Managing The Cultural Issue Of Merger And Acquisition

In recent years, the number of mergers and acquisitions that have taken place across the world has been staggering and has affected nearly all industries, as well as large and small companies alike. Increasing globalization has also given rise to a higher number of cross-border mergers.The reasons given by companies for this recent wave of consolidation have included cost-cutting through economies of scale, strengthening the company's market position, gaining access to new markets, global expansion, gaining a talented workforce, acquiring new knowledge and expertise, gaining a new customer base, and pursuing new technologies.However, although mergers and acquisitions are being aggressively pursued by companies, recent studies have indicated that 60-80% of all mergers are financial failures.While it is true that some of these failures can be largely attributed to financial and market factors, many studies are pointing to the neglect of cultural issues as the main reason for M&A failures. A 1997 PricewaterhouseCoopers global study concluded that lack of attention to culture and related organizational aspects contribute significantly to disappointing post-merger results.In this thesis, focus will be given on developing a better understanding of the correlation between cultural issues and synergy realization within M&A with the aim of giving recommendations to Renault in its way of handling its alliance with Nissan.Chapter 1 gives a brief introduction of the merger and acquisition waves as well as the role of culture in the performance of M&A integration. Chapter 2 first explores the difference between synergy potential and synergy realization. Then it elaborates the integration process of an M&A on the basis of culture integration and culture compatibility. These are followed by the definition of key concepts in cultural context. Chapter 3, the characteristics of French and Japanese cultures are demonstrated and analyzed. Analysis of the case - Renault vs. Nissan - within the theoretical framework is divided into two parts: economic factors and human factors. At last, recommendations to Renault on its way of handling its alliance with Nissan are given. In this thesis, basic concepts, theories, as well as case analysis are exploited.No one would get into a car knowing that it had a fifty-fifty chance of reaching its destination safely without taking precautions. The same thinking should be applied to merger/acquisition integration.The good news is that even though many companies continue to neglect culture-related issues in mergers and acquisitions, there is some evidence that more and more companies are trying to do something about it and that they increasingly recognize the importance of culture integration after the merger and acquisition.