The Impact of Culture on Mergers

Introduction

Mergers and acquisitions are corporate strategies which facilitate the financing and management of operations concerning selling, buying, combining, and dividing organizations and their entities. These strategies are aimed at enhancing the rate of growth of the organizations involved while focusing on the joint venture. Mergers and acquisitions present a number of benefits to the organization. The most important one is the reduction of economic uncertainty. Moreover, mergers and acquisitions improve cost efficiency and this increases revenue as well as the market share of the organization. Other common benefits include the maximization of shareholders’ investments, elimination of redundant functions, and the reduction of competition (Pablo & Javidan, 2004).

Pre-merger Preparations

For any organization to get the benefits that mergers and acquisitions provide, they must have effective integration strategies to minimize economic uncertainty. Adequate attention has to be paid to the pre-merger preparations. Pre-merger preparations reduce the complexities that are associated with turning multiple enterprises into one. Inadequate preparations make mergers and acquisition to be more challenging than they really are. This happens when the team involved in their implementation skips critical steps in a rush to gain financial leverage and increase profitability. However, increased market share comes with bigger responsibilities, especially when the organization expands its operations into a new market (Ulijin, 2010).

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Culture has a great impact on merges of business enterprises. It predominantly influences the staff morale and consumer acceptability. According to a recent study by KPMG, about 83 percent of the mergers and acquisition fail to bring benefits to the shareholders of the organizations involved. In fact, more than half of these mergers lead to a reduction of companies’ market shares. This is especially true when two organizations happen to be based in different countries. Successful mergers and acquisitions are possible (Pablo & Javidan, 2004). However, this success requires effective strategies to facilitate operational change and adaptation to the new way of doing business.

As the management of organizations engages in financial evaluation of the assets determining their price, it is imperative to remember that mergers also involve human transactions, which are often accompanied by trauma, survival behavior, and emotions. The human aspect of engagement differs from the financial one due to its non-linear and irrational characteristics. These characteristics make it difficult to predict changes, especially when inadequate preparations are made. Alongside factors of political environment which significantly affect mergers, international acquisitions are complicated by differences among cultures. Individuals from different countries react to similar events and situations in different ways. In this regard, companies that engage in international mergers and acquisitions have to put these differences into consideration during the design stage because this increases the probability of success. The next section focuses on the impact of culture on the employees’ morale and consumer acceptability.

Employees Morale

Whenever mergers and acquisitions are announced, individual employees get curious as they do not know how such developments would affect them. As stated earlier, this is especially true when merging organizations come from different countries. Differences in cultures weaken employees’ commitment to their organizations. Consequently, this may lead some of them to quit the job and start working for other companies. This situation in its turn reduces the firm’s competitiveness. Employees might choose to change jobs because they tend to identify with specific groups and perceive them to be a reliable source of support. In countries like Italy and France acquisitions elicit emotions which prompt employee strikes. This is quite different from the manner in which such issues are handled in countries like Canada. The solution to this problem would be speeding up of the integration process as it helps to reduce anxiety and uncertainty. Delaying integration efforts makes employees’ worries to continue and increase. This situation disorients every stakeholder in the organization (El Hag, 2009).

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Consumer Acceptability

Lack of adequate information makes managements of merging organizations conceal information from their customers. Whenever the organization attempts to address the issues raised by the customers, the management may find the available information as one that cannot promote stakeholders’ interests. The situation gets complicated when merging organizations use different languages during their everyday operations. In fact, communication may break down even when the English language is used as the medium of communication (Carleton & Lineberry, 2004). This may be the case when one of the organizations feels that it needs more time to deal with the expectations of the loyal customers. Effective mergers and acquisitions are, therefore, possible in instances where consumers’ cultural beliefs and expectations are considered before several organizations are merged.

Conclusion

Avoiding the common pitfalls of the pre-merger preparations makes the processes of acquisitions and mergers easy and efficient. In this regard, today’s leaders must have the capacity to manage organizational change. They should have a clear strategy to accelerate the adaptation of employees when business deals involve organizations from different countries. When effectively tackled, the cultural and human issues that once divided two organizations are transformed to become their strengths. Consequently, productivity, growth, and economic value of the companies are sustained and profits for companies’ stakeholders are increased (Carleton & Lineberry, 2004).

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