the cultural aspects involved in a merger. Give sufficient examples.
Answer : Merger success is possible; however, being part of the 17% that succeeds, rather than the 83% that does not deliver, requires more than insight. Merger success is based on acceleration, concentration and creating a critical mass for operational change (adaptation).
Up to the point in the transaction where the papers are signed, the merger and acquisition business is predominantly financial – valuing the assets, determining the price and due diligence. Before the ink is dry, however, this financially-driven deal becomes a human transaction filled with emotion, trauma, and survival behavior – the non-linear, often irrational world of human beings in the midst of change.
The seven pitfalls represent the critical and vulnerable areas of the M&A transaction. These areas must not only be valued for their negative impact on the critical success factors that drove the “deal”, they are the very agenda for the organization’s action in the critical first 90 days of the new entity.
In the case of international mergers and acquisitions, the complexity of these processes is often compounded by the difference in national cultures. People living and working in different countries react to the same situations or events in very different manners.
Therefore, a company involved in an international merger or acquisition needs to consider these differences right from the design stage if it is to succeed.
The concept of time is also related to culture. While long-term in North America tends to mean three years, it means up to 30 years in Japan. Consequently, Japanese strategy discussions are likely to take into consideration events that Canadians consider irrelevant, since they are expected to take place beyond the Canadian planning horizon.
Space is also relative. In an increasingly virtual world, those not “connected” in the same space and time feel disconnected from the decisions and the center of the action. Irregular and incomplete communications at headquarters becomes a daunting challenge for those who live in different time zones, regions, countries and organizational units.
Only a new culture can create the context for true change to happen and hold. Changing culture means changing behavior. One of the quickest way to effect change and create the new company is to place in all key positions those individuals who are true representatives of the new culture and who can lead effectively people on both side of the company’s cultural divide.
These pitfalls of mergers and acquisitions challenge today’s leaders to a new standard of managing change. The strategy is clear – accelerate, concentrate, adapt, and in the case of international M&As, consider cultural differences. The human and cultural issues that separate the 17% from the 83% are not about some abstract values or the “soft stuff”, but the concrete reality of productivity, economic value and sustained growth.
Q.2 What are the sources of operating synergy?
Q.3 Explain the process of a leveraged buyout.
Q.4 What are the basic steps in strategic planning for a merger?
Q.5 Study a recent merger that you have read about and discuss the synergies that resulted from the merger.
Q.6 What are the motives for a joint venture, explain with an example of a joint venture.
