Impact of Culture on Mergers and Acquisitions

5069 Words Dec 4th, 2009 21 Pages
Impact of Culture on Mergers and Acquisitions: A Theoretical Framework
Mohibullah*

Mergers and acquisitions (M&As) are the front line strategic option for organizations attempting to have competitive advantage over its competitors. Organizations word-wide spend billions of dollars in pursuit of this strategy. However, the success rate is less then estimable. This is mainly due to the clashes of corporate cultures. The objectives of this theoretical paper are to find out the reasons why most of the mergers and acquisitions fail. Four main issues related to the culture clashes are highlighted in this paper, ambiguity and communication problems within the merged entity, properly management of cultural integration, the acquisitions and
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Good management can still prove effective.

Literature Review Explanations For The Failure Of Mergers and Acquisitions
The success of mergers and acquisitions are directly proportional to the level and quality of planning involved. Organizations often spend insufficient time to analyse and anticipate current and future market trends as well as integration issues. Firms allocate insufficient resources to establish strategic objectives. Many transactions also fail or suffer significant setback as a result of insufficient due diligence performed on the target company (Oon, 1998). However, research shows that the opportunity for mergers fail is greatest during the integrated process (Simpson, 2000). Integration fails because of improper managing and strategy, culture differences, delays in communication and lack of clear vision. Mergers and acquisition has a very long history; it has been existed at least since the 1900s (Gaugan, 1999). However, the saliency of M&A has increased considerably during the past two decades as numerous US firms have adopted M&A as a common corporate strategy to expand their organizational capabilities and to take better competitive market positions (Buono and Bowditch, 1989, Sally Raid, 2007). This propagation continued during the 1990s, and beyond, including 7,809 M&A transactions with a total value of $1.19 trillion in