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MERGER MERGER AND AND ACQUISITION
ACQUISITION
hinder the marriage of acquired and acquiring firm.
So, most of the M & As could not reach the period of
honeymoon. The success factors anticipated at the
inception mostly go to the dogs. In the M&A,
cherished goals are found to be difficult to reach.
The most dreadful reasons inhabiting the M & A
are outlined : below :
Organizational Culture
Culture is the software of human mind. It
encompasses the beliefs, assumptions and values
shared by the members of an organization. There are
a number of groups and subgroups in the
organization. Each group holds distinct attributes with
its membership (Hogg and Terry, 2000), and
individual’s identity is derived from that membership
(Kramer, 1991). In M & A, individuals are found to
loss their identity—it creates rivalry.
Organizational cultures affect an individual’s
commitment, satisfaction, and longevity within a
group (O’Reilly et al, 1991). This culture also
determines the roles of conduct, leadership styles,
administrative procedures, rituals, and customs
within the organization. Moreover, there might be
psychological bonds within the group and these bonds
are not easy to break (Larsson and Lubatkin ,2001).
M & A will cut a sorry figure if the organizational
culture is not properly addressed and comprehended.
National Culture
The national culture may cause tension during the
integration process of two firms. The two firms of two
countries appear to be compatible in organizational
cultures. But the culture of one nation may differ from
that of another. The geography, climate, economy,
political system, racial mix, language, and educational
system of a country may influence its nation (Very
et al, 1997). As a consequence, organizations will
rarely reach the depth and richness of socially shared
understanding.
Acculturation
Berry (1980) finds that acculturation may change
as result of contact between two different cultural
groups. In case of M & A, acculturation process is
essential. There are many individual groups along
with different subcultures within these networks. The
process of acculturation may vary between
individuals and subgroups within an organization
(Seo and Hill, 2005). The greater the cultural gap
between the acquired and the acquiring firms, the
lower the process of adaptation on the part of
executives (Hambrick and Cannella, 1993). Therefore,
poor acculturation is a significant reason for the failure
of M&A.
Social Identity
Social identity of an individual is derived from his
or her membership in group (Kramer, 1991). In the
M&A, this identity was ignored and forced the
executives to adapt the new organizational identities.
Consequently, the employees of an organization react
to the forced adaptation. These lead to serious
organizational conflicts and disbeliefs at the
leadership of the company. Social identity problem
may create conflict between high status employees
and low status employees, senior managers and junior
managers, and the like. It is to be mentioned here that
two blades of scissors are necessary for cutting cloth.
Similarly, harmony of social identity in between firms
is also essential. Due to the dearth of homogeneous
social identity, M&A cannot succeed.
Acculturation Perspective
There are four modes of acculturation : deculturation,
assimilation, separation and integration (Berry,
1980). Deculturation occurs when the members of an
organization do not retain their old culture or replace
it with a new one. In case of assimilation, the members
of an organization adopt the culture of another.
According to separation, members of both organizations
retain the original cultural identity. Integration
ensures some degree of changes in the culture of both
the organizations. The modes of acculturation may
create cultural clash in communicating, planning,
managerial authority, commitment, monitoring and
teamwork (Marks and Mirvis, 1992). Inevitably,
acculturation perspective is responsible for acculturation
stress. It causes low morale, absenteeism, low
turnover and decreased productivity in the
organization (Cartwright and Cooper, 1993b).
Effect of Cultural Clash in M&A
Cultural clash fuels the fire of discontent in merger
and acquisition. As a consequence, a number of pitfalls
and bottlenecks creep in. Most of these hindrances are
very difficult to overcome. However, the effects of
cultural clash caused by M & A are identified as :
General Problems
The cultural clash between organizations creates
some difficulties in communication, commitment,
integration and resource sharing (Brock, 2005).
Communication problems may result from language
differences. Limited managerial and employee
commitment may originate from pressure (Hambrick
and Cannella, 1993, Haspeslagh and Jemison, 1991).
Structural preferences complicate integration (Brock,
2005). The sharing of resources is limited when skills
and resources are not sufficiently pooled between two
merging companies.
The Management Accountant |September 2011 791