Achieving a successful merger
However attractive the figures may look on paper, in the long run the success orfailure of a merger depends on the human factor. When the agreement has beensigned and the accountants have departed, the real problems may only just bebeginning. If there is a culture clash between the two companies in the waytheir people work, then all the efforts of the financiers and lawyers to strikea deal may have been in vain.According to Chris Bolton of KS Management Consultants, 70% of mergers fail to live up totheir promise of shareholder value, riot through any failure in economic termsbut because the integration of people is unsuccessful. Corporates, he explains,concentrate their efforts before a merger on legal, technical and financialmatters. They employ a range of experts to obtain the most favourable contractpossible. But even at these early stages, people issues must be taken intoconsideration. The strengths and weaknesses of both organisations should beassessed and, if it is a merger of equals, then careful thought should be givento which personnel, from which side, should take on the key roles.
This was the issue in 2001 when the proposed merger between two pharmaceutical companiespromised to create one of the largest players in the industry. For bothcompanies the merger was intended to reverse falling market share andshareholder value. However, although the companies' skill bases werecompatible, the chief executives of the two companies could not agree which ofthem was to head up the new organisation. This illustrates the need tocompromise if a merger is to take place.
But even in mergers that do go ahead, there can be culture clashes. One way to avoid thisis to work with focus groups to see how employees view the existing culture oftheir organisation. In one example, where two global organisations in the foodsector were planning to merge, focus groups discovered that the companiesdisplayed very different profiles. One was sales-focused, knew exactly what itwanted to achieve and pushed initiatives through. The other got involved inlengthy discussions, trying out options methodically and making contingencyplans. The first responded quickly to changes in the marketplace; the secondtook longer, but the option it eventually chose was usually the correct one.Neither company's approach would have worked for the other.
The answer is not to adopt one company's approach, or even to try to incorporate everyaspect of both organisations, but to create a totally new culture. This meanstaking the best from both sides and making a new organisation that everyone canaccept. Or almost everyone. Inevitably there will be those who cannot adapt toa different culture. Research into the impact of mergers has found thatcompanies with differing management styles are the ones that need to workhardest at creating a new culture.
Another tool that can help to get the right cultural mix is intercultural analysis.This involves carrying out research that looks at the culture of a company andthe business culture of the country in which it is based. It identifies howpeople, money and time are managed in a company, and investigates the businesscustoms of the country and how its politics, economics and history impact onthe way business is done.
13 According to the text, mergers can encounter problems when
A contracts are signed too quickly.
B expertscannot predict accurate figures.
C conflicting attitudes cannot be resolved.
D staff areopposed to the terms of the deal.
14 Accordingto Chris Bolton, what do many organisations do in preparation for a merger?
A ensuretheir interests are represented
B givereassurances to shareholders
C considerthe effect of a merger on employees
D analysethe varying strengths of their staff
15 The proposedmerger of two pharmaceutical groups failed because
A majorshareholders were opposed.
B there wasa fall in the demand for their products.
C there wereproblems combining their areas of expertise.
D an issueof personal rivalry could not be resolved.
16 Accordingto the text, focus groups can help companies to
A developnew initiatives.
B adoptcontingency plans.
C bedecisive and react rapidly.
D evaluatehow well matched they are.
17 Creatinga new culture in a newly merged organisation means that
A managementstyles become more flexible.
B there ismore chance of the merger working.
C staff willfind it more difficult to adapt to the changes.
D successfulelements of the original organisations are lost.
18 Accordingto the text, intercultural analysis will show
A what kindof benefits a merger can lead to.
B how thenational context affects the way a company is run.
C how longit will take for a company culture to develop.
D whatchanges companies should make before a merger takes place.