Merging OC

The new companies`s tendency to increase their profits and market share by acquisitions has allow managers, politicias and academics to create a debate. The main important fact to take into account when deciding if such acquisitions and mergers really help companies to growth is based on ethical and beneficial issues. However, it has been demonstrated that the learning process for companies in this new "adventure" and the cooperation between the firms lead undoubtly to success. 

"Mergers and acquisitions (M&A) have a unique potential to transform firms, and to contribute to corporate renewal (Angwin, 2001). They can help a firm renew its market position at a speed not achievable through internal development (Haspeslagh and Jemison, 1991; Harrison 2002)."

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.

The most important objective when entering into an acquisition process is the value creation. Nevertheless, it cannot be obtain without the perfect integration and participation of both companies, employees and managers, which must cooperate in the process and commit themselves to the strategic goal. 

The best way to achieve such objective has been analyzed by some scholars arguing that companies with similar cultures work better and understand easily the given tasks. In the other hand, it has been proved that nowadays cultural diversity is one of the most succesful tool when leading companies to pursue a common goal, because it is hard to work with the differences between employees but still managers that implement such differences within their companies must use all the necessary tools to keep people motivated and commit to their work; thus success can be grant as well by making acquisitions with companies implementing different culture strategies but working within the same industry.

"Merging implies the reconstruction of a new social identity".

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.314.

The new social identity of an acquisition can be managed by creating a perfect process of integration. However, such an integration has its advantages and disadvantages. Some scholars study "two organizational integration variables that are particularly relevant in the acquisition process (Datta and Grant, 1990; Datta, 1991):

1. the motive for the acquisition (strategic fit and decision making process); and

2. the process of implementation (including the "acculturation" process)."

Ibídem. Pag 314.

The first one refers to the "why" of making an acquisition, because it influence the level of interaction that companies must have in the process. Strategies that are not well managed in the process could lead to a failure in the acquisition and its effectiveness producing high levels of tension and conflict. The sencond one refers mainly in the process of cultural adaptation. When making an acquisition, both companies must understand differences between organizations and employees`s culture, beliefs, behavior, etc. Nevertheless, it is not easy as it might see because generally acquisition selection decisions are driven by financial and strategic considerations which make companies fail to meet expectations due to the difficulties in the acculturations process.

"According to Elsaa and Veiga (1994), the success of a particular integration strategy depends primarly on:

• the manager`s ability to reconcile the need for strategic interdependence between the two firms; and
• the need for organizational autonomy".

Ibídem. Pag 314.

The equilibrium between these two variables allow companies to properly approach the strategic interdependence when making acquisitions while keeping their own identity and autonomy.

The autors wanted to understand what happen during the integration process in firms by making a research with three different case studies. Thus, they explore how "transferring capabilities from acquisitions can lead to value creation" through interviews conducted primarly with top managers from Deutsche Bank (DB) and Bankers Trust (BT), British Petroleum and Amoco, Volvo and Ford.

Ibídem. Pag 315.

The main findings were that acquisitions have common practices associated with success. "The common issues are linked to the steps the three acquirers used to integrate their different entities, i.e. in their knowledge transfer, learning and acculturation processes".

Ibídem. Pag 319.



"The case studies have demonstrated, as in the literature, that while nationality and cultural differences may decrease the perception of a common identity, the awareness of a common set of goals and objectives may reinforce integration. In the three case studies, intergroup cooperation has been fostered by top management. The creation of the integration teams induces the members of both groups to conceive themselves primarly as one large group rather than separate entities: from "us" and "them" into the more inclusive "we" (Gaertner et al., 1989)".

Ibídem. Pag 319.

Here I want to share two videos related with two important cases of successful acquisition in the last decade:

Source: http://www.bolivarzuiga.com/

Dell Inc. Signs Acquisition Agreement for Scalent Systems (DELL)

 

Source: http://www.clinf.net/

Coca-Cola Co.(NYSE:KO) Confirms Acquisition of Coca-Cola Enterprises' (NYSE:CCE) 

Include at least 3 challenges and 3 opportunities.

Challenges:

1. Nationality .
2. Perceived cultural differences.
3. Implementing strategies, if not handled well, may prove to be detrimental to organisational effectiveness, particularly if it leads to high levels of acculturate tension and conflict (Buono and Bowditch, 1989).

Opportunities:

1. Appropiate integration strategies can overcome cultural diversity.
2. Awareness of a common set of goals and objectives may reinforce integration.
3. A process of knowledge transfer and creation can be triggered in merging firms which allows for intercultural and inter-organisational learning to occur.

The information above is based on data collected in: 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.