Integration programs in cross-cultural mergers and acquisitions

<p><strong>Introduction</strong></p><p>During the last 10 years, a large amount of companies initiated M&amp;A activities in order to strengthen their position on the market. Nowadays, we can observe clearly that under globalization and increased competition M&amp;A is a popular instrument for fast growth. Nevertheless, despite its high attractiveness more than 60% of such transactions during the last 30 years end up in a failure.</p><p>In the meantime, during the M&amp;A process more attention is usually paid to the choice of the company to acquire and the respective due diligence process, while practice shows that the most risky part of the acquisition, i.e. integration program of the acquired company, stays underdeveloped.</p><p><strong>Literature Review</strong></p><p>There are not so many studies dedicated to the research topic but within these researches, scholars and practitioners agree on the essential importance of properly developed and implemented integration program and confirm the cultural impact in the probability of success in an M&amp;A transaction. However, the combination of these two topics has not gotten enough attention. Even though, it seems that the integration program should reflect not only the goals of the acquirer, but also take into consideration cultural aspects. Therefore, this paper is aimed at clarifying the impact of integration program, i.e. choice and implementation, on success of cross-cultural M&amp;A transactions.</p><p><strong>Methodology</strong></p><p>This study tests the following hypothesis: <em>1)</em> Structural separation strategy choice helps to achieve better results of M&amp;A between companies with significant cultural distance; and 2) Despite the potential of transaction and strategy choice, improper implementation may lead to the failure of M&amp;A program.</p><p>To test Hypothesis #1 case studies with simple regression for abnormal return valuation were chosen. In addition to this, a qualitative analysis was performed to have a bigger view of the situation.</p><p>For Hypothesis#2 interviews and survey were used to understand the employees&rsquo; perception of the Merger of Rosbank and BSGV. They were also supported by financial analysis.</p><p><strong>Conclusion</strong></p><p>As a result of the analysis it was concluded that there is no strong enough evidence supporting or rejecting the idea that structural separation strategy helps to achieve better results of M&amp;A between entities with significant cultural distance. Following this, based on the experience of the final case study, it was proven once again how crucial can be to organize and implement integration program properly, i.e. a program with clear views, well defined actions-plan developed in advance, transparent and constant communication of relevant information to employees, to the success of transaction overall.</p><p><strong>References</strong></p><p>1.&nbsp;&nbsp;&nbsp;&nbsp; Aybar B. and Ficici A. (2009) &ldquo;Cross-border acquisitions and firm value: An analysis of emerging-market multinationals&rdquo;. <em>Journal of International Business Studies</em>. 40, 1317&ndash;1338.</p><p>2.&nbsp;&nbsp;&nbsp;&nbsp; Calori, R., Lubatkin, M., &amp; Very, P. (1994). &ldquo;Control mechanisms in cross-border acquisitions: An international comparison&rdquo;. <em>Organization Studies</em>, 15(3), 361&ndash;379.</p><p>3.&nbsp;&nbsp;&nbsp;&nbsp; Cartwright, S., &amp; Cooper, C. L. (1996). &ldquo;Managing mergers, acquisitions, and strategic alliances: Integrating people and cultures&rdquo;. <em>Boston</em>, MA: Butterworth-Heinemann.</p><p>4.&nbsp;&nbsp;&nbsp;&nbsp; Deloitte and Touche (2004) &ldquo;Survey of CIO&rsquo;s regarding Business Transformation: Top 10 Barriers to Success&rdquo;. Deloitte and Touche</p><p>5.&nbsp;&nbsp;&nbsp;&nbsp; Hofstede, G. (2001). <em>Culture&rsquo;s consequences: Comparing values, behaviours, institutions, and organizations across nations</em> (2nd ed.). Thousand Oaks, CA: Sage.</p><p>6.&nbsp;&nbsp;&nbsp;&nbsp; John P. Kotter &ldquo;Leading Change&rdquo; &mdash; М.: Olymp-Business, 2007. &mdash; 256.</p><p>7.&nbsp;&nbsp;&nbsp;&nbsp; Mazur and Shapiro. Мазур И.И., Шапиро В.Д. Реструктуризация предприятий и компаний. &mdash; М.: Экономика, 2001.</p><p>8.&nbsp;&nbsp;&nbsp;&nbsp; Philippe C. Haspeslagh and David B. Jemison (1991). <em>Managing Acquisitions: Creating Value Through Corporate Renewal.</em> New York: The Free Press.</p><p>9.&nbsp;&nbsp;&nbsp;&nbsp; Puranam, P., Srikanth, K. (2007). &ldquo;What they know versus. what they do: How acquirers leverage technology acquisitions&rdquo;. <em>Strategic Management Journal</em> 28: 805&ndash;825.</p><p>10. Weber, Y., Tarba, S. Y., &amp; Reichel, A. (2011). &ldquo;A model of the influence of culture on integration approaches and international mergers and acquisitions performance&rdquo;. <em>International Studies of Management and Organization</em>, 41(3), 10&ndash;28.</p><p>&nbsp;</p>