In which measure the organizational culture can influence the success of a merger-acquisition operation Mémoire Economie § Finances

In which measure the organizational culture can influence the success of a merger-acquisition operation
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Synthèse

Since the beginning of the 1980, mergers and acquisitions are dominating the world of business and financial press. In fact, almost everyday we have an article of a merger project or an unsuccessful mergers and acquisitions (M&A). During this period, M&A became a worldwide growth industry. In fact, we saw an important growth between 1984 and 1990: according to Cartwright and Cooper (1996:1), the global value of M&A risen from €60 billion in 1984 to €355 billion in 1990. Today, according to a study of the CNUCED: United States conference about trade and development, M&A is worth more than €1 000 billions. Moreover, M&A became more and more international: thirty-seven percents in 1990 according to Cartwright and Cooper (1996: 1).

According to Pritchet (1985:1): “mergers and acquisitions serve as one form of corporate growth”. This strategy can give to companies good opportunities for their future: improve performance, explore new markets, diversify products, acquire new technologies, reinforce competitive position, etc.

But this growth was stop in 2002: we saw a drop of 28% for the M&A: in 2002 the global M&A was worth $1206 billion in comparison to the $1675 billion in 2001 (Lethielleux, 2004: 2618). This decrease can be explained by a lot of complex reasons but we can see that human factors are one of the most important with the organizational culture. According to Pritchet (1985: 1), in most of cases, “the dissonance, the psychological shockwaves, appears to be unexpected, poorly understood and inadequately governed”. These facts can lead to the decrease of mergers and acquisitions benefits for a company.

Reuter’s glossary of international and financial Terms gives good definition in order to differentiate mergers and acquisition. It describes a merger as the fusion of two companies or, sometimes, an acquisition or a takeover of one company by another. An acquisition occurs only when an investor holds more than 50 per cent of outstanding voting securities.

“Today, mergers and acquisitions (M&A) are a big part of the corporate worldwide. Every day, Wall Street investment bankers arrange M&A transactions, which bring separate companies together to form larger ones. When they are not creating big companies from smaller ones, corporate finance deals do the reverse and break up companies through spin-offs: the creation of an independent company through the sale or distribution of new shares of an existing business / division of a parent company”, carve-outs or tacking stocks.

However economic conditions is not good, M&A operations are still a boost to create economic benefits. In France some good operations were done recently: the rapprochement between banks Credit Agricole and Credit Lyonnais, acquisition of Wella by Procter & Gamble (hygienic products), etc. Because of the instable Economy, the risk associate to merge and acquire is very high in comparison with previous years. Moreover shareholders and bank demands, employees and customers’ expectancy lead to increase the pressure on the company managers during a M&A. Researches showed that only one M&A under two brings value for companies. Even today, reasons of these failures are very complex so this study will focus in the organizational culture.

Today, the accomplishment of a M&A relies as much as the preparation post M&A than the integration process after the signature of the companies. But the most important point is the quality of the implementation process. Now, we have enough detachment to analyze big operations in M&A and we can try to analyze success and failure of these operations.

In this field study we want to explore the world of the merger and acquisition. Inside of this subject there is many and many problems to solve. We can ask many questions about how a merger can work. We will explore the complex world of the M&A and try to understand why more than 50% of these strategies do not achieve their aim. According to Bengtsson (1992:3): “some acquisitions are prematurely declared successful but, after a few years, they are still so fundamentally unsound that the company disintegrates”. M&A can fail almost immediately if there are integration problems or if the post-merger analysis is not done correctly.

This report will consist of four parts: first of all, it is necessary to define the problem the research is required to solve and its objectives. Then, the report will present a theoretical literature review and empirical findings, in order to give some recommendations to reach research goals.

Plan

TABLE OF CONTENTS

Working title: 1

Part I/ Research objectives and methodology 6

1.1 INTRODUCTION: 6
1.2 Problem statement: 9
1.3 Primary and secondary research objectives: 11
1.4 Theoretical literature review and empirical findings: 12
1.5 Research design: 12
1.6 Data collection strategy: 14
1.7 Research ethics: 17

Part II/ Theoretical literature review of merger and acquisition 18

2.1 Merger and acquisition: definitions, theories 18
2.1.1 Different theoretical definitions: 18
2.1.2 Four main types of M & A 19
2.1.2.1 Explanation of these four main types 19
2.1.2.2 Fourth integration/merger ways: 20
2.1.3 The merger and acquisition operation process 21
2.1.3.1 Pre-acquisition 22
a) Target research 22
b) Analyze and evaluation (potential target, financial evaluation and human asset) 23
2.1.3.2 The deal making 23
2.1.3.3 The integration 24
2.1.3.4 Breakdowns and their consequences in the process 25
2.1.4 The merger and acquisition consequences 25
2.1.4.1 Human consequences 26
a) The decrease of the productivity 26
b) The Satisfaction decrease 28
c) The power conflict 29
2.1.4.2 Firm consequences 29
a) The firm culture 30
b) The culture chock 31
c) The culture integration 33
2.2 Trends of mergers and acquisitions between 1980 and today (2009): 36
2.2.1 the success period of merger and acquisition: 36
2.2.2 from success to the decrease because of the actual crisis (1990-today): 37
2.2.2.1 the situation between 1990 and 2000 in Europe 37
2.2.2.2 Mergers and acquisitions French market in 2008 38
2.2.3 M&A in the future: 40
2.3 Explore the organizational cultures of the firms: 41
2.3.1 Different corporate culture 41
2.3.2 Organizational culture: make good use of the differences 44
2.3.2.1 The culture choice 45
2.3.2.2 Tools to develop the organizational culture 46
2.3.3. Culture understanding, the hidden factor 46
2.3.3.1. International M&A with a close culture: 46
2.3.3.2. International M&A with a “cousin country”: 47
2.3.4 Intercultural negotiation 47
2.3.5. Implication of the culture in the success or the failure in mergers and acquisitions 48
2.4 How can a merger or an acquisition work? 49
2.4.1 General theory of a successful M&A 49
2.4.2 Anticipate and pilot the key steps of the integration process: 50
2.4.2.1 Integration team structure: 51
2.4.2.2 Integration process’ schedule 52
2.4.3 The communication 53
2.4.4 The success inside the organizational culture: 53
2.4.5 Manage the human aspect: 54
2.5 Reasons of mergers and acquisitions fail: 55
2.5.1 Theoretical reasons of fails: 55
2.5.2 Mergers and acquisitions fail like a weeding can fail: 56
2.5.3 Famous failure cases of merger/acquisition: 57

PART III/ EMPIRICAL FINDING 59

3.1 The merger and acquisition decision motivation 59
3.1.1 The strategic motivation 59
3.1.2 The financial motivation 61
3.2 Performance of mergers and acquisitions 62
3.2.1 Operation performance according to strategy objectives: 62
3.2.2 Driving forces for acquisitions: 63
3.3 Reasons of a merger or an acquisition: 64
The merger must be justified by the creation of a value. 65
3.4 TOTAL and ELF 66
3.4.1 The story 66
3.4.2 Elf, a difficult choice 66
3.4.3 human, financial and cultural problems 67
3.4.4 Outcome of the M&A TotalFina and Elf 69
3.5 HSBC and CCF 77
3.5.1 Strategy for the merger HSBC-CCF 77
3.5.2 HSBC and CCF culture 78
3.5.2.1 HSBC (The Hong Kong and Shanghai banking corporation) organizational culture 78
3.5.2.2 CCF (credit commercial de France) organizational culture 82
3.5.2.3 a good beginning: a compatible culture 83
3.6 Managing cultural change in international mergers and acquisition. 91
The last part showed the merger between two banks with different nationalities. This following part will deal about the impact of this characteristic, problem and advantages. 91
3.6.1 Consequences of national cultural diversity 91
3.6.2 Consequences of corporate culture diversity 93
3.7 Example of a predict failure because of a merger-acquisition and a cultural conflict. 94
3.7.1 Context 94
3.7.2 History of the merger acquisition between Lyondell and basell 94
3.7.3 Problem due to the bad management of the merger-acquisition 95
3.7.4 Problem accentuated by the crisis in 2008-2009 96
3.7.5 Positive and negative points with this merger-acquisition 97
3.7.6 Lyondellbasell in the future: 98
IV/ Summary of the findings, recommendations and conclusion 99

4.1 Summary of the findings 99
4.1.1 Merger and acquisition: large and complete definition 99
4.1.2 The organisational culture 100
4.1.2.1 The firm culture: 100
4.1.2.2 Different corporate culture 102
4.1.4 The communication 104
4.1.5 The success inside the organizational culture: 104
4.1.6 Manage the human aspect: 105
4.1.7 Theoretical reasons of fails: 105
4.2 Recommendations to have a success during a merger-acquisition operation. 107
4.2.1 After the transaction, the integration 107
4.2.2 The cultural chock management 108
4.2.2.1 the acculturation concept 109
4.2.2.2 The cultural audit: the cultural evaluation of the partner or of the target. 109
4.2.3 The matter of the leadership 111
4.2.3.1 To share a strategic vision 111
4.2.3.2 The communication 112

CONCLUSION 116

REFERENCES 120

Appendix 1 : List of the most important financial advisors, cumul of 2006, 2007, 2008 : 127
Appendix 2 : Questionnaire of cultural audit: TOTAL and HSBC 128
Appendix 3 : Interviews with HSBC managers: 131
Appendix 4 : Interviews with Total managers 133

Matière :	Economie § Finances
Nature :	Mémoire
Type :	Document Word
Nombre de pages :	135
Langue :	f

Auteur
Profil	Etudiant
Dernier diplôme :	MBA
Diplôme actuel :	MBA
Université / grande école :	ESC RENNES

Ce document a été ajouté à notre catalogue le jeudi 24 mars 2011.

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Economie § Finances

In which measure the organizational culture can influence the success of a merger-acquisition operation

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Synthèse :
Since the beginning of the 1980, mergers and acquisitions are dominating the world of business and financial press. In fact, almost everyday we have an article of a merger project or an unsuccessful mergers and acquisitions (M&A). During this period, M&A became a worldwide growth industry. In fact, ...
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