‘Merger and acquisition deals’ (M&A deals) – these often imply potential opportunities and profits for business leaders, yet may invoke resistance and anxiety among employees, and create headaches for managers. Indeed, it is hard to argue that M&A deals, similar to other business deals, have certain business goals, be it access to a new market or technology, business growth or improvement of one’s competitive position, for example. In other words, an M&A deal can certainly be a good strategic decision. Unfortunately, this doesn’t make implementation any easier, as practically one needs to manage the integration of different units, which means staff relocations, changes within teams and possible cuts. Given human nature, especially our general reluctance towards change and uncertainty, none of the aforementioned sounds particularly enticing. Moreover, in the case of cross-border M&A deals there is also increased diversity and the need to merge different cultures.
With all these apparent issues, it comes as no surprise that failure rates of such deals are quite high. According to a relevant Aon Hewitt M&A survey, nearly 50% of companies do not achieve their deal objectives, and over 50% of companies lose some of their key talent along the process. The unexpected length of the integration process, cultural integration issues and insufficient attention to people issues are among the top five drivers that contribute to failure.
Hence, ‘what can be done to make cross-border deals more successful?’ and ‘how to bring cross-cultural teams together after the deal?’ seem to be very relevant questions to ask. These questions have been brought up in a recent Financial Times article, which I had the pleasure to be interviewed for as well.
Drawing on my own research interests and specific case studies I have worked on, my first suggestion is to look for bicultural or multicultural employees within both entities and encourage them to serve as linking pins in the process. As discussed in one of my earlier blog posts, being representatives of one or more cultures, such employees act as ‘bridges across cultural faultlines’ (Fitzsimmons et al., 2011) thus reducing ‘us versus them’ thinking and divisions within the group based on cultural affiliation. Although bi- and multicultural employees may be the starting point of enhancing a common identity, management should also invest time in creating shared goals and values. A great example of shared values is brought up in the FT article in terms of equality rights (e.g. gender) and respective policies. I totally support the recommendation of adopting company-wide policies on equality rights, which apply globally. Finally, management should create practical opportunities for integration by developing employees’ cultural intelligence, establishing communication channels, organising mutual visits, and supporting different collaboration possibilities.
In my opinion, another important ground rule for making M&A deals work should be to avoid destroying the assets that you are buying. While this appears to be a no-brainer, overly ambitious or biased integration objectives often lead to the loss of key talent in the acquired unit, and with it technical or local market knowledge. Therefore, it is wise to retain local leadership as much as possible and build on the strengths of the acquired entity.
All in all, M&A deals are not about simply issuing orders to leverage the new entity, but rather about helping people to adjust, integrate into the new culture and create a new social identity. As Mr Du Jingguo, a long-serving Haier executive, who has been involved in Haier’s acquisition and integration of Sanyo’s white goods business, puts it, ‘As the manager, I can issue an order, but if people don’t agree in their hearts, the order will be meaningless’.
Fitzsimmons, S. R., Miska, C., & Stahl, G. K. (2011). ‘Multicultural employees: Global business’ untapped resource’. Organizational Dynamics, 40, 3, 199-206.