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In the current business world, entities are looking into ways to expand, acquire an operational or a competitive advantage edge. One way of accomplishing this entails mergers and acquisitions.
A merger entails two firms combining on equal terms to form a different firm while in an acquisition; one firm becomes the holding entity of the other.
This is normally an exceedingly risky move since most entities are different in diverse ways. Companies differ in terms of philosophy, culture, operations and organizational structure. Integrating all these aspects is challenging.
Subsequently, many acquisitions and merge may fail to realize the ambitions of undertaking them (Goldberg & Practising Law Institute, 2005).
One of the factors that contribute to failure of mergers and acquisitions is cultural disparity among organizations. Organizational culture denotes the values that an organization seeks to entrench among the staff members. Most of the American firms have a relaxed approach to management.
However, European entities form countries such as Germany will probably have a very formal approach to management. Merging firms form such backgrounds may be tough. This will result in lower job satisfaction among the employees who have to alter the way they undertake their work.
The culmination of a merge in the above scenario would be high employee turnover and lower productivity. The merger between Chrysler, an American entity and Daimler-Benz, a German company did not take off appropriately since the entity had many cultural and philosophical disparities.
Chrysler had a relaxed managerial attitude, which was suitable for its employees. Hence, this managerial approach was responsible for the success the entity had realized. Contrary, Daimler-Benz, another successful organization had a different managerial culture.
The company owed its accomplishments to a formal managerial approach. The merger between the two organizations should have resulted in a bigger entity with massive potential.
The resultant company would have had at its disposal a greater market proportion, excellent employees and a good product portfolio. However, the merger failed to meet the expectation of the managers and owners (Gole & Hilger, 2008).
The organizations had different philosophies with reference to remuneration and management. Attempts to merge these disparities had massive implications on the work force. The Daimler- Benz’s employees became more motivated as the entire entity tried to replicate their organization’s culture.
Conversely, Chrysler’s employees were disoriented and most left the organization. Subsequently, Chrysler’s performance dwindled significantly triggering take-over attempts by Daimler- Benz. The above example provides insight into the failures of mergers and acquisitions.
The two firms failed to consider the human aspects of the merger. Chrysler and Daimler-Benz overlooked the impact of the merger on the most important resource, the human resource. As such, one firm was operating better than the other was, but the merged firm (resultant entity) was not realizing the expected results.
This reveals that managers should make lengthy considerations prior to merging. The entity should consider the cultural disparity and various philosophies employed in determining vital issues such as remuneration.
Overall, entities should seek merges among entities with similarities in numerous aspects. Disparities make it hard for entities to integrate various aspects of the merger (Sherman & Hart, 2006).
Conclusion
In conclusion, mergers require massive preparations. Hence, merging entities should create a period within which to integrate and jell various aspects of the entities such as operations, philosophy and culture.
This period should come prior to the signing of a comprehensive merger and acquisition deal.
Period to this period the entities should sign a memorandum, which will detail what the entities should undertake to set the stage for the signing of a comprehensive deal. The integration process should provide insight to possible outcomes of the merger or acquisition (Sherman & Sherman, 2011).
References
Goldberg, R. A., & Practising Law Institute. (2005). A guide to mergers & acquisitions, 2005. New York, NY: Practising Law Institute.
Gole, W. J., & Hilger, P. J. (2008). Corporate divestitures: A mergers and acquisitions best practices guide. Hoboken, N.J: Wiley.
Sherman, A. J., & Hart, M. A. (2006). Mergers & acquisitions from A to Z. New York: AMACOM.
Sherman, A. J., & Sherman, A. J. (2011). Mergers & acquisitions from A to Z: Mergers and acquisitions from A to Z. New York: American Management Association.
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