The Global M&A Tango: How to Reconcile Cultural Differences in Mergers, Acquisitions, and Strategic Partnerships - Hardcover

TROMPENAARS

Hardcover

ISBN 10: 0071761152 ISBN 13: 9780071761154

Verlag: McGraw Hill, 2010

Inhaltsangabe

A leadership blueprint for managing cross-cultural issues in any M&A deal

In our rapidly expanding and increasingly volatile global economy, mergers and acquisitions are becoming the strategy of choice for businesses seeking to stimulate growth while managing risk. As more and more M&A deals are struck between global organizations, difficult new issues involving cultural differences have arisen.

In The Global M&A Tango, international managementexperts Fons Trompenaars and Maarten Nijhoff Asser explain how to detect and manage these issues before they become major problems.

Drawing on the world-renowned Trompenaars Hampden-Turner Cross-Cultural Database and Culture Compass, the authors illustrate how widely cultures can differ and, by reconciling the dilemmas created by that difference, howthey can be integrated quickly, efficiently, and effectively.

The Global M&A Tango helps you meet all thechallenges of cross-national M&A by:

• Creating common mission, vision, strategy, and values
• Developing trust across value boundaries
• Enabling people with different cultural perspectives to engage in valuable discussions

Change-management programs all too often ignore the culture perspectives of the individuals and groups involved--and it's often why organizations fail to realize the benefits that prompted the integration in the first place.

With The Global M&A Tango, you have everything you need to integrate two old entities into a powerful new organization poised for dramatic growth in the comingdecades.

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Über die Autorinnen und Autoren

Fons Trompenaars is a world-renowned expert on international management and the author of the global bestseller Riding the Waves of Culture, which has sold hundreds of thousands of copies and has been translated into a dozen languages. The cofounder and director of Trompenaars Hampden-Turner (THT), he is author or coauthor of eleven bestselling books on culture and business, innovation, and leadership.

Maarten Nijhoff Asser is a consultant at THT whose areas of expertise include the facilitation of change-management processes at the senior management level and the development of scenario planning workshops. His special interests are strategic dilemma reconciliationand action-learning-based leadership development programs, which he has facilitated with clients all over the world.

Fons Trompenaars is a world-renowned expert on international management and the author of the global bestseller Riding the Waves of Culture, which has sold hundreds of thousands of copies and has been translated into a dozen languages. The cofounder and director of Trompenaars Hampden-Turner (THT), he is author or coauthor of eleven bestselling books on culture and business, innovation, and leadership.

Maarten Nijhoff Asser is a consultant at THT whose areas of expertise include the facilitation of change-management processes at the senior management level and the development of scenario planning workshops. His special interests are strategic dilemma reconciliationand action-learning-based leadership development programs, which he has facilitated with clients all over the world.

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A leadership blueprint for managing cross-cultural issues in any M&A deal

Legal, financial, and operational issues make M&A deals highly complex endeavors. Add to the mix cultural differences between the parties involved, and the complexities grow exponentially. Differences in interpersonal communication, corporatecultures, and business values can make a great deal quickly go sour.

The Global M&A Tango delivers what you need. Authored by international cultural management experts Fons Trompenaars and Maarten Nijhoff Asser, this invaluableguide offers a practical framework for identifying culturally related issues and resolving them in a structured and disciplined manner that satisfies all stakeholders. You'll learn:

• Why cultural differences serve as obstacles tosuccessful organizational integration
• How to use various tools to align visions and values
• How to manage relationships to build trust and create value

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THE GLOBAL M&A TANGO

HOW TO RECONCILE CULTURAL DIFFERENCES IN MERGERS, ACQUISITIONS, AND STRATEGIC PARTNERSHIPS

By Fons Trompenaars, MAARTEN NIJHOFF ASSER

The McGraw-Hill Companies, Inc.

Copyright © 2011 Fons Trompenaars and Maarten Nijhoff Asser
All rights reserved.

ISBN: 978-0-07-176115-4

Contents

Foreword
Acknowledgments
The structure of this book
PART I The context: Organizational integration, the human touch
PART II Introduction: The ten steps of the three phase framework
Phase A: Creating the compelling business case
Phase B: Developing implementation strategy through objectives and KPIs
Phase C: Realizing and rooting the benefits
PART III The business of relationships and dilemmas
Conclusion
Index

Excerpt

CHAPTER 1

PART I

The context: Organizational integration, the human touch

Global business expansion and development through mergers, acquisitions andstrategic alliances is big business. Even in the wake of the financial crisis of2008/2009, in a climate of banking difficulties and credit restrictions, moreand more "share for share" deals are being proposed and effected.

Business is increasingly pursuing mergers, acquisitions and strategic alliances,not only to implement globalization strategies and necessary restructuring, butas a consequence of political, monetary and regulatory convergence. Globalcompanies like P&G, J&J, IBM, GE, Pfizer and Cisco but also Tata & Sons,Mahindra & Mahindra, Haier, Lenovo, HSBC, and others all have an M&A strategycoupled with an organic growth strategy, enhancing growth and managing risk atthe same time. Some will have partnerships with (former) competitors; otherspursue integrations with other businesses in particular markets or productventures. Some out- or in-source particular competencies to and from otherorganizations. Integrations in one form or another are a feature of the businessworld.

It's not easy ...

Realizing the business benefits and creating wealth in an integration process isnot a straightforward procedure. Integrations, in various forms, have beenhappening for decades, but with all that experience to draw on, two out of everythree deals still don't achieve anywhere near the benefits that were initiallyanticipated. Although success rates of mergers and acquisitions are difficult tocompare, as surveys in the area use a variety of assessment metrics, most pointto a success rate of about one third, while some have found that only 20% ofmergers and acquisitions are ultimately successful.

Yet these low success rates do not appear to have curbed business enthusiasm forgrowing by refocusing through some type of integration. Given the currenteconomic and financial climate, business leaders worldwide need to manage theirresources and assets more tightly than before to build sustainable growthcapabilities that can withstand downturns and emerge stronger than before.

Looking ahead, many pundits are predicting two conflicting trends, which havetheir origins in 2009. On the one hand we can observe a plethora of divestmentsand de-integration processes going on, in particular in the financial servicesindustry. On the other we can see a round of increasing integrations andreorganizations under the pressure of global sustainability while globalcompetitiveness increases. Bigger companies will abound but their strength willlie in their nimbleness and agility, not simply their scale or scope. Companiesare realizing that they have to operate within a business ecology whereinterdependence, not independence or singular dependence, is the name of thegame. Emerging markets will find more flexible capital sources, andconglomerates will leverage and alter their strategic approach to markets,forcing others to make rapid adjustments. Even the big US-based companies employmore and more people outside of the US and many generate more than half theirincome overseas (GE, Corning, IBM J&J, etc.). Indian, Chinese, and South Africancorporations are acquiring and integrating companies in the UK, the US, andacross various parts of Asia and Africa (Old Mutual, Lenovo, Haier, Tata,Mahindra, etc.). Constant change, economic waves, financial bubbles, ambiguity,and risk measures will put a greater emphasis on the ability to increasecapacity, influence employees, collaborate with other entities across bordersand boundaries, and integrate with former challengers.

Leaders will be faced with frequently recurring dilemmas or seeming trade-offsand will have to co-create solutions with their management teams and navigatetheir organizations in and out of complex strategic relationships with theultimate goal of creating sustainable growth and value.

Definitions

Although they throw up similar dilemmas, mergers, acquisitions, and strategicpartnerships are different types of union. An acquisition is when one companybuys another and integrates it into its own organization. Mergers entail twoorganizations integrating into a third entity, even when the two originalcompanies are of unequal size. There are many varieties of these integrationformats, and many that "market" an outright acquisition as a merger in thepublic and/or private media. A strategic partnership or alliance may differ inthis regard as there may only be an integration of a department or a smallerpart of an organization for a particular purpose or defined project. We havealso seen strategic partnerships that eventually end in a merger or acquisition.

For the purpose of this book, we will not differentiate between these differenttypes of integration but will focus broadly on the cultural challengesunderlying any kind of integration between organizations with a common purposeor goal, whatever that goal might be. With that in mind, when we refer here to amerger, we include acquisitions, partnerships, joint project teams, and anyother instances where people (re)organize themselves to forge relationshipsbetween human or organizational competencies with the ultimate goal of gettingmore out of these relationships than the sum of their parts. We approach thechallenges of integration from the principle of creating value out of humanrelationships and their alignment with strategic intent.

Merger optimism and the key elements of success and failure

KPMG (1999) and Booz Allen Hamilton (2001) have reported that more than two-thirdsof mergers failed to live up to their own targets. However, in ourconsulting work we have seen some improvement in merger results in the past fiveyears. The cynic might say that the main reason for this is that due tofinancial constraints purchase prices have become more realistic. There are somereports indicating that between 2005 and 2008 the average price for the acquiredcompany was 16 times EBITDA (earnings before interest, taxes, depreciation andamortization).

There is also evidence that companies have become somewhat better at merging andhave realized the need to place more focus on the human factor, relationshipmanagement, communication, trust, and a clear people process and humanintegration strategy. As a result of this new focus we have seen significantsuccesses at IBM, Cisco, Compass (Catering), Johnson & Johnson, Linde AG andVodafone. The Bank of America/Merrill Lynch merger will be an interesting caseto watch, and we will see how well that merger process is going in the comingyear.

At the same time as seeing signs of growing success, we have learned from ourown research and clientele that there are many challenges ahead for mergingorganizations. Organizations will have problems if they fail to identify andfocus on the key issues or to question (cultural) assumptions (both of theseissues are discussed in detail below), or fail to assess and allocateappropriate resources.

Focus on the key issues

Traditionally, when we review the key issues in a merger, we distinguish betweenhard and soft issues. Managing these issues can in itself determine the successor failure of a merger. We look first at the hard issues.

Evaluating synergy and savings

Evaluating the synergies and savings for any merger or acquisition will confirmthe direction the involved parties need to take and determine the steps andprocesses to be used. This is crucial in providing the necessary reassuranceduring the negotiations and early evaluation of the deal that the identifiedbenefits are robust and can indeed be realized.

The synergy and savings evaluations process generally focuses on the areas ofprocurement, R&D investments, and new product development, as well asdistribution channel and supply chain analysis. Examination of the operationalcost reductions normally considers the area of headcount reduction, which isoften the most difficult synergy to achieve and implement. Loss of staff is aninevitable outcome following the execution of a merger. What we learned from theKPMG (1999) study was that few companies move beyond statements of intent withregards to headcount reduction. On average 50% of managers will leave followingthe first year of any acquisition or merger, so it is vital to analyze preciselyhow and indeed whether the vision, mission and values of the NEWCO arecompletely aligned within the merger strategy. This important (re)alignment ofbusiness and cultural dilemmas forms the basis of our integration process. It isalso extremely important to assess the inherent dilemmas underlying headcountreduction.

Project planning integration

The second most critical function is the integration of the project planningprocess as it provides the expression of the way in which the synergies from thecombined organizations will be attained and gives tangible evidence that thingsare stable yet changing. The strategy of the merger is communicated through theselection of the project planning team and the goal setting. This process iscarefully monitored by the general employee population in theorganization—while not directly linked to the integration process itself,they are subject to it.

Due diligence

Due diligence is of fundamental importance to the non-operational pre-dealactivities. It enables the acquirers to focus their attention upon marketreviews, risk assessments, management competencies, and synergies to support theoperational impact. It generally doesn't involve a full review of the(corporate) cultures of the two companies, but traditionally stays solely withinthe realm of financial measurement and reporting tools.

Questioning (cultural) assumptions

These challenges, traditionally referred to as the "soft issues," form the corearound which we have created our human integration process.

Selecting the management team

Management teams for the NEWCO require exceptionally strong and visibleleadership and direction to drive complex value realization. Generally, though,the selections are either made in great haste (e.g., Bank of America and MerrillLynch) and demonstrate obvious power and title related choices, or too slowlywith a severe loss of motivation and morale which often results in the loss ofimportant management talent, not to mention market value as investors growimpatient over time. In this context, we need a stronger focus on the specificskills of the leaders initiating the merger and those who make up theintegration management teams. These individuals need to be true reconcilers ofdifferences and dilemmas of strategy, organizational structure and team culture.We have developed a framework for assessing and training such individuals inidentifying tensions and dilemmas and providing reconciliation techniques whichlead to integrated value at all levels.

Resolving cultural issues

In most studies the main reason given for merger failure is "culturaldifferences." These issues must be better addressed so that future mergers willsucceed where others have failed. A systematic and triangulated approach toassessing cultural differences needs to be in place and communicated through themanagement ranks and beyond. There are many tools available to help in this, andwe'll share a few of these later in the book, but importantly, we have foundthat it is not just about measuring cultural differences and/or resolvingpotential challenges.

Our consulting process always begins with identifying and prioritizing the keyintegration issues through multiple assessments. The problem with organizationaland national cultural issues in general is that the underlying basic assumptionsremain largely implicit and unspoken. We have spent 20 years refining ways ofmaking these cultural issues explicit and prioritizing them. Using a consistentand well-researched method to elicit cultural issues, challenges and dilemmas ina merger early on can provide a major improvement over current integrationprocesses. It is vital that the new culture that is being created takes the bestof all worlds and supports the new strategic challenges.

Communication

Communication needs to be treated like any proper business process. It needs tobe consistent, reliable, and repeatable. Leaders of industry know that anysuccessful message will need to be reiterated many times in many different ways.Management teams cannot communicate too much. As the 1999 KPMG report concluded:"Communications to employees will have a greater detrimental effect on thedeal's success than that to shareholders, suppliers or customers ..."

Secondary level managers and lower level staff are often kept in the dark aboutthe opportunities of the merger at their level, and are barely included inregular communications. It is immensely important to identify formal andinformal ways of "working" the communications channels throughout the mergerprocess. The organizations that prioritize communication plans as a central partof their overall integration process are much more likely to be successful inattaining merger success than those that see communication as just one of themany tasks to be undertaken in the merger process.

In most surveys, poor selection of the management team and failure to resolvecultural issues generally score very high among the reasons for merger failure,but evidence from our consultation work reveals that the communication problemsoften act as a multiplier on the other factors in determining success orfailure. The ability to communicate effectively during a merger becomesincreasingly important as merging organizations face dilemmas. Leaders need tocreate dilemma maps that identify and analyze the toughest merger challenges andcommunicate a strategic path for reconciling them. These maps integrate the needto build strategic alignment and commitment, while communicating a commonlanguage and supporting the vision. Dilemma maps become discussion models thatlead to greater understanding amongst core project teams and other employees. Wewill elaborate on the power of these dilemma maps in detail later in the book.

Integration of process

We have found, in our own work on merger success, that each of these elementshas a primary role to play in supporting success and enabling goals to beachieved. However, these key elements cannot maximize the potential benefits inisolation—the activities must be brought together in a singleintegration process that enables the NEWCO to maximize its post mergersuccess.

A successful merger requires the same processes that any individual companyrequires:

• A vision and mission that indicate what the aims of the merger are;

• A purpose that indicates what the merged companies stand for;

• A strategy that identifies how the goals will be achieved;

• Strong values that direct the all-important relationships within and outsidethe company.

The many dilemmas and challenges that individualize the merger process make eachmerger unique. We need to acknowledge these unique cultures and dilemmas whileproviding a consistent, reliable and repeatable process to drive merger success.

Merger goals

We can't talk about merger success or failure without addressing themeasurement of success and failure. Most research organizations focusprimarily on shareholder value as the ultimate goal and measure of success. Butif we focus exclusively on the financial benefits of the merger within arelatively short time frame using precise financial indicators such as the stockprice and shareholder dividends, we overlook the various levels of complexitythat provide more sustainable shareholder value. We have interviewed thousandsof international business leaders and extensively reviewed the managementliterature and have found that many organizations are simultaneously managing atleast five parallel goals at all times in their business cycle (numbers3–7 in the list below). These five goals are contextualized by theoverarching goals of the organization's vision and values, and the strategicpurpose that supports this (1 and 2 below).

1 Achieving the (joined) vision;

2 Reaching strategic goals after the merger;

3 Improving overall business processes;

4 Being regarded as a "best place to work" in our industry and beyond;

5 Increasing and maintaining customer satisfaction ratings throughout the mergerand beyond;

6 Maintaining and increasing overall contributions to society and generalsocial, political and economic recognition;

7 All of which will result in increasing shareholder value.

These parallel goals create dilemmas and value tensions for the NEWCO that wewill examine in detail when we look at the "Ten Golden Dilemmas."

The human touch: integrated value

Organizations are often acquired on the basis of their inherent valuation(shareholder value) rather than with the intention of achieving full integrationof all human capabilities. A wider range of other expected benefits mightinclude synergistic values (e.g., cross-selling, supply chain consolidation andeconomies of scale) or more direct strategic values (becoming market leaders,penetrating a ready-made customer base, etc.). However, the pre- and post-dealmanagement too often focuses on the rapid exploitation of new opportunitieswithin a mechanistic or financial due diligence mindset, on the assumption thatdelivering benefits simply requires the alignment of technical, operational andfinancial organizational systems and market approaches.

(Continues...)

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Excerpted from THE GLOBAL M&A TANGO by Fons Trompenaars. Copyright © 2011 by Fons Trompenaars and Maarten Nijhoff Asser. Excerpted by permission of The McGraw-Hill Companies, Inc..
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Details zur Ausgabe

• Verlag: McGraw Hill
• Erscheinungsdatum: 2010
• Sprache: Englisch
• ISBN 10: 0071761152
• ISBN 13: 9780071761154
• Einband: Tapa dura
• Anzahl der Seiten: 208
• Kontakt zum Hersteller: Nicht verfügbar
• Verantwortliche Person: Nicht verfügbar