Given the globalized world, companies have found themselves in a situation in which they must look for new options in order to keep their competitiveness and keep offering value to potential customers. “Mergers and acquisitions have a unique potential to transform firms, and to contribute to corporate renewal” as well as companies come up with new alternatives to improve their market position.
This process is not easy to be carried out since it entails the transfer of skills and capabilities from one company’s members to another organization, that is to say, managers of both sides must feel encouraged and be committed to work jointly by sharing a common vision and a complementary knowledge. Depending on how well this task is made the value creation of the company will be successfully accomplished.
Also, challenges will be present throughout all the process, especially regarding to cultural issues when the ‘actors’ belong to different cultural backgrounds or even when there is cultural diversity within the companies themselves. It’d seem to be tricky and tough to do, and maybe it is indeed, however “in bringing together firms with different skills and knowledge bases, acquisitions create unique learning opportunities for the partner firms”.
So, what is and effective integration? It might be defined as the combination of firms into a single unity, generating shared efforts to fulfill the goals of the new association.
Based on the required reading for this module, list and explain - using evidence from the cases presented in the reading - the main challenges and opportunities arising in processes of mergers and acquisitions from an organizational culture perspective.
Include at least 3 challenges and 3 opportunities.
§ Challenges
-Integration process: As Nick Starrit defined it, integration is like a marriage. Companies have to make some tough decision that might compromise organizational culture in both sides since they have to decide their common physical and non-physical assets and how a desirable future situation will be accomplished. It means that at any step along the integration plan might be a clash of organizational cultures when trying to state that common point.
- Identity: As we read in the case of integration between Deutsche Bank and Bankers Trust, employees’ identity can be a very sensitive topic if it is not managed in the right way. That is exactly what had happened before when BT acquired Alex Brown, not taking into account some issues that made Alex Brown’s employees feel ignored regarding to their identity they’ve already had before the integration. Deutsche Bank had the vision to note it and made the good choices, not only giving back the identity to these people but also including the brand Alex Brown in the name of the new company.
- Another important challenge is how to find the way of not making redundant those employees who, in the first instance, might not be considered to be into the new plan for the company. Even though sometimes it is inevitable, organizations taking part in the process should concern about linking all individuals to the construction of the new corporate culture since it will add diversification and opportunities. Sometimes it is good that organizational culture adapt the employees, not the opposite.
§ Advantages
-Cultural assessment: It allows the organizations to reduce potential cultural conflicts by uncovering the perceptions each group has about the counterpart. This exercise permits companies to prevent future problems related to communication, the key element to finish a successful agreement.
-Integration processes force companies to show their best qualities and capabilities in order to integrate. It means they have to uncover the best practices within their organizations. A good example for this approach was the case of BP and Amoco, since “BP performance management process was considered the best practice in terms of generating strong performance. However, when it came to allocating capital, they adopted the Amoco model.”
- Acquisitions can enhance the building of a new corporate culture for the new organization. This entails a break down regarding to the previous barriers that might exist between the participant groups. “Several meetings with the top 500 managers were held in order to explain BP’s operating philosophy. It also encouraged them to socialize and mix with their counterparts from the Amoco organization”.
Source: Alzira Salama, Wayne Holland, Gerald Vinten, (2003) "Challenges and Opportunities in Mergers and Acquisitions: Three International Case Studies – Deutsche Bank-Bankers Trust; British Petroleum-Amoco; Ford-Volvo", Journal of European Industrial Training, Vol. 27 Iss: 6, pp.313 – 321.
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