Chapter 8: Human Resource Management in Cross-Border Mergers and Acquisitions

1. Why is it that the role of cultural difference in influencing the success or failure of an M&A may be exaggerated?

The recent research shows that cross-border M&As are not less successful than domestic transactions. Cultural distance can have positive or negative effects. There is even some evidence that the success rate of cross-border deals may be higher than domestic deals. Many companies that engage in cross-border M&As have prior experience of M&A transactions and integration.

2. A useful way of conceptualising M&As is to consider their desired end-state. What are the five end-states according to Marks and Mirvis (1998)? Briefly define each one.

When no cultural change is desired in the acquired company, then it can be considered as a preservation acquisition. When a large amount of change in the acquired company is expected but with relatively little change for the acquirer, then absorption is the most likely path. When major cultural change is expected in both entities then the result is a cultural transformation, while the selective combination of the most appealing features of the two cultures is often described as a ‘best-of-both’ acquisition. In rare cases, the culture of the acquirer is blended into that of the acquired firm in a reverse merger.

3. What are the top ranked factors contributing to acquisition success according to well-known surveys and reports?

Retention of key talent (identified by 76 per cent of responding firms); Effective communication (71 per cent); Executive retention (67 per cent) and cultural integration (51 per cent) (Kay and Shelton, 2000). According to a subsequent consulting report, published nearly a decade later, the problems remained the same. Differences in organisational culture (50 per cent) and people integration (35 per cent) were top of the list of M&A challenges, in fact, four of the six top issues were people related (Mars et al., 2008).

4. What do Pucik and colleagues (2017) propose are the cultural and people issues in cross-border M&As?

Assessing culture, undertaking a human capital audit and selecting the management team, effective communication, retaining talent, creating the new culture and managing the transition.

5. Specify some of the questions that a cultural due diligence team should ask in order to understand the ‘deep knowledge’ of the culture.

  • What are their core beliefs about what it takes to win?
  • What drives their business strategy? Tradition or innovation?
  • Is the company short-term or long-term in its outlook and execution of initiatives?
  • How much risk is the company used to accepting?
  • Is the company results-oriented or process-oriented?
  • How is power distributed throughout the company?
  • How are decisions made: consultation, consensus, or authority?
  • How is information managed and shared?