B- The post-merger integration phase
Although it is clear that successful mergers must be based
primarily on legal and financial criteria, ignoring a potential clash of
cultures can lead to financial failure. Far too often, personal and
organizational issues are assigned a low priority during the pre-merger
evaluation process. The goal is to maximize human potential in transnational
collaboration. It is increasingly understood that what ultimately makes mergers
work are the people, and, collectively, the cultures of the merging
companies.
Mergers are often crucial moments in a company's history. The
failure of Merger is often attributed to disharmony between the corporate
cultures of the Merger shareholders, bureaucratic procedures in the new
organization and failure to achieve adequate economies of scale. Often, at
79 Under American company Law practice the merger
agreement will be filed with the Secretary of State or equivalent entity in the
other state.
80 "The plan of merger will be registered in the
"clerk's court' office of the Company's registered office, An extract of this
plan will be published in the "JORT", an excerpt containing the name of the
firm, the appraisal of asset & liability that will be transfer, the merger
bonus, the date of the closing stage (merger plan...)" article 16 of the TCC
Code,
81 Article 5 of the EU Directive on cross border
mergers. see appendices 1
both the negotiation and implementation stages, mergers fail due
to a failure of leadership.
The absence of real leadership will trouble a merger. Whether it
is a deal that falls apart, or one that is completed but fails to achieve the
potential the deal-makers envisioned, the result is the same - a lost
opportunity to advance the mission. Management is a crucial board task, and
especially so in strategic restructuring. Most mergers are predicated on the
idea that the target,s operations will be integrated into the
acquiring firm,s existing lines of business.
Through this integration, the acquirer aims to achieve some type
of "synergy." Properly defined, synergy is "the condition that exists when two
activities are worth more together than the sum of their individual values,
this concept is often illustrated by the expression, "2 + 2 = 5"82.
Many synergies, however, may never be realized or may be simply imagined by
optimistic managers looking for rationales to grow their companies quickly.
Internal accountants can be of tremendous value in helping to develop
reasonable estimates of potential synergies, calculating the probability of
achieving synergies, and estimating costs of realizing synergies. According to
Miller, J. most failed mergers result from permitting opportunity to drive
strategy, rather than integrating merger decisions into an overall corporate
strategy83.
There is no formula for post merger integration. The reason is:
no two mergers are alike! But if there is any axiom for built-up a successful
merger, it is that the merger must make sense for the acquirer from the
beginning. Before a company can successfully integrate a merger, its leadership
must stop and reflect on why it wanted to buy the company in the first
place.
82Flanagan, D, "Internal Auditor", Institute of
Internal Auditors, Inc August 1, 2004 west law
8s "...A successful merger program must also be an
integral part of a company's largely strategic goals including growth,
diversifications, product or market expansion and access to technology Mergers
and Acquisitions ..." Miller, J., Mergers and Acquisitions, back to basic
techniques for the 90's, op.cit page 16 note 1
International mergers are fundamentally different from domestic
ones, and have to be looked in a slightly different manner. They require the
fundamental knowledge of cross-cultural communication. The most fundamental
areas of difference distinguishing an international merger from a domestic one
lie in the cultural and human dimensions of the deal. Not only should the US
buyer recognize that Europe is not North America, but also Tunisia is not
German and England is not France.
Social structure, political environment, cultural background and
historical development all play a part in determining a country identity. With
the globalization of the economy the likelihood of cross-border mergers
increasing is high. This will create an increased demand on the ability to
manage cross-border merger integration well. International mergers are doubly
complex, because the differences in national culture (management style,
decision-making, expression etc.) and language make it difficult to even have a
common framework within which to operate and work out the corporate culture
differences.
Many corporate culture84 models which work well for
domestic merger are inappropriate or insufficient in an international
framework.
Increasingly it is clear that cultural differences play a very
significant role in this. Whatever the nature of the two cultures to be merged,
communication is a key tool in engaging employees - gaining their commitment
to, and preparing them to deal successfully with, the changes that will take
place. The message should begin on the day the merger is announced and continue
throughout the integration period and beyond.
If the merging companies have similar cultures, it obviously
makes the job of integration easier. But differences do not necessarily mean
incompatibility. For example while one company has highly independent,
hard-driving executives, the other may have a slower, more cautious management
approach.
84 Culture refers to the values, beliefs, symbols,
style and practices from national, ethnic, organizational, professional or
functional groupings
If these two styles are combined in a merger, the differences
must be addressed if a truly combined culture is to be achieved. To give an
example, the case study between two banks belonging to two different legal
systems and therefore two different cultures: A French bank
(Société Générale, SG) and a Tunisian bank (Union
Internationale des Banques, UIB). Based on survey made by Tunisian commentators
and
researchers85, the analysis had lead to the following
interesting points: Firstly, UIB bank had attracted the attention of the
leaders of the SG because its 74 agencies covering the national territory. The
UIB had accepted the Société Generale offer. By this operation,
the Société Generale acquires 52% of the capital of UIB. The
operation can be considered an acquisition. Second, by following the merger,
the corporate culture that has been adopted was essentially a French one.
Whereas the management of the UIB didn,t take into account the
cultural and human factor, SG has encouraged it as it constitutes one of the
determinants of the success of the merger and guarantees the stability of the
transaction. An executive of UIB affirmed that the management of the SG wants
to create the best conditions of understanding between employees of the two
banks. The management of SG had pushed UIB's management to focus of the human
aspect of the deal to avoid possible difficulties generated by the marriage
between two different cultures. The French culture of the absorbing company
(SG) dominates the one of the UIB. The example
given in the survey was the annual calendar which
doesn,t include the Tunisian religious holidays. Thirdly, some
employees of the Tunisian bank complain about the domination of the culture of
the SG because it is too severe at work and doesn't tolerate mistakes. An
executive of UIB declared that «making mistakes at work is not allowed".
They also complain about the conditions of work imposed by the French
management that is «too strict, too difficult ".
85 Ben Fadhel, A. , « La culture d'entreprise :
Facteur de réussite des alliances stratégiques et des fusions
», Tunis, 2004 article published in internet
It is important for the leaders of both companies to manage the
cultural gap and to accelerate the integration of the merger, to opt for a
permanent channel communication, to establish dialogue between the staffs of
the two companies that will constitute a fundamental element of the
integration. Meaning that, the cultural clash should be mastered and should not
threaten the merger deal. Compatibility need not mean similarity, however.
Sometimes merging companies with similar cultures may make the job difficult
for integration: the merger case between two domestic Tunisian
banks86 : due to the absence of corporate culture and divergences in
the mentalities, communication between the two banks failed, and conflicts
arose rapidly after the merger occurred.
Cultural factors can have a profound impact on the outcome of
Merger transactions, and both cultural and financial due diligence are key to
ensuring successful integration. But while compatibility between the acquiring
company and target along various dimensions is important, some inconsistency
between the two companies may help compensate for any differing market and
cultural conditions experienced by the combined firm. To support this point of
view, Professor Cremades has quoted that: many inexperienced acquirers still
ignore their important task in the integration stage: The restoration of the
stability of the "4Ps", - purpose, power, People and Projects87.
The cross border merger deal requires for its completion to
undertake carefully the closing and the integration stages supposing that the
deal is feasible.
86 « .... l'absence de la prise en compte du facteur
culturel. Par conséquent aucun audit culturel n'a été
effectué et de ce fait, les conflits ont fait rapidement leur apparition
à cause des différences culturelles et des divergences de
mentalités. On a alors rapidement regretté le fait qu'aucun audit
culturel n'ait été réalisé.... A ce propos le
directeur des filiales de la STB a déclaré On aurait dû
étudier cette fusion de point de vue culturel ». Ben Fadhel Op.cit
note 1 page 26 id
87 Cremades, M.B. "Settlement of Disputes in Cross
border Mergers and Acquisitions", Kluwer Law International, (2001) Unidroit
Library, Rome , 2001
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