Mergers and
acquisitions are important for the implementation of corporate renewal
strategy. The paper, A Model of the Influence of Culture on Integration Approaches andInternational Mergers and Acquisitions Performance, brings about
a theoretical framework of combing corporate culture and national culture
distance with synergy potential on different integration approach, and provides
with the theoretical explanation of M&A performance on premerger and
post-merger stages.
What type of
research was done for the model formation in this paper? The authors made a
research on the papers in the past twenty years, all of which relate to M&A
performance, integration approaches and cultural differences of such M&A
studies. This study fills the gap of former research not done with combining
all these variables simultaneously. The authors summarized the impact of
post-acquisition integration on performance from previous empirical research
papers between year1991 and year2004, and examined these researches on the
impact of integration with various performance measures. Moreover, after
examining a lot of papers regarding to the impact of different corporate and
national cultures on post-acquisition, the authors further summarize the key
findings by developing a theoretical model of the influence of culture on
various integration approaches.
The key findings
in this paper include seventeen propositions with the general explanation of
the model. The first proposition proposes that the correct level of integration
makes good performance of the merger. The second to the fifth propositions indicate
uncertainty avoidance affects integration approaches in post-acquisition.
Uncertain avoidance is defined as “the extent to which people with different
culture are made nervous by unclear or unpredictable situations.” Concerning the score on uncertainty
avoidance, the U.S. score is 46, French 86, Japanese 92, German 65, U.K. 35,
just name a few. For example, the
propositions indicate acquirers with low uncertainty avoidance would perform
partial absorption & full preservation for the highest performance, while
acquirers with high uncertainty avoidance would perform full absorption &
partial preservation for the highest performance. The six to the ninth
propositions indicate the culture in masculinity and femininity affects
post-acquisition approaches. For example, low masculinity means partial
absorption & full preservation for highest performance, and vice versa. The
tenth to thirteenth propositions tell that the levels of power distance
interrelate with post-acquisition approaches. The fourteenth to seventeenth
propositions refer to the culture of individualism and collectivism relating to
post-acquisition integration approaches. All of these mixed findings provide a
theoretical framework how acquirers from countries with different cultural
characters are implementing different integration approach to achieve the
highest performance.
The
process of mergers and acquisitions is of great significance for enterprise
development. The theoretical study in this paper implies that executives or
managers should have due scrutiny on target companies before mergers and
acquisitions. Good performance of mergers and acquisitions can make
corporations get bigger and stronger and occupy greater market shares in the
world market. However, mergers and acquisitions are not without risk, and the
key for success lies in the effective integration after mergers and
acquisitions. Of all, the cultures together with integration approaches play an
important role on the post-merger integration process. Corporate culture is the
basic and core part during corporate operations, which affects all levels of
corporate pre-and post-merger strategy.
References:
Weber, Yaakov, Shlomo Tarba, and Arie Reichel.
"A Model of the Influence of Culture on Integration Approaches and
International Mergers and Acquisitions Performance." Int. Studies of
Mgt. & Org. vol. 41, no. 3. (Fall 2011): pp. 9–24. Web. 22 Jul. 2012.
<http://prtl.uhcl.edu/portal/page/portal/LIB/HOME>.
Great Article Raymond. M&A are a vital part for any company to continue to grow but it also comes with its risk. The managers must not only look at whether the numbers make sense but also how will the corporate cultures of both firms will mesh. It has been seen that many times, managers don't seem to pay too much attentiong into that and it causes the merger to take more time and resources than necessary. I can think of the famous AOL/Time Merger. The cultures were completely different, on one hand you had AOL who was in a more relaxed enviroment and Time Warner has a more traditional enviroment. The merger was never a success and one factor was the both cultures were never able to merge effectively. Just recently Time Warner had to spin off AOL due to this culture failure. This article shows how much culture influences mergers. Great job on sharing this article with us.
ReplyDeleteThanks, Jose. You shared with us another good example. I agree with your ideas. Some research indicates that many M&A’s failure attributes to the poor integration for companies’ culture confliction. The motivation of M&A is primarily to achieve synergistic effect, including operating synergy and financial synergy. During this process, cultural integration performs a key function to achieve the goal. To make a successful M&A, executives and managers need to do much work in considering the sense of cultural identity of both parties in pre- and post-merger stage.
DeleteNice article. I believe that mergers and acquisitions are an aspect of business that will always be studied and new findings will always come out. There may be mergers and acquisitions that look great on paper and then just don't mesh and there may be mergers and acquisitions that look terrible on paper but end up being successful. I was part of the World Savings/Wachovia merger back in 2006. It looked great but Wachovia went under almost three years later. The cultures were similar but in the end it ended up being a terrible merger.
ReplyDeleteYes, Mark, you are correct. There are so many scholars are studying and making some search on M&A issue. This is a trend for some strong corporations to want to enlarge business in this way. So it is a big issue for many mangers to make a further study on. They need to have due scrutiny in this process because some unexpected risks are always there. Many companies want to increase the whole competitiveness in the way of M&A, but indeed a lot of them failed to achieve the goal.
DeleteGreat article Raymond, Merger & Acquisition are important for an organization to grow and make their business model more efficient. In the past few weeks in our class we saw that M&As made during low economy get high market evaluation in the future while M&As made when economy is high mostly get low market evaluation in the future. It is true that some M&As have failed if the organization have completely different culture. Alcatel(French) & Lucent(American) was one such tech merger and acquisition which failed due to culture.
ReplyDeleteYou are right, Vijeta. We actually reached many of such papers to talk about M&A, because it is really important issue to talk about and big decisions for companies to make. Culture has been mentioned in many occasions relating M&A strategy. Thanks for providing another example for a good understanding about this.
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