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Managing Culture Clashes in M&A's -- Table of Contents -- List of Abbreviations -- List of Figures -- Management Summary -- 1 Introduction -- 1.1 Overview of the M&A Market and Activity -- 1.2 Problem Statement -- 1.3 Research Method -- 1.4 Structure -- 2 Definitions -- 2.1 Transactions and Due Diligence -- 2.2 Culture and Culture Clashes -- 2.3 Trust and Language -- 3 Impact of M&A's -- 3.1 In General -- 3.2 During the M&A Stages -- 3.3 Cultural Problems and Key Drivers in M&A Stages -- 4 Integration Models as Solution Alternatives -- 4.1 Analysis Approach -- 4.2 Selection of Existing Integration Models -- 4.3 Evaluation of the Models -- 5 A Set of Cultural Integration Tools -- 6 Conclusion -- 6.1 Summary and Conclusion -- 6.2 Outlook and Recommendations -- Appendices -- References -- Other Bibliography.
Merger and acquisition activities have become an integral part of today's business world. They are considered as strategic component to gain market shares and extend product portfolios. Still, these transactions have a huge impact on an organization. This paper looks specifically at the M&A impact on company culture. Based on an analysis of identified key elements, which drive a M&A process, a cultural integration toolkit will be developed to solve identified cultural problems. Secondary data serves as source data for an inductive approach. Cultural problems and key drivers will be identified based on systematic research. The implantation of these key drivers in existing integration models will be further studied. Findings prove that not all of the identified key drivers are implemented in the models. Therefore, existing models solve the identified cultural problems semi-efficient. This leaves the need for a basic integration tool, which implements all key drivers, serves as guideline through an M&A process and provides specific instruments for realization of single steps. This paper develops such a basic integration toolkit in chapter five. The toolkit meets all these requirements and proves that 'managing culture clashes in M&A's' is possible. Auszug aus dem Text Text sample: Chapter 3, Impact of M&A's: After defining the framework for M&A correlations in the previous chapter, this chapter highlights M&A consequences. These impacts on organizations have direct impact on their culture and vise versa because culture is embedded within the organization (Carleton, 2004, p. 32). Sample impacts will be presented referring to M&A stages and outlining cultural problems. Key elements, which are needed to solve these problems, will then be derived. 3.1, In General: The following example is based on a study by marketline, 2011. The second largest player
in the pharmacy industry with an M&A history back to 1800 acquires companies around the world. Still, the company had faced a failure in ist R&D pipeline after the last merger. In contrast to that they started an operational program which has compensated this shortcoming largely and led to market growth of 15% outside the US and Europe. This example reflects direct impacts of M&A's on performance but it also proves the company's M&A strategy, which obviously had cultural problems mitigated if not eliminated. Furthermore an M&A success role is more essential in deal making then size and frequency of deals (Cottin, 2011, p. 1 and Rehm, 2012, p. 5). When two companies are involved in a merger or acquisition one overall dilemma occurs: culture clash - the meeting of organizational and national culture at both sides. This leads to culture integration problems in most cases. 3.2, During the M&A Stages: This section focuses on the M&A impacts during the transaction stages. The pre-merger phase includes among others negotiations (Schneck, 2007, p. 11 and Faber, 2007, p. 12). Disrespecting nature of control and decision making structure on either side, or ignoring the distribution of decision making power among people, or not tolerating emotional needs of negotiators may lead to breaking off the negotiations (Hofstede, 2001, p. 435) and probably causing total loss of the deal. Cultural problems are clearly expressed in misunderstanding and lack of intercultural competence. Conducting due diligence is another part of the pre-merger phase. Several studies suggest that acquirers admitted a desire for a better due diligence and planning, a faster integration and more attention to HR and cultural issues - the next time (KPMG, 2011, p. 19 and Knechtel, 2009, p. 12). Connections between individual due diligence areas cannot be explored since they are conducted
separately from each other (Knechtel, 2009, p. 12). Consequently, creating of values and synergies is rather inefficient and will not improve the new company's performance. This impact of missing an integration strategy and plan results in integration issues. Those companies that prioritized the selection of the management team during the pre-deal planning stage were 26% more likely to have a successful deal (KPMG, 1999, p. 16). The lack of a selected management or integration team would slow down the integration process and create an integration problem. The next samples overlap from the merger to the post-merger phase. People who are involved in an M&A transaction face changes of organizational structure, roles, in working processes and tools, maybe relocation and many more. They feel losses leading to increased uncertainty and anxiety concerning their future (Cartwright, 1996, pp. 48-49). Preoccupation increases in those affected, eventually resulting in loss of productivity. A study about culture shock indicates that a more than 15% of effectiveness is lost because of worry, rumors, and misinformation (Gitelson, 2001, p. 41). Losing effectiveness due to lack of integrating people indicates integration issues as cultural problem. Referring to Cartwright, 1996, pp. 39-40, affected people often live through loss in stages. Stage 1 points out extreme shock expressed in disbelief and denial. Stage 2 shows anger through rage and resentment followed in stage 3 by emotional bargaining through uncertainty about individual job future, resulting in depression. Finally acceptance takes place in stage 4, indicating that the past is gone forever. Because of these impacts on staff M&A's frequently result in loss. Loss of talent due to role duplicity or due to resignations including executives indicates again an integration issue (Cartwright, 1996, p. 45-46
and Krug, 2003 p. 14).
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