At the beginning of 2010 the United Nations Conference on Trade and Development (UNCTAD) reported a total volume of cross-border mergers and acquisitions (M&A) volume for 2009 of 239.9 billion US-dollars. Even if this sounds like a huge volume the global M&A market was considerably affected by the economic crisis and decreased by 66% compared to the volume of 2008 where we had a total volume of 706.5 billion US-dollars of cross-border sales (UNCTAD, 2010a). The following chart shows that international M&A’s play a significant role in todays economy.
Beside that a quarterly survey conducted by Hewitt Associates showed up that 54% of European headquartered organizations evaluated already completed transactions as not as successful as they were intended to be and did not reach the initial financial and strategic objectives (Hewitt Associates, 2010).
Why do companies still do international M&A’s even if it seems that they fail to reach their targets in so many cases? The target of this essay is to evaluate why M&A’s are still so important for businesses and to show up that the success of international M&A’s is dependent on more than the financial evaluation of the organisations involved.
Therefore this essay provides some basics on international M&A’s including types of M&A’s, according processes and expected benefits. Based on that it evaluates the human side of M&A’s and how this influences the successful implementation.
Table of Contents
1 INTRODUCTION
2 BASICS ON MERGERS & ACQUISITIONS (M&A)
2.1 Definition
2.2 The M&A process
2.3 Expected benefits of international M&A
3 THE HUMAN SIDE OF SUCCESSFUL M&A
3.1 Individual’s perception of M&A
3.2 The merger model of trust
3.3 Consideration of different organisational cultures
3.4 Aspects of cross-cultural communication
3.5 Leadership and management in cross-border M&A
4 CONCLUSION
Research Objectives and Themes
This essay evaluates the reasons for the high failure rate of international mergers and acquisitions by shifting the focus from purely financial assessments to critical human and cultural factors. It argues that successful implementation depends on addressing organizational culture, individual perceptions, and effective communication and leadership.
- The role of organizational and national culture in M&A success.
- Psychological effects of mergers on individual employees.
- The significance of trust within post-acquisition integration.
- Strategic cross-cultural communication and leadership styles.
Excerpt from the Book
3.1 Individual’s perception of M&A
As already discussed in the last chapter, an alliance focussing only on financial aspects is often not that successful as it should be. To be able to understand why this is the case one must consider how a merger or acquisition is received by all the individuals of acquired or merged companies. Engeli (2005, p. 103) stated that ‘a merger or acquisition is like a knife cutting into the lives of employees, drastically changing what they can expect of their future at their companies overnight. Therefore, employees experience a very high degree of risk during a merger or acquisition.’
The psychological effect of individuals can be even linked to the Kübler-Ross model of personal bereavement, where the response of the affected individual to a merger will pass through four stages (Mirvis, 1985):
1. Disbelief and denial
2. Anger through rage and resentment
3. Emotional bargaining beginning in anger and ending in depression
4. Acceptance
The gravity of this response makes it obvious that a merger or acquisition is highly stressful for each affected employee. Emotional concerns and effects are loss of identity, increased anxiety e.g. regarding future job prospects or geographical relocation, survival thinking which overrides organizational goals, loss of performance due to job search and finally family repercussions e.g. through working overtime (Cartwright & Cooper, 2001).
Summary of Chapters
1 INTRODUCTION: This chapter highlights the volume of global M&A activity and introduces the core problem that many transactions fail due to an over-reliance on financial metrics.
2 BASICS ON MERGERS & ACQUISITIONS (M&A): This section defines M&A, outlines the standard phases of the process, and discusses the traditional financial drivers behind such alliances.
3 THE HUMAN SIDE OF SUCCESSFUL M&A: This core chapter examines the critical psychological and cultural variables, including trust models, cultural integration, communication, and leadership, that determine the success of an acquisition.
4 CONCLUSION: The final chapter summarizes that while financial assessments are necessary, integrating the 'soft' human factors is the decisive element to increase the probability of a successful alliance.
Keywords
Mergers and Acquisitions, M&A, Organizational Culture, National Culture, Cross-cultural Communication, Leadership, Trust, Post-acquisition Integration, Change Management, Employee Perception, Globalization, Synergy, Corporate Strategy, Personnel Management.
Frequently Asked Questions
What is the primary focus of this work?
The work focuses on why many international mergers and acquisitions fail, arguing that success depends on more than financial evaluations.
What are the central themes of the essay?
The central themes include the psychological impact on employees, the role of corporate and national culture, trust building, and the importance of leadership and communication in transition phases.
What is the core research objective?
The objective is to demonstrate that integrating "soft" human factors into the M&A process is essential for achieving successful outcomes.
Which scientific approach is used?
The author uses a literature-based analysis of organizational behavior models, cultural frameworks (like Hofstede), and case studies to evaluate integration strategies.
What topics are covered in the main section?
The main section covers employee risk perception, the merger model of trust, cultural layer analysis, communication styles, and specific leadership dimensions during change.
Which keywords characterize this work?
Key terms include M&A success, organizational culture, cross-cultural leadership, trust, and change communication.
How does cultural similarity affect M&A?
Cultural similarity can facilitate integration, but since most mergers involve dissimilar cultures, the essay emphasizes the need for adaptation strategies rather than assuming compatibility.
Why is leadership considered critical in the M&A process?
Leadership is critical because it defines the future vision, inspires employees through change, and helps establish a sense of stability and trust during high-stress transitions.
- Quote paper
- Carmen Sum (Author), 2010, Success Factors of International Mergers and Acquisitions, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/208118
