The following summary is based on the article written by Alzira Salama, Wayne Holland and Gerald Vinten, called ¨Challenges and opportunities in Mergers and Acquisitions: Three International Case Studies: Deutsche Bank-Bankers Trust; British Petroleum-Amoco; Ford-Volvo¨.Like they have quoted in the article, ¨Integration process is the real source of value creation in acquisitions¨1 and the objective for success it is precisely that value creation. M&A have become one of the most important international strategies for integration and competitiveness.
Value creation cannot be done until the organisations involve don't share their knowledge, capabilities, skills and start making collaborative tasks that helps them understand each other’s firm and objectives. For this to happened, managers should lead this information transference and make sure that any process is compromising the particular interests of each organisation and most important risking the human capital.
The most important challenge within M&A is to find a way of convergence between the firms that are been fusion and the governmental differences within the nations involve, but most important overall is the organisational culture and the managerial behavior styles that could raise with the mergers or acquisitions.
In order to avoid challenges to undertake the future success of mergers, it is very important that the organisation picks very well those employees that will be in charge of the integration process so they can understand but most important tolerate the cultural and policies differences and that also have the skills to promote adaptation techniques.
These are some of the challenges that companies could face when doing mergers or acquisitions, the positive outcome ending up from these challenges depends on the good strategies make over them.
Aspects such us nationality compatibility, cultural differences, perception, country's ideologies, industrial relations systems (Distinctiveness of organisations), acculturation processes (normally link to the lack of a good organisational integration strategy), decision making processes and the need for interaction between members are some of the factors that most impact the adaptation process of M&A.
When companies have to suddenly start ¨leaving¨ to put it that way, with another company is very common to adopt power positions where antagonic roles are taken and one wants the other to cede, creating power struggles over the birth of a new social identity, in which both organisations want to give away less than the other one.
Two solutions to possible struggles, according to Elss and Veiga (1994) are the most accurate ones in order to succeed when battling the challenges:
a. The manager's ability to reconcile the need for strategic interdependence between the two firms.
b. The need for organisational autonomy.
¨Some individuals may refuse to give up particular culturally bound ideologies, traditions or behaviors, and therefore may purposely delay the acculturation process¨2
b. The need for organisational autonomy.
¨Some individuals may refuse to give up particular culturally bound ideologies, traditions or behaviors, and therefore may purposely delay the acculturation process¨2
In order to identify real opportunities and challenges within M&A it is very important to have clear the different integration phases that could exist among the process, basically divided in three, which are: the Preparation phase, where specific teams analyzed the future situation in which they could get in; the integration phase where the merger or acquisition actually happens; and the post merger phase, also known as the marriage situation, where the companies are already together and they have nothing else but to pull it together, face the new challenges and make the best effort possible to get the most positive and profitable outcomes of the venture.
Deutsche Bank - Bankers Trust
Success factors
- One of the characteristics for succes in this acquisition was the favourable market situation that the U.S was facing by that time.
- Due diligence period:The time between announcing the deal and closing the deal.
- Undertake a cultural assesment exercise to minimize cultur clashes between germans and americans, which was conducted by external consultants and aimed to uncover perceptions of each other's groups of people.
- The integration team is a key element within mergers, since the need of executives making the ¨tough calls¨is essential to have consistency in the process and been accurate when choosing the right people and the right resources.
- Changing a German bank into a global organisation.
- The DB was lagging behind, particulary in the US.
- Operating independently.
- Convincing DB members that BT was worth of it.
- Internal conflicts already existing in both companies within subsidiaries and other groups.
- Invest in the oldest U.S investment bank which was own by BT.
- DB had a more stronger position than BT, but BT was the one having the experience in the U.S, so what they could do was to take the best parts of both sides in order to improve the positioning process over the market.
Success factors
- The most important key for success in this case was the assertive strategies applied in the preparation phase, creating the ¨Pre-merger task force¨a team prepared to analyzed the mergers' challenges and prevent the possible obstacles that could harm the process.
- Who gets the higher positions? Who is going to be in charge? Who are we going to choose? Should we pick someone from outside? Who has more skills, my men or your?. These are typically some of the challenging questions that both companies have to face, been objective for the best of the future merging group, having to sacrifices sometimes people from their own company, seeking the most suitable people for the new company.
- Uncover the best practices of both companies, in order for them to get the best performance, having the opportunity to choose the best business models and most profitable of each one, to generate bilateral earnings and have a win-win situation among the process.
Challenges
- The organisational culture differences are really important in this case, since both companies have a completely opposite way of doing things. Volvo is a decentralized company, where the desicion making process takes place from the lowest positions to the highest ones, there is no hierarchy just teamwork and recognition for the people's knowledge, while Ford is a structured and hierarchical company, where groups division exist among the organisation and their ideas, knowledge and opinions are taken into account depending on the position occupied in the company.
- The idea of having to cede in the car's brand can be a big issue, since both companies consider themselves as successfull organisations and both of them wants to have their seal in the cars, meaning been perceive for the customers and society in general as a car from Volvo or Ford. Pride and the seek for admiration and recognition plays an important role in M&A, since companies want to be known for their success but for their falls.
- The technology transfer can be consider as the greatest opportunity within this case, since both companies could have the chance to acknowledge their own teams of engineers and managers with innovative processes or better ways of doing specific operations already done at the plants but in a more efficient way.
I invite you to watch the following video, which gives a broad idea of how the market has been affected by M&A and how big is the impact of these processes within the most important companies of the world.
http://www.youtube.com/watch?v=DdDZFbzhAn0?v=DdDZFbzhAn01-Haspeslagh and Jemison, 1991, p. 167
2-Buono and Bowdich, 1998, p. 105
by: Alzira Salama, Wayne Holland and Gerald Vinten, called ¨Challenges and opportunities in Mergers and Acquisitions: Three International Case Studies: Deutsche Bank-Bankers Trust; British Petroleum-Amoco; Ford-Volvo¨.
By: Wang, Cong; Xie, Fei.Corporate Governance Transfer an Synergistic Gains from Mergers and Acquisitions. Review of Financial Studies, Feb2009, Vol. 22 Issue 2, p829-858, 30p
Image taken from:http://www.thevarguy.com/2009/02/26/comptia-where-are-the-ipos-mergers-and-acquisitions/
