The Role of Organizational Culture in Merging Process

merger. retrive from
http://www.paddypowertrader.com/blog/index.php/shares-indices/
mergers-and-acquisitions-explained/

Mergin  is a speacila type of acquisition in which two firms join forces to create new large firm. A more formal definitican  according to the Oxford Dictionary of Business (2nd ed., 1996) the term merger is defined as:A combination of two or more businesses on an equal footing that results in the creation of a new reporting entity formed from the combining businesses. The shareholders of the combining entities mutually share the risks and rewards of the new entity and no one party to the merger obtains control over the other. But let not forget that acquisition is very close bonded with merger, acquisition refers to a direct investment or purchase of an existing company or an facility.

Let me tell, you this is the latest trend in the business world! All the big companies are doing it..

Let´s look at the most popular  M&A deals worldwide by value (in mil. USD) from 2000 to 2010.

Rank	Year	Purchaser	Purchased	Transaction value (in mil. USD)
1	2000	Fusion: America Online Inc. (AOL)[23][24]	Time Warner	164,747
2	2000	Glaxo Wellcome Plc.	SmithKline Beecham Plc.	75,961
3	2004	Royal Dutch Petroleum Co.	Shell Transport & Trading Co	74,559
4	2006	AT&T Inc.[25][26]	BellSouth Corporation	72,671
5	2001	Comcast Corporation	AT&T Broadband & Internet Svcs	72,041
6	2009	Pfizer Inc.	Wyeth	68,000
7	2000	Spin-off: Nortel Networks Corporation		59,974
8	2002	Pfizer Inc.	Pharmacia Corporation	59,515
9	2004	JP Morgan Chase & Co[27]	Bank One Corp	58,761
10	2008	Inbev Inc.	Anheuser-Busch Companies, Inc	52,000

Most popular  M&A deals worldwide by value (in mil. USD) from 2000 to 2010.

retrived from http://en.wikipedia.org/wiki/Mergers_and_acquisitions


Merger comes in different shapes and sizes. let look at this video that would explain the different type of mergers....

Why is this trend become everyday more and more popular??? Well a possible answer to this is because  merging can increase market share, it enables a firms to have more market share and therefore it is in a position to set higher prices and make more profit. Also if a the merging occur between a small and big firm, the  merger can enable greater efficiency because the larger firms can share fixed costs. And last, merging enables a firm to make more investment for Research and development. A more simple view of the advantages that we saw in class are:

•Economy of scale

•Economy of scope

•Increased revenue or market share

•Geographical or other diversification

•Resource transfer

One thing for sure is that the Organizational culture is very important to take into account when a merger is in the process. Many times people in an acquired company often complain that they don’t know what is happening, express fear about losing their jobs, and feel demoralized as to the future of their contributions and let not forget that employees are the motors of a company, they are what keeps the company moving, what keep the company alive!!!!

The success of this practice defenaly involves  cultural cohesion as a root strategic asset in merger and acquisition integration. It is important that the companies go under the microscope and identify the other company  disciplines, conditions, beliefs , attributions, background, culture view, etc. Noted anthropologist John Honigmann sums up those challenges…..

“Successful [cultural] diffusion is never automatically accomplished. Innovations diffuse when they meet certain conditions and diffusion promptly slows down or ceases when other conditions exist. Anthropologists who have studied what lies behind the spread of culture stress the importance of compatibility. Diffusion speeds up whenever an origination is congruent with strategic features of the receiving culture.”

According to the case studies (in class and in textbook), what are the practical steps to minimize the feelings of uncertainty normally expected by employees, and also to facilitate the learning process to occur between the two groups of people in their process of cultural and behavioral integration?

As mention before, Many times people in an acquired company often complain that they don’t know what is going on with the company they work every day at, express fear about losing their jobs since they may be unaward of what is and merger or acquisition, and feel discouraged as to the future of their contributions . the fact is that  most mergers fail do to Cultural differences. culture is considered to be the most prominent issue for the lack of predicted performance, loss of key employees, and time consuming conflicts in merging of business Bijilsma-Frankema, 2002. 

I believes is very important to take into account culture and mostly for the sake of the employees well being, since they are the motor of the company. a way to minimize the uncertainty feeling is definably letting know the employees of what is going on with the company, letting them know the background of the company they would be merging with. Like their styles, norms, sanciones, philosophies, and objectives. Because, “A high level of trust with in a network form is seen as a functional equivalent of building and maintaining control in functional forms.” Miles and Snow (1994)

Another practical step is Control and trust, this are vital elements of merged organizations, also The two organisations must be integrated in such away that they become as similar as possible in order to attain a mutual corporate culture this way the change wont be so harsh and traumatic on the employees. In conclusion, I can say that Organisations need to develop a system before they proceed with the integration, where they should apply proper communication among employees from top to down wards. This approach will lead to decrease the severity of ambiguities found among the employees during the integration process.

Biblio.....

* Advantages of Mergers (2008)                     http://www.economicshelp.org/blog/monopoly/advantages-of-mergers/

*Alzira S., Wayne H., and Gerald V. (2003) "Challenges and opportunities in mergres and acquisitions: three international case studies –Deutsche Bank-Bankers Trust; British Petroleum-Amoco; Ford-Volvo", Journal of European Industrial Training, Vol. 27 Iss:6, p. 313-321.

 http://www.bizresearchpapers.com/attachments_2009_01_13/21.Mohib.pdf

*J. Honigmann, Understanding Culture. (New York: Harper & Row, 1963): 338.

*Mergers and Acquisitions

 http://en.wikipedia.org/wiki/Mergers_and_acquisitions

*Mohibullah, Impact of Culture On Mergers andAcquisitions: A Theoretical Framework. International Review of Business Research Papers Vol.5 No. 1 January 2009 Pp. 255-264