Comment réussir des fusions-acquisitions "cross-culturelles"?
Mergers and acquisitions continue apace in spite of an alarming failure rate and evidence that they rarely manage to benefit shareholders. Most completed takeovers damage one party: the company making the acquisition. Many studies made have all reached the same conclusion: around 65% of takeovers harm the interests of the acquiring company's shareholders. They do, however, often reward the shareholders of the acquired company.
Indeed, most of failed mergers suffer from poor implementation, and in half of the cases, senior management fails to take into account the different cultures of the companies involved. Melding corporate culture takes time, which senior management does not have after a merger. Most mergers are based on the idea of "let's increase revenues", but the company must have an efficient management team to succeed in that process. The nature of the problem is not so much that there is open warfare between the two sides. It is that the cultures do not meld quickly enough to take advantage of the opportunities. In the meantime, the marketplace has moved on.
Many consultants refer to how little time companies spend, before a merger, thinking about whether their organisations are compatible. The benefits of mergers are usually couched in financial or commercial terms: cost-savings can be made or the two sides have complementary businesses that will allow them to increase revenues. Mergers basically consist in compatibility, which means agreeing whose values will prevail and who will be the dominant partner. So it is no surprise that managers, as well as journalists, reach for marriage metaphors in describing them. We are convinced that defining in advance what success means for the merging companies is already part of their success to come, part of the durability of their union.
We are all interested in mergers because, statistically, an executive has nowadays 100% chance to be, at least once in his professional life, concerned by a merger, the firm he works for being acquired or acquiring another one. Studying Daimler-Chrysler, Renault-Nissan and Air-France-KLM, and confronting those three examples to different theories about mergers, has enabled us to understand and work on the deep and intrinsic relationship which exists between mergers and corporate culture in every firm, especially as these three M&As are different in many ways: they have either worked out, failed, or not been implemented yet.
We consider corporate culture as a whole of convictions, values, ways of behaving, assumptions and beliefs that are shared by employees, workers and managers of a firm, and define its running. The elements which differentiate corporate cultures are:
Power distance, individualism v. collectivism, uncertainty avoidance (career stability, formal rules, no tolerance for deviant ideas/behaviours, expertise…), masculinity…
(Geert HOFSTEDE: “Culture's consequences: International differences in work-related values”, 1980)
Basically, it is a "social contract" inside a firm, consisting of rules of behaviour and a cultural code. Thanks to this common code created by the founder of the firm and enriched by the successive generations, employees have the feeling they belong to a special group or organisation: they share a common vision of it. Moreover, they have a part to play in the elaboration and the evolution of these unwritten conventions. The more involved they feel in the firm, the better they will work and participate in the creation of profits. Thus, the attention managers give to the respect of corporate culture and to the necessity of its restructuring when negotiating and implementing a merger is vital. Indeed, without such an attention, the merger has very little chance to be successful, partly due to a strong negative reaction of its employees.
One must never underestimate the importance of psychological criteria when dealing with a merger, be it in small or big companies. Communication is determining between all the levels of the hierarchy, because fears and expectations of employees cannot be left apart without jeopardising the productivity of the merging firms. If so, the merger would be a failure and definitely useless. This leads us to emphasise the fact that a merger is a melting pot of technical as well as human skills, which make the success or the difficulties of the two merging firms. Corporate culture is therefore a competitive advantage for a firm, along with its technical performances. This is why it must be considered as a priority in the implementation of a merger.
The question we chose to work on is that of the skills necessary to “manage” an M&A. We have envisaged the word “to manage” in both of its meanings, in order words as “to succeed” and “to lead”, thus privileging the point of view of a board of directors confronted to a cross-cultural M&A, in the shape of recommendations concerning each stage of a merger: ASSESSMENT, NEGOTIATION and IMPLEMENTATION.
[...] He carried out individual interviews with trade-union representatives to explain why he was considering this merger with KLM : thus trade-unions understand better what he aims at doing through this merger and employees keep in touch with what is going to happen . In KLM, the CEO Leo Van Wijk explained the coming agreement to KLM's 250 senior executives and to the Dutch government Evaluating fears Both the French and the Dutch trade-unions such as UNSA or CFDT-Air France fear : - that the human factor might not be taken into account - that would-be synergies be inferior to what they are supposed to be - the uncertainty around the group's revenue in 5 years time - a quest for hyper-profitability (lay offs, relocation, plant closings ) Criticism in the Netherlands shows that this merger is considered as the loss of a national symbol Defining the status of the employees - KLM's employees are due to be protected at least for 5 years but those of Air-France also want to have the same advantages concerning job security - Lay-offs will be led in KLM 5. [...]
[...] As for corporate values, it appears that mergers are very difficult in culturally-distant or unfamiliar countries, for which acquisitions are recommended Assessment of the economic situation of the environment ( refers to the contingency approaches) and of that of the firms in order to define the repartition of power Air France-KLM : worldwide, and in particular in Europe, the flight industry experiences a slowdown. KLM is in debt : Debt/Gearing = revenue = - 146 million Market share (between 1998-2003) = - Air France is making profit : 2002 revenue = 120 million Market share (between 1998-2003) = + 28% This could lead to a struggle for power. [...]
[...] How they think, what is it they like to do, etc. The human content is crucial for an organization, and we do not manage it like an army.” Capability to translate complex global designs into commonly accepted practices. Example : what ABB has implemented : - Common official language - Common reporting system/headquarters/currency - Common set of company values - Regular global managers meetings/communication events - International assignments/rotation programs/cross-cultural teams - Sharing best practices/trainees/seminar-discussions - Recognition for behaviour that helps the group - Standardization rules 4. [...]
[...] interested ourselves for mergers because, statistically, an executive has nowadays 100% chance to be, at least once in his professional life, concerned by a merger, the firm he works for being acquired or acquiring another one. Studying Daimler-Chrysler, Renault-Nissan and Air- France-KLM, and confronting those three examples to different theories about mergers, has enabled us to understand and work on the deep and intrinsic relationship which exists between mergers and corporate culture in every firm, especially as these three M&As are different in many ways : they have either worked out, failed, or not been implemented yet. [...]
[...] At higher levels horizontal moves should be used to create challenges and opportunities” What does this phase require ? It is the ability to continuously identify and develop a critical number of professionals with a unique set of skills and multicultural outlook which leads to practical advantages of a multidomestic structure. Moreover, during the implementation phase, it is necessary to - keep thin headquarters base - avoid duplications across national markets and business - eliminate potential internal competition in overlapping areas Thus the key notions to be underlined are : speed, communication, practice and developing people Post M&A organizational design and the of management In the new structure, global control : scale economies degree of local autonomy : flexibility, responsiveness to the environment It is the “think global and act local” motto. [...]
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