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AcquisitionWorks, Inc. Newsletter ...delivering on the promise.
July 2005
 
As a small consulting firm, we have quickly learned the importance of strong affiliate relationships. In today's feature article we highlight a study being conducted by Cambio International, a firm that has specialized in improving cross-border relationships and change management since its founding in 1994. This study, which is underway, identifies cultural characteristics that can make a difference in how successful cross-border business partnerships are." If you are interested in the results of this study or becoming a study participant, contact Cynthia Livingston at cynthia@cambiointernational.com.

We have also recently developed relationships with two firms that provide Cross Border Cultural Workshops designed to help managers learn quickly how to effectively adjust to managing employees overseas. Together with Shilpa Pherwani, Navjeet Singh and Herb Wong of Ibis Consulting Group (Waltham, MA), we cojointly offer programs for Indian and Chinese acquisitions, strategic relationships and outsourcing.

For European and Middle East programs of a similar nature we have joined up with Gayle Cotton's firm, Circles of Excellence. With offices in Texas and Geneva, Circles of Excellence has been providing cross cultural workshops for 14 years.

Combining the expertise of AcquisitionWorks in mergers and acquisitions with the diverse cultural experience of these other firms creates powerful programs to address the specific needs of global businesses today. More information about each of these firms can be found by clicking in the Quick Links section of this newsletter.

 

in this issue
  • Cambio International on
           the Impact of Culture
  • Cultural Hubris
  • Do you know Jack on M&A?
  • YTD Statistics
  •  

    Cultural Hubris

    Why do companies with good cultures fail when it comes to acquisitions? Is it inevitable that companies with successful track records of internal growth will overwhelms the acquired's less defined culture? When does a strength become a weakness?

    This article explores these questions and looks at the impact of culture on competitive differentiators and the value of the deal.


     

    Do you know Jack on M&A?

    Winning, the new book by Jack Welch with Suzy Welch, devotes one chapter to mergers and acquisitions, subtitled Deal Heat and other Deadly Sins.

    Welch, who as Chairman of GE was involved in well over one thousand mergers and acquisitions, believes that acquisitions have the potential for synergistic growth but require a realistic expectation that in order to reap the rewards it requires ‘blood, sweat and tears’ long after the deal is done. In his book he outlines seven pitfalls to avoid:

    Pitfall One:  Believing that a merger of equals can actually occur…most MOEs self-destruct because of their very premise.

    Pitfall Two:  Focusing so intently on the strategic fit that you fail to assess cultural fit…which may be even more important to a merger’s success

    Pitfall Three:  A reverse hostage situation in which the acquirer has made so many concessions that the acquired calls all the shots.

    Pitfall Four:  Integrating too timidly

    Pitfall Five:  The conqueror syndrome…where the acquirer marches in, installs their own managers everywhere and overlooks the new talent pool.

    Pitfall Six:  Paying too much.

    Pitfall Seven:  For the acquired…resistance to change…”If you want to survive, get over your angst and learn to love the deal.”

     

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    Cambio International, Inc. launched a study in April ’05 on the “Impact of Culture on Corporate Partnerships” (M&A’s, strategic alliances, and joint ventures) with a special focus on cross-border and global partnerships.  Bronwyn Poole, an independent management and organization change consultant in Chicago, is collaborating with Cambio on this project.

    M&A and corporate development executives, CEOs, CFOs, Legal Counsels, HR executives, integration team members, and consultants have been interviewed.  The summarized results will be published and appear on our website:  www.cambiointernational.com in the fall of ’05.

    For a preview of the study findings, read the following selected direct quotations from seasoned acquisition, alliance and integration executives.  Their comments highlight some of the assumptions, cultural issues and lack of culture due diligence which negatively impact partnership success.

    Self-fulfilling Prophecy  
    “I approach every deal like a marriage and recognize that there’s a 50% chance that it’s not going to work… What I mean by work is that 1) few come close to meeting the financial plan that is established at the outset, and 2) a majority of the legacy organization, that you didn’t intend to make redundant, doesn’t always stick around
    .”

    Need for Speed  ”I’d be the first to tell you that we don’t look enough and with enough rigor at the cultural intelligence in terms of strategic fit in management style, work processes and company behaviors.  If we knew of ways to do it, it would have influenced what we would have paid for acquisitions.  It’s not because of lack of good intention but many times we have to move so quickly because it’s a competitive market and sellers are looking for speedy resolution on deals.  Many times you have to make a ‘leap of faith’ on the cultural side because there’s not enough time to do it.”

    Cultural Misunderstanding 
    “The problem with cultural differences is that they don’t lead to disagreements, they lead to misunderstandings.  Disagreements are obvious immediately and can be dealt with.  But you tend to discover misunderstandings when it is too late – when each party has tackled an action plan in its own way.”

    Communications  “We now know how to integrate manufacturing and computer systems, but what we really need to do is to get people to communicate better.”

    Repetition  “It is interesting to think what might have become of this data networks company, which had been an early leader in the industry, if it hadn’t been beaten up by being sold and acquired four times in three years.”

    Personal Style  “As the top American executive, when I re-negotiated our long-term strategic alliance with our Italian partner, I felt it was stagnate and that each partner was being measured and rewarded for things where they had no control.  After about six months of pushing my agenda, I realized that the biggest cultural barrier to a more productive partnership was probably my own style.”

    One Best Way – and It’s Ours 
    “The American view of business is not the global view of the business world.  To approach business with an American capitalistic sensibility is profoundly flawed.  While we’re focusing on return to shareholders, other countries view the purpose of business to bring prosperity and jobs to people.  Applying American sensibilities other places can be disastrous.”

    Cultural Clash  “People talk about cross-cultural differences and how you’re to bridge them, and how you’re going to keep people post-acquisition.  All too many people think that money alone will do it.  The best people are the first ones to leave.  And money alone is not what people get up in the morning and go to work for.  The type of activity that you’re talking about doing… making sure that people really analyze the cultural differences, and come up with a plan for how do we take these into consideration when we’re integrating, and how do we make sure that both cultures are satisfied.  There’s clearly not enough emphasis put on that.”

    For more information
    about Cambio International go to www.cambiointernational.co
    m.

    <YTD Statistics> The number of M&A deals in 2005 is expected to double both here and in Europe based on reported end of June statistics from Mergerstat. Interestingly, while the per deal value of US deals has more than doubled since 2003, European values have remained relatively flat around $60 Million. M&A deal volume
     

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