M&A (Role of HR) - 6. Cross Border M&A situations

Cases of cross-border deals or M&As of different geographical areas are really tricky affairs as organizational culture and the national culture become two important factors in determining the feasibility of integration.

For example, the organizational culture of company A might be very open and transparent with free flow of communication in all directions. People enjoy their freedom of working in an informal and friendly atmosphere. On the other hand, company B might be known for its stringent policies, systems and strict regulations with marked hierarchies. People in this company are used to work in a bound and regulated environment.

A blind eye to these differences would render any M&A deal between these two companies, disastrous.

Similarly, when it comes to cross-border mergers and acquisitions, care should be taken to see that the national cultures of the two companies are not drastically different. A past M&A study identified a set of cultural attributes that define and differentiate cultures.

They can be studied under Uncertainty Avoidance, Power Distance, Individualism Vs Collectivism, Future Orientation and Gender Differentiation.

For example, a country like Sweden, which is ranked high on uncertainty avoidance, would prefer a structured and orderly work environment.

On the other hand, a country like Russia, which is ranked low on the same attribute would thrive under uncertainty.

If a company from Sweden, characterized by orderliness merges with a company from Russia characterized by uncertainty, it can lead to chaos and confusion. Therefore, a complete feasibility study on the human resources front is important while going for a merger or acquisition.

However, inspite of all best precautions there can be major disparities in culture that need to be bridged. We need to understand that culture is the pattern of norms, values, beliefs and attitudes that influence individuals’ and groups’ behavior within the organization. In short, culture is “the way we do things.”

Culture, therefore, is not an independent variable and it equates with business and supports the strategies. It aligns with the organization’s goals and influences the work groups in such a way as to align their personal and professional values and beliefs to enhance themselves and the organization, too.

Cross-cultural differences or issues are one of the most important challenges which globalization has brought to the world of business. Understanding how cultural factors can make or break a deal across borders is the most significant question, which arises before making any deal.

Knowing the ‘do’s and don’ts’ and a proper understanding of cultural values of other countries and organizations are the keys to the success of these deals. Creating a cohesive culture from two distinct entities is a challenge.

Apart from that, how competent these organizations are to deal with cultural differences is the key challenge in this global, competitive world. Today’s business environment M&As have to look into cultural issues seriously, as they do the financial ones.

In view of the importance of the above aspect, we need to focus on the impact of culture and the existing cultural issues faced by the organizations entering the deals.