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Unit 12: HRM in Cross-border Mergers and Acquisitions

12.5 HR Interventions in M&A Notes

Despite the goal of performance improvement, results from mergers and acquisitions (M&A)
are often disappointing. M&A performance is a multi-dimensional function. For a successful
deal, the following key success factors should be taken into account:
1. Strategic logic which is reflected by six determinants – market similarities, market
complementarities, operational similarities, operational complementarities, market power,
and purchasing power.

2. Organisational integration which is reflected by three determinants – acquisition
experience, relative size, cultural compatibility.
3. Financial/price perspective which is reflected by three determinants – acquisition premium,
bidding process, and due diligence.
Post-M&A performance is measured by synergy realisation, relative performance (compared to
competition), and absolute performance.

Since, M&A involves cross-border deals which vary in national cultures, work behaviour of
employees, their attitude, perception, expectation and relationship dynamics which are modified
and altered. So, whenever a company plans out a cross-cultural deal, it has to take in account the
cultural differences of the concerned company and thus, the cultural pre-disposition of the
employees therein. In such deals, the organisational and corporate culture plays a major role in
designing the managerial attitude, decision-making styles, hierarchy pattern in the organisation,
the policies and procedures in the company, etc.
The four dimensions of the national culture – Power distance, uncertainty avoidance,
individualism and masculinity plays a grate role in determining the employee behaviour in a
cross border deal. Power dimensions determine the nationality on certain issues like preference
for centralisation, hierarchical level for the decision making, etc. Uncertainty avoidance guides
the preference for the number of hierarchical levels and rigidity of the organisational systems.
Individualism is the tendency of the people to look themselves and their immediate families
only. This trait is very high in Americans where they value the individual decision over group
decision. These cultural differences led to the failure on the part of the companies to understand
each other, respect the differences in culture which ultimately leads to the failure of the cross-
border deals. So, based on these traits, the HR policy in international deals is affected.
In order to contribute to the success of any M&A deal, HR must be involved in business critical
decisions at the onset and contribute thoughts on likely issues or integration strategies. HR
professionals understand the value they bring to the deal. Therefore, HR executives need to be
able to speak the same language as the deal-makers, and demonstrate a clear understanding of
the M&A process and the logic behind different types of deals. HR needs to be able to develop a
people strategy that supports the deal structure.

Example: An organisation that typically doesn’t communicate frequently or effectively
will likely be less inclined to take the time to clearly articulate and share the real context of the
deal beyond what goes to the market or the press.
Cultural integration is often the key to making the deal work. It is apparent that failed cultural
integrations are often at the heart of merger difficulties. A 2004 Mercer transatlantic study of
executives involved in M&A deals found that 75 percent of the executives cited “harmonising
culture and communicating with employees” as the most important factors for successful post-
merger integration. There is a need for the HR to take care of the national differences and
regional information while designing the HR policies and facilitating the integration of the
cultures between two companies in M&A deals.

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