CULTURE: THE OFT FORGOTTEN INGREDIENT FOR A SUCCESSFUL INTERNATIONAL M&A TRANSACTION
David Fubini, a lecturer at the Harvard Business School recently wrote of his M&A observations thusly, “Management is usually shocked to find the degree of differences that exist between their two, soon to be merged, organisations – and too few actively consider these integration challenges before the deal”.
While the difficulties encountered by management in domestic M&A transactions are substantial, the omnipresence of culture pervading an international M&A transaction brings an added dimension to the already difficult obstacles faced by parties. And yet, culture is too often given the short shrift in an international M&A deal, with the end result being disappointment and unrealised expectations by both parties.
Consider, for example, the Japanese buying spree of US landmarks such as Rockefeller Plaza and Pebble Beach in the late 80s and early 90s. Cultural awareness gave way to capitalist avarice with the acquired assets managed by internationally immature executives. The subsequent losses incurred by the Japanese buyers provided the international community with stern lessons of what not to do when acquiring internationally.
But, what is this thing called culture? Consider the following allegory. There are two young fish swimming along, and they happen to meet an older fish swimming the other way, who nods at them and says, “Morning, boys, how’s the water?” The two young fish swim on for a bit and eventually one of them looks over at the other and asks, “What the hell is water?”
Jul-Sep 2015 issue
Santa Clara University School of Law