Working Abroad - Cultural Differences impact Mergers and Acquisitions

According to a KPMG study, "83% of all mergers and acquisitions (M&As) failed to produce any benefit for the shareholders and over half actually destroyed value". It was cited that the overwhelming cause for failure "was the people and the cultural differences".

Difficulties encountered in M&As are amplified in cross-cultural situations, when the companies involved are from two or more different countries.

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 behaviour - the non-linear, often irrational world of human beings in the midst of change.
In the case of international mergers and acquisitions, the complexity of this process 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.

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Cultural Issues - Mergers and Acquisitions

Companies in Mercer Study "Very Concerned" about Top Talent Departure

Only a small number of companies analyze cultural issues as part of their integration plans for mergers and acquisitions, according to feedback from global human resource leaders attending Mercer’s M&A Ready™ workshops. Only 25 percent of respondents indicated their company had a process for addressing cultural issues to ensure more successful business integrations.

According to Mercer, most companies seem to have a strong awareness of culture and talent issues in M&A situations. Regarding the risk of top talent departing the organization following an M&A transaction, virtually all attendees said they were concerned, with 46 percent saying they were “very concerned.” When queried about the level of prominence of people issues in M&A situations, 64 percent of respondents said that people issues are more prominent today compared to one or more years ago.

“It’s a concern that well considered cultural integration plans and processes are seemingly absent in many organizations planning M&A deals,” said Chuck Moritt, senior partner in Mercer’s M&A consulting business. “While many acquisitive organizations are aware of culture-related risks that surface in transactions, few organizations are doing enough to mitigate those risks ahead of time.”

Need help or support with cultural issues?

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