The history of mankind is marked by the striving of a person to surpass oneself. In the early days growth was mainly achieved by enlarging the own family, and during the times of sedentarisation growth was achieved by claiming more areas of arable land. These two human characteristics have survived to the present day and have been transferred into modern world economy – on the one hand striving for more and on the other hand the increase of own power or influence. Nowadays those men are called entrepreneurs, and they take care of these things in the economic world through Mergers and Acquisitions.
Therefore, it is hardly surprising that this kind of enterprise growth has found more and more approval in the course of the last years. It is easy to recognize that development by comparing the impressively increasing transaction volumes.
That this trend will obviously continue has been confirmed by one of the most recent surveys conducted by the Boston Consulting Group (Kronimus et al., 2009). According to the survey every fifth company in Europe plans an acquisition in the year 2010 – in spite of the continuing economic crisis.
These figures look impressive, but if one gets deeper into the subject, one realises that almost 70% of these mergers do not achieve the intended objectives (Palmer, n.d.), or are even regarded as a complete failure (Habeck et al., 2000). Remarkable is the fact that there are even unsuccessful mergers involving financially sound companies. Therefore, it can be concluded that the success of a merger or a takeover not only depends on the financial evaluation of the involved organisations but rather that there must be other factors which play a significant role. These other factors will be identified in this paper and their importance will be critically discussed.
Table of Contents
1 Introduction
2 Classification and Definition of Terms
2.1 Merger
2.2 Acquisition
2.3 Economical relevance of international M&A
2.4 Expected vs. Realised Benefit
3 Critical Factors of Success for M&As
3.1 General Considerations and Chosen Approach
3.2 Management and Leadership in International M&As
3.3 Demands on Communication
3.4 Culture, People and Change
4 Conclusion
Objectives & Core Topics
The primary objective of this essay is to identify and critically discuss the non-financial success factors that determine the outcome of international mergers and acquisitions. It addresses the common paradox where financial evaluations suggest growth, yet a significant proportion of M&A projects fail to meet their intended strategic objectives due to human and communication-related barriers.
- The divergence between financial expectations and realized benefits in M&A.
- The essential role of leadership and management style during integration.
- Strategic importance of internal communication and stakeholder information.
- Impact of organizational culture and human factors on merger success.
- Practical lessons derived from the author's professional experience in corporate integration.
Excerpt from the Book
3.2 Management and Leadership in International M&As
One of the most important goals before the closing of an M&A is the definition of management positions (Fontaine, 2007). This helps to direct the focus on business operations and facilitate the transition. A leadership vacuum has to be avoided under all circumstances, as this leads to rumours and uncertainty among the employees. In such a situation, well-qualified staff tends to leave the company and customers begin to reorient themselves (Habeck et al., 2000). This can be prevented through effective leadership that provides answers to questions like "Where are we going?" and "Why are we going there?"(Jackson et al., 2008). This is particularly important because managers tend to win influence at increasing uncertainty in the organisation and thus specifically play a key role in M&A (Nahavandi & Malekzadeh, 1993). However, this also applies vice versa: e.g., managers can block change processes through retrogressiveness or prevent these are implemented in radical consequence (Studt, 2008). M&As therefore require specific leadership and management skills that go beyond the scope of skills needed to run a business under normal circumstances (Berndt, 2003).
Furthermore the management philosophy lived by the executives has influence on the employees. Thus a participative leadership style reinforces the individual positive acceptance of change by employees and can affect the course of an M&A significantly (Studt, 2008). Of course national differences also affect leadership style, which may especially in international M&A cause different views with respect to the duties of a supervisor and how he should perform them(Wirtz, 2003). This in turn can influence the course significantly negative. Above all, leadership in change processes always means communications too (Studt, 2008).
Summary of Chapters
1 Introduction: This chapter highlights the history of M&A as a growth tool and presents the problem statement that financial success is often hindered by non-financial obstacles.
2 Classification and Definition of Terms: This chapter establishes a common understanding of core concepts like mergers, acquisitions, and their economic relevance, noting that diverse interpretations often cause confusion.
2.1 Merger: This section defines the technical aspects of mergers, specifically distinguishing between integration and new formation.
2.2 Acquisition: This section explains the different categories of acquisitions, namely share deals and asset deals, and their impact on legal and economic independence.
2.3 Economical relevance of international M&A: This section analyzes the global and national economic importance of M&A activities, acknowledging their continued prevalence despite market crises.
2.4 Expected vs. Realised Benefit: This section examines the core drivers for M&A, such as market share and cost synergies, while noting the high rate of failure to realize these benefits.
3 Critical Factors of Success for M&As: This chapter introduces the main section of the paper, focusing on critical success factors separate from traditional financial metrics.
3.1 General Considerations and Chosen Approach: This section introduces the theoretical framework for identifying critical success factors, moving beyond simple financial logic.
3.2 Management and Leadership in International M&As: This section details the vital role of leadership in preventing uncertainty and guiding the organization through complex transition processes.
3.3 Demands on Communication: This section explores how inadequate communication acts as a primary failure factor and emphasizes the need for integrated, transparent stakeholder interaction.
3.4 Culture, People and Change: This section discusses the human element of integration, focusing on corporate culture, employee motivation, and the importance of perceived justice.
4 Conclusion: This final chapter synthesizes the main findings, asserting that M&A success depends on managing human, leadership, and communication factors rather than just financial numbers.
Keywords
Mergers and Acquisitions, M&A, International Business, Corporate Integration, Leadership, Change Management, Communication Strategy, Organizational Culture, Synergy, Stakeholder Management, Strategic Objectives, Human Factors, Business Transformation, Due Diligence, Management Philosophy.
Frequently Asked Questions
What is the core focus of this work?
The essay fundamentally addresses why international mergers and acquisitions frequently fail to meet their objectives by analyzing critical success factors beyond simple financial evaluations.
What are the primary thematic fields covered?
The core themes include M&A definitions and classifications, the role of leadership in transitional periods, the impact of communication strategies on integration, and the management of human and cultural factors during change.
What is the main research question of this study?
The work seeks to answer why so many M&A transactions fail despite clear financial rationales and how leadership, communication, and cultural considerations influence the success of these integrations.
Which research methodology does the author employ?
The study utilizes a combination of secondary literature analysis, examining various academic studies and expert opinions on M&A failure rates, combined with the author's own professional practical experience as a case study.
What topics are discussed in the main section?
The main section investigates the critical success factors for M&A, specifically focusing on leadership strategies, the necessity of transparent communication, and the management of human-centric issues such as organizational culture and employee motivation.
What keywords characterize the research?
Key terms include Mergers and Acquisitions, Corporate Integration, Leadership, Change Management, Communication Strategy, and Organizational Culture.
How does the author integrate personal experience?
The author uses their own professional background as an employee and manager within companies that underwent mergers and acquisitions to illustrate the theoretical points with real-world examples, providing practical depth to the analysis.
What is the significance of the "Perceived Justice" concept?
The author highlights "Perceived Justice" as a key factor in ensuring that employees accept the change process, noting that if stakeholders feel the process is unfair or opaque, it is doomed to fail.
Why is communication considered a barrier to success?
The study identifies inadequate communication as a top cause of failure, as it fosters uncertainty and negative rumours, whereas clear communication helps align employees with the new integration goals.
- Citar trabajo
- Eduard Fuchs (Autor), 2010, Success factors of international Mergers & Acquisitions , Múnich, GRIN Verlag, https://www.grin.com/document/155786
