|
cultural clash
in mergers
and acquisitions
Mergers and acquisitions are a fact of life intoday's highly competitive global business envi-ronment. Unfortunately, statistics indicate thatup to one-third of mergers fail within five years,and as many as 80 percent never live up to theirfull expectations.
A great deal of evidence indicates that the ultimatesuccess of mergers and the amount of time it takesto get them on track is determined by how well thecultural aspects of the transition are managed.
This article provides insights on how to system-atically and consciously avoid cultural clash togain the most synergy from any merger oracquisition.
By Larry SennMergers and acquisitions are a An article in the Los Angeles Times as 80 percent never live up to their fulltitled, "After Back-Slapping Wanes, expectations. The majority of mergerkey part of many organiza- Mega-Mergers Often Fail" concluded that shortfalls are due to human factors, not"Perhaps more than anything else, senior to quantitative analysis. "You can run alltions' strategies. Often billions management stumbles over cultural your discounted cash flows and have theof dollars are at stake, as well issues." The article noted that the most numbers come out perfectly, but it's theimportant issue is trust. "Along with culti- human resources side of a merger oras the very future of the vating trust, the keys to success in pulling acquisition that spells failure or success."organizations and the execu- together companies are crafting a shared (Training magazine)vision, developing a precise transitiontives who are coordinating the plan, which includes more than structure It's interesting to note the parallel in theand processes, and avoiding the common divorce rate in America and the fallout inmerger. Unfortunately, more pitfall of focusing so much on the merger mergers. The number of divorces eachoften than not, the benefits of details that customers (and employees) year is approximately 50 percent of theare neglected." number of marriages. The number of suc-mergers or acquisitions fail to cessful mergers is about the same.materialize or fall short of While it is clear that successful mergersand acquisitions must be based primarily The Importance of Addressingexpectations. on strategic, financial and other objective the Impact of Culturecriteria, ignoring a potential clash of cul-Learning to systematically and consciously tures can lead to financial failure. Far too Since the human factor is so critical, it isavoid cultural clash is a necessary skill often, cultural and leadership style differ- important to understand the role of thisbecause mergers are a fact of life in busi- ences are not considered seriously phenomenon and to address it in eachness. One reason is the continuing con- enough or systematically addressed. Many phase of the merger or acquisitionsolidation of industries. Phone companies, acquisitions that looked very promising process.cellular firms, utilities, oil companies, from a strategic or financial viewpointfinancial services firms, insurance compa- ultimately fail, require major surgery Over a period of time, organizations, likenies, health care organizations, retailers, and/or extensive subsequent hand-hold- people, develop distinctive and uniquedefense and electronic firms, and dozens ing because these "soft" issues were neg- personalities. This personality of theof others are a part of this consolidation lected. organization has been referred to mosttrend. often as corporate culture. An individual'sEvidence of the Magnitude personality is made up of one's habits,Historical industry-shaping mergers are of the Challenge beliefs, values and behavioral traits. Acommon today. Examples include the company's culture is also made up of itstelecommunications industry, with SBC's Most articles written about mergers men- habits, values system, customs and normsacquisition of AT&T, Sprint and Nextel, tion cultural compatibility as an obvious that govern behavior within the organiza-Cingular and AT&T Wireless, and Verizon's challenge. The AOL/Time Warner merger tion. The culture reflects the unwrittenacquisition of MCI. never lived up to expectations. The con- ground rules of behavior, or simply "thecept of leveraging the content and distri- way we do things around here."In retailing, the Federated acquisition of bution advantages that each firm broughtThe May Department Stores Company to the deal sounded great,... [download for more]
|
