The role of organizational culture in merging process

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The role of organizational culture in merging process

Mergers and Acquisitions (M&A) is the combination of assets and liabilities of two firms in order to form a one new firm in which the term acquisition means absorption of a smaller firm by a larger one and merge means the combination between firms at the same level all this with the purpose of “transform firms, and to contribute to corporate renewal” (Angwin, 2001) and Help a firm renew its market position at a speed not achievable through internal development

(Haspeslagh and Jemison, 1991).

During the past decades there have been some waves of merge and acquisition as you can see explained in the next chart.

The integration process can implies the reconstruction of a new social identity (Alzira, Wayne, Gerald 2003) and in that way the company can create value by acquiring in the next factors:

·         Economy of scale

·         Economy of scope

·         Increased revenue or market share

·         Geographical or other diversification

·         Resource transfer

Two organizational integration variables are particularly relevant in the acquisition process (Datta and Grant, 1990; Datta, 1991) :

- the motive for the acquisition (strategic fit and decision making process)

- the process of implementation

Managing the cultural differences has been proved as a more realistic and successful strategy in integration processes than finding the “ideal culture fit” (Alzira, Wayne, Gerald 2003).

For last but not less important, there are some cultural modifications embedded in the merge and acquisition process that managers may want to focus in order to understand the business environment they want to enter, the cultural modifications are:

1.    Support for a global view of business.

2.    Reinforcement of ethical behavior.

3.    Empowerment of employees to excel in product

4.    service quality.

According to the case studies (in class and in textbook), what are the practical steps to minimize the feelings of uncertainty normally expected by employees, and also to facilitate the learning process to occur between the two groups of people in their process of cultural and behavioral integration?

In a merge and acquisition process The success of a particular integration strategy depends primarily on:

• The manager’s ability to reconcile the need for strategic interdependence between the two firms.

• The need for organizational autonomy (Elsaa and

Veiga 1994).

• The existence of cultural fit

If a corporation follows this three primarily factors that assure an effective M&A integration strategy because based on the errors that Daimler and Mercedes made in their process due to the differences they had, they didn’t took into account the cultural differences and the market share and marker orientation each company has in their home country but at the end they knew how to go ahead and avoid all the troubles that those problems brought at the beginning of the process because they realized the roots of the problems or differences and they solved them in a successful way.

Bibliography:

• Alzira S., Wayne H., and Gerald V. (2003) “Challenges and opportunities in mergres and acquisitions: three international case studies – Deutsche Bank-Bankers Trust; British Petroleum-Amoco; Ford-Volvo”, Journal of European Industrial Training, Vol. 27 Iss:6, p. 313-321.
• Angwin, D. (2001) “Mergers and acquisitions across European borders: national perspectives on pre-acquisition due diligence and the use of professional advisers”, Journal of World business, Vol.36 No.1, p. 2-57.
• Datta, D.K. and Grant, J.H. (1990), “Relationships between type of acquisition, the autonomy given to the acquired firm, and acquisition process: an empirical analysis”, Journal of Management, Vol.16, p. 29-44.
• Elsaa, P.M. and Veiga, J.F. (1994), “Acculturation in acquired organizations: a force-fieldperspective”, Human Relations, Vol. 47 No. 4.
• Gitelson, G., Bing, J., Laroche, L (2001) Culture Shock, CMA Management.
• Haspeslagh, P.C. and Jemison, D.B. (1991) Managing Acquisitions, The Free Press, New York.
• Nahavandi, A. and Malekzadeh, A.R. (1998) “Acculturation in mergers and acquisitions”, Academy of Management Review, Vol.13, p.79-90.
• Nelson, D and Quick, J.C. (2009) Organizational culture. In Organisational Behavour: Science, the real world and you.