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Mergers & Acquisitions

Global Mergers and Acquisitions

Mergers and acquisitions are a primary growth strategy for companies domestically and worldwide. Although the decision to merge with or acquire another company is typically made by a small circle of top executives and specialists, the implementation of a major transaction requires effective collaboration of leaders and employees at all levels. We help guide clients towards successful integrations through recognizing and working through organizational and cultural differences.

Firms working on mergers or acquisitions commonly focus on immediate strategic & financial issues; these concerns shape the questions asked during the “due diligence” process:

What is the financial condition of our acquisition target?
How well do our product portfolios mesh?
How much overlap is there between our customers and theirs, and how will customers react?
Will we have new market opportunities?
What cost savings can we extract from the combined operations?

Cultural Diligence Is Often Lacking

While busily searching for information in response to such questions, M&A teams often underestimate or mishandle more subtle issues. There is increasing recognition that lack of cultural fit is the primary reason that mergers or acquisitions fail.

An estimated seventy percent of such cross-border M&A transactions either fail or underperform.

– “Perspectives on Merger Integration,” McKinsey & Company, June 2010.

When these deals are global, the cultural aspect is magnified for not only are organizational cultures mixing, but also national cultures. It is clear from our conversations with clients, backed by numerous studies, that the number one cause of failure among international mergers and acquisitions is employee integration: the human element. The effective collaboration among leaders and employees at all levels is often assumed or overestimated. Yet this is where the breakdown in global mergers and acquisitions most often occurs, catching senior executives off guard, and leading to prolonged and costly efforts to improve situations that could have been anticipated and avoided.

Expertise in Assessing Corporate and National Cultures

Aperian Global’s expertise in this area is to help companies strengthen their due diligence processes and consider questions that go beyond the usual financial and strategic concerns. Our cultural diligence process considers the following:

  • Is your merger integration team considering country and regional characteristics, infrastructure, human resources practices, and the differences in competitive environments?
  • Are you setting up planning teams that focus on operational and functional aspects of the combined entity?
  • Have you performed a stakeholder analysis that maps key employees critical to the deal valuation and future success (R&D, distribution, sales relationships, product development, etc)?
  • Does your integration plan fully account for the challenges related to national, organizational, and team cultures?

Ernest Gundling, co-author of Leading Across New Borders, explains important considerations when approaching a global acquisition or merger, including having a deep understanding of the specific markets involved.

Read our thoughts & latest news related to Mergers & Acquisitions

Case Studies

Creating a new global organizational culture post-acquisition

Challenge:

A German manufacturing company was being acquired by a state-owned Chinese company to expand its international footprint through technology acquisition and transfer of managerial know-how. During the transition, the results from the company’s first employee satisfaction survey in the firm’s 100+ year history revealed that employees, including leadership, wanted a stronger learning culture with a focus on professional development. In addition, the firm needed to strategically align all senior leaders at manufacturing sites spread across western and central Europe, Mexico, and the United States during a time of transformation and create a new, more international organizational culture.

Solution:

A multi-module leadership development series facilitated by Aperian Global consultants was rolled out over the course of a year to senior leaders across all entities and business divisions. Theory and experiential learning were combined for the effective building of new skills. Individual coaching took place in between modules, which further transferred concepts such as “leader as coach” into the daily behavior of participants. Global leadership skills, such as “invite the unexpected,” were explored through exercises. This gave the German, Chinese, and other business leaders the confidence and knowledge not only to drive change with their teams, but also to better understand the expectations of the new Chinese owners.

Results:

The result was the creation of an informal senior leadership support network which spans all divisions. Not only have the individual leadership styles of these executives evolved, but they now reach out to each other for knowledge and sharing of best practices. They continue to drive the transformation from a collection of national mindsets to an international, more inclusive one. The new positive energy and fresh outlook have become contagious and continue to spread across the organization.

Supporting a U.S. integration team through acquisition of an Israeli firm

Challenge:

One of the world’s largest manufacturing companies, based in the Midwest of the U.S., had an opportunity to acquire an Israeli firm with key technology, distribution, and market share. Importantly, the Israeli firm had access to markets in China and India that the U.S. firm did not have. The U.S.-based management team were eager to move quickly on the deal as part of their top-line growth M&A strategy; however, they were concerned about the integration of the Tel Aviv-based organization. This smaller firm was a Kibbutzim, a close-knit, family-run company with its own unique culture (both corporate and Israeli). The US firm, with its global procedures, policies, and systems, needed to tread carefully with this smaller, more entrepreneurial and collective company, so as to not overwhelm and push out its people.

Solution:

Aperian Global was engaged to help the U.S. firm and its integration team prepare for the acquisition. This involved interviewing (in Hebrew) several key employees of the Israeli company on location at their factory. Positioned as a neutral third party, this exercise enabled Aperian to learn which employees were absolutely essential to remain in place in order for the deal valuation to hold as expected. These employees, many of whom were nervous about the acquisition and pending change, had enormous loyalty from others in the organization as well as with key customers in their distribution chain.

In the next step, as part of a “first 100 days initiative,” Aperian consultants facilitated an integration team workshop involving key players from the U.S. and Israeli companies. Two managers from the U.S. side, who would soon relocate to Israel for extended expatriate assignments, were prepared via personalized cross-cultural coaching sessions.

Results:

Having performed a mapping exercise of the assets, relationships, and best practices of both organizations early on, Aperian Global was able to recommend specific strategies to ensure a smooth integration. For example, in the course of the interviews, it had been discovered that one influential leader in the Israeli firm had the personal relationships that enabled the firm’s access to markets in India and China. The integration team thus knew to position this person properly in the new organization and to show respect during the integration in order for sales in those markets to remain steady. The U.S. managers who were sent to Israel to drive the integration settled in quickly and were effective in their new roles.