According to Kumar, B. Rajesh and Panneerselvam, S. “In a merger, corporations come together to combine and share their resources to achieve common objectives” while “An acquisition involves the purchase of the assets or shares of one firm by another where the acquired firm’s shareholders cease to be owners of that firm. In a merger a new entity may be formed subsuming the merging firms, whereas in an acquisition the acquired firm becomes the subsidiary of the acquirer” (1).
In the document "Challenges and Opportunities in Mergers and Acquisitions: Three International Case Studies - Deutsche Bank-Bankers Trust, British Petroleum-Amoco, Ford-Volvo." The authors analyze the experiences and different situations of mergers and acquisitions in each case.
This document explains that the final purpose or objective of mergers and acquisitions is the creation of value for a company or organization. They are seen as strategic keys used for improving the way an organization is being managed and therefore its market position and recognition.
Sometimes, these mergers and acquisitions cause conflict inside the organization if they are not well managed and could work as a double-edge sword, in the cases where companies merge or are acquired for the purpose of growing and improving the organizations together and instead of achieving this objective, they lose all control and begin decreasing their performance until they both disappear from the market.
When these integrations are made it is really important to understand the concept of acculturation, because companies need to appreciate the possible changes presented by the interaction of two or more organizational cultures that are merging. Employees must understand that some changes could be implemented in the organizations and that they should be prepared and disposed to receive them in the best way. This would help each organization to be adapted easier to another one.
With the three cases of effective integration mentioned in the document "Challenges and Opportunities in Mergers and Acquisitions: Three International Case Studies - Deutsche Bank-Bankers Trust, British Petroleum-Amoco, Ford-Volvo.", the authors explain some actions that facilitate the achievement of a better merger and acquisition. The first one is creating integration teams that can work during the process, another one is setting common goals; the third one is that the executives should be committed in the entire process and should act as guides for the rest of the employees, another action is by differentiating and assimilating aspects between the companies, and finally strengthening the common identity.
“A merger is principally a legal process and a follow up to an acquisition of controlling interest” (2).
Questions
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.
Based on the reading "Challenges and Opportunities in Mergers and Acquisitions: Three International Case Studies – Deutsche Bank-Bankers Trust; British Petroleum-Amoco; Ford-Volvo" I can conclude that there are different challenges and opportunities depending on each specific case, which will be presented above.
“Effective integration can be defined as the combination of firms into a single unity or group, generating joint efforts to fulfill the goals of the new organization. This combination is always obstructed by the challenges of nationality and perceived cultural differences.” (3) (Olie,1994)
In the three cases it is possible to observe that each company looked for a strategic interdependence, but at the same time they were willing to keep their own identity and autonomy.
The first case exposed in the reading is Integrating Deutsche Bank (DB) and Bankers Trust (BT). This particular case presented challenges and opportunities such as:
• DB’s process of growth, in which they wanted to transform a common German bank into a global organization.
• DB’s corporate finance was lagging behind, especially in the USA.
• DB’s top management decided to implement a cultural assessment exercise, looking for a reduction of cultural misunderstanding between the German and the US banks.
• The cultural assessment exercise showed that DB’s employees were not convinced at all about the legitimacy of the deal, feeling that BT was not the solution for their problems, which could present previous problems when the integration took place.
• With those results, the top management understood that they were failing in the communication and that the information given to their employees was not complete.
• Another challenge was the internal conflict that BT and Alex Brown were facing. The exercise showed that the integration between these two banks had not been done properly. This is why DB had to gain Alex Brown employees confidence before they started the new integration. Therefore, they decided to name the merged company The Deutsche Bank - Alex Brown Investment Bank.
• The last challenge was to overcome national culture differences, as “BT felt that DB was a very German company, bureaucratic, hierarchical, with low decision making process.” (4). The Top management decided that it would be a challenge for the employees to keep these thoughts about DB and ion this way they would improve their work.
• DB found an important opportunity merging with BT because in some areas BT’s executives had a stronger position in the market than DB’s managers had.
• Another opportunity for DB was to expand and let people know this bank all over the world merging with the oldest U.S investment bank (Alex Brown). This helped DB to open its doors not only to the German market but also to the U.S market and therefore to the rest of the world, gaining trust and confidence not only because of Alex Brown but also for BT’s reputation.
The second case is Integrating British Petroleum (BP) and Amoco into a single organization.
• The main challenge of this integration was the difficulties that these 2 companies had to face in order to merge 2 different organizational cultures. For this reason, managers guided the employees, giving them accurate information so they could socialize among them and know each other better until they got to understand each other’s organizational culture.
• Another challenge was to understand exactly which practices were to be uncovered by each company, as they considered it was better to uncover the best practices inside each organization.
• This integration generated important opportunities for employees in both companies.
• The main opportunity of this case was to achieve more synergies than had at first been forecast, as they went faster and further than they had promise the market.
The third case is Volvo and Ford: merging two distinct cultures.
• The main challenge of this case was merging two completely different cultures, one Swedish company (Volvo) and one Anglo-Saxon (Ford).
• Volvo was a decentralized and teamwork oriented organization, with a participatory style, were its decision making process happened at the lower levels of the organizational structure. On the contrary, Ford was perceived as a structures and hierarchical U.S corporation. For these reasons, it was a challenge for them to unify and merge the organizational cultures, as they were completely different.
• Then they found an important opportunity in learning about each other’s way of working and managing the company.
• In order to overcome these cultural differences, both companies created integration teams that could find synergies in specific areas such as power trend, purchasing, marketing and the most important one in the automotive industry, which is technology transfer. These teams were organized with the same number of participants from both companies.
• Ford found a very important opportunity with this integration, because they needed money to develop new models of cars. Without this integration they couldn’t stay as competitive as they were in the world market.
References:
• (1) & (2) Kumar, B. Rajesh; Panneerselvam, S. Mergers, Acquisitions and Wealth Creation: A Comparative Study in the Indian Context. IIMB Management Review (Indian Institute of Management Bangalore), Sep2009, Vol. 21 Issue 3, p222-244, 23p, 8 Charts, 4 Graphs
• (3) & (4) 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.
• Wang, Cong; Xie, Fei. Corporate Governance Transfer an Synergistic Gains from Mergers and Acquisitions. Review of Financial Studies, Feb2009, Vol. 22 Issue 2, p829-858, 30p
• “Acquisition of Bankers Trust Successfully Closed; Deutsche Bank Expands in U.S.A.”, PR Newswire (1999)
In the document "Challenges and Opportunities in Mergers and Acquisitions: Three International Case Studies - Deutsche Bank-Bankers Trust, British Petroleum-Amoco, Ford-Volvo." The authors analyze the experiences and different situations of mergers and acquisitions in each case.
This document explains that the final purpose or objective of mergers and acquisitions is the creation of value for a company or organization. They are seen as strategic keys used for improving the way an organization is being managed and therefore its market position and recognition.
Sometimes, these mergers and acquisitions cause conflict inside the organization if they are not well managed and could work as a double-edge sword, in the cases where companies merge or are acquired for the purpose of growing and improving the organizations together and instead of achieving this objective, they lose all control and begin decreasing their performance until they both disappear from the market.
When these integrations are made it is really important to understand the concept of acculturation, because companies need to appreciate the possible changes presented by the interaction of two or more organizational cultures that are merging. Employees must understand that some changes could be implemented in the organizations and that they should be prepared and disposed to receive them in the best way. This would help each organization to be adapted easier to another one.
With the three cases of effective integration mentioned in the document "Challenges and Opportunities in Mergers and Acquisitions: Three International Case Studies - Deutsche Bank-Bankers Trust, British Petroleum-Amoco, Ford-Volvo.", the authors explain some actions that facilitate the achievement of a better merger and acquisition. The first one is creating integration teams that can work during the process, another one is setting common goals; the third one is that the executives should be committed in the entire process and should act as guides for the rest of the employees, another action is by differentiating and assimilating aspects between the companies, and finally strengthening the common identity.
“A merger is principally a legal process and a follow up to an acquisition of controlling interest” (2).
Questions
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.
Based on the reading "Challenges and Opportunities in Mergers and Acquisitions: Three International Case Studies – Deutsche Bank-Bankers Trust; British Petroleum-Amoco; Ford-Volvo" I can conclude that there are different challenges and opportunities depending on each specific case, which will be presented above.
“Effective integration can be defined as the combination of firms into a single unity or group, generating joint efforts to fulfill the goals of the new organization. This combination is always obstructed by the challenges of nationality and perceived cultural differences.” (3) (Olie,1994)
In the three cases it is possible to observe that each company looked for a strategic interdependence, but at the same time they were willing to keep their own identity and autonomy.
The first case exposed in the reading is Integrating Deutsche Bank (DB) and Bankers Trust (BT). This particular case presented challenges and opportunities such as:
• DB’s process of growth, in which they wanted to transform a common German bank into a global organization.
• DB’s corporate finance was lagging behind, especially in the USA.
• DB’s top management decided to implement a cultural assessment exercise, looking for a reduction of cultural misunderstanding between the German and the US banks.
• The cultural assessment exercise showed that DB’s employees were not convinced at all about the legitimacy of the deal, feeling that BT was not the solution for their problems, which could present previous problems when the integration took place.
• With those results, the top management understood that they were failing in the communication and that the information given to their employees was not complete.
• Another challenge was the internal conflict that BT and Alex Brown were facing. The exercise showed that the integration between these two banks had not been done properly. This is why DB had to gain Alex Brown employees confidence before they started the new integration. Therefore, they decided to name the merged company The Deutsche Bank - Alex Brown Investment Bank.
• The last challenge was to overcome national culture differences, as “BT felt that DB was a very German company, bureaucratic, hierarchical, with low decision making process.” (4). The Top management decided that it would be a challenge for the employees to keep these thoughts about DB and ion this way they would improve their work.
• DB found an important opportunity merging with BT because in some areas BT’s executives had a stronger position in the market than DB’s managers had.
• Another opportunity for DB was to expand and let people know this bank all over the world merging with the oldest U.S investment bank (Alex Brown). This helped DB to open its doors not only to the German market but also to the U.S market and therefore to the rest of the world, gaining trust and confidence not only because of Alex Brown but also for BT’s reputation.
The second case is Integrating British Petroleum (BP) and Amoco into a single organization.
• The main challenge of this integration was the difficulties that these 2 companies had to face in order to merge 2 different organizational cultures. For this reason, managers guided the employees, giving them accurate information so they could socialize among them and know each other better until they got to understand each other’s organizational culture.
• Another challenge was to understand exactly which practices were to be uncovered by each company, as they considered it was better to uncover the best practices inside each organization.
• This integration generated important opportunities for employees in both companies.
• The main opportunity of this case was to achieve more synergies than had at first been forecast, as they went faster and further than they had promise the market.
The third case is Volvo and Ford: merging two distinct cultures.
• The main challenge of this case was merging two completely different cultures, one Swedish company (Volvo) and one Anglo-Saxon (Ford).
• Volvo was a decentralized and teamwork oriented organization, with a participatory style, were its decision making process happened at the lower levels of the organizational structure. On the contrary, Ford was perceived as a structures and hierarchical U.S corporation. For these reasons, it was a challenge for them to unify and merge the organizational cultures, as they were completely different.
• Then they found an important opportunity in learning about each other’s way of working and managing the company.
• In order to overcome these cultural differences, both companies created integration teams that could find synergies in specific areas such as power trend, purchasing, marketing and the most important one in the automotive industry, which is technology transfer. These teams were organized with the same number of participants from both companies.
• Ford found a very important opportunity with this integration, because they needed money to develop new models of cars. Without this integration they couldn’t stay as competitive as they were in the world market.
References:
• (1) & (2) Kumar, B. Rajesh; Panneerselvam, S. Mergers, Acquisitions and Wealth Creation: A Comparative Study in the Indian Context. IIMB Management Review (Indian Institute of Management Bangalore), Sep2009, Vol. 21 Issue 3, p222-244, 23p, 8 Charts, 4 Graphs
• (3) & (4) 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.
• Wang, Cong; Xie, Fei. Corporate Governance Transfer an Synergistic Gains from Mergers and Acquisitions. Review of Financial Studies, Feb2009, Vol. 22 Issue 2, p829-858, 30p
• “Acquisition of Bankers Trust Successfully Closed; Deutsche Bank Expands in U.S.A.”, PR Newswire (1999)
Images Taken from:
- http://yevgyeni.com/
