Silent forces in cross-border acquisitions : an integrative perspective on post-acquisition integration
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Doctoral thesis (monograph)
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Helsinki University of Technology, Institute of Strategy and International Business doctoral dissertations series, 2006/1
AbstractDespite a continuing increase in the number of mergers and acquisitions (M&A), it has been argued that there is an insufficient theoretical understanding of the complexity of the organisational encounter that mergers and acquisitions represent for the firms involved. These concerns are particularly relevant to cross-border acquisitions, which, owing to the presence of different country contexts, are considered to be more challenging than domestic ones. However, there is a surprising lack of qualitative research evidence on cross-border acquisitions. This shortcoming is especially marked as regards the post-acquisition integration of cross-border acquisitions and the cultural dynamics therein. This dissertation took a grounded theory approach with an emergent research design focused on the integration dynamics of cross-border acquisitions. The findings are based on extensive qualitative material relating to a total of 166 interviews with 141 interviewees in eight acquisitions in France, Denmark, Germany, the US, the UK, and Finland. The acquisitions took place during the period of 1990-2000 and were made by four Finnish multinationals operating in different industrial sectors. Interviewees' experiences with eight other former parent firms of European and American origin were also used to inform the research findings. This dissertation contributes to research on mergers and acquisitions by developing an integrative framework of the post-acquisition integration dynamics of cross-border acquisitions. This integrative framework emphasises the importance of jointly considering integration-related strategic, managerial, behavioural, attitudinal, motivational, emotional, cultural, and structural factors to understand the dynamics and outcomes of cross-border acquisitions, conceptualised in terms of the amount of cultural change and organisational identification induced in the acquired firm and the financial performance of the acquisition. The notion of 'silent forces' is introduced to denote those integration-related factors that rarely reach the cognitive attention span of managers involved in acquisitions. In the present corporate context, they typically relate – but are not limited – to the managerial, behavioural, attitudinal, motivational, emotional, and cultural dimensions of organisational life. In other words, buying firms tend to emphasise the financial, strategic, and structural dimensions of cross-border acquisitions to the detriment of the silent forces therein. Unless these forces are recognised, though, they continue exerting a detrimental impact on the progress and successful outcome of cross-border acquisitions. In addition to this important main contribution, this dissertation makes a set of specific contributions to the M&A literature, as regards 1) the impact of the pre-acquisition phase on the post-acquisition phase, 2) the need to consider cultural and structural dimensions of inter-firm differences at departmental, unit, corporate, and national levels of analysis in the assessment of pre-acquisition organisational fit and in the management of post-acquisition change, 3) the components of integration management and the roles within both firms that contribute to the success of the integration efforts, 4) the impact of negative inter-unit emotional tensions on the progress and outcome of integration efforts, 5) the presence, impact, and management of behavioural and systemic manifestations of national cultures in cross-border acquisitions, 6) the impact of language on the effective integration of cross-border acquisitions, 7) factors impacting motivation and uncertainty levels in the acquired firm in the pre-and post-deal eras, 8) the nature and progress of post-acquisition cultural change in the acquired firm following cross-border acquisitions, 9) the nature and progress of organisational identification in the acquired firm following cross-border acquisitions, and 10) the impact of silent forces on the financial performance of cross-border acquisitions. In a broader perspective, the findings contribute to research on cross-cultural management, organisational culture, organisational identity, and organisational cognition. The findings have important managerial implications. For one, they provide an outline of the post-acquisition integration dynamics of cross-border acquisitions. Furthermore, they add to the understanding of managers currently involved in acquisitions by highlighting not only their financial, strategic, and structural dimensions, but also the ways in which less attended managerial, behavioural, attitudinal, motivational, emotional, and cultural factors impact their progress, outcome, and performance. Most importantly, this dissertation encourages managers involved in acquisitions to consider the areas on which they focus their attention during acquisitions, and the extent to which the latter attends to the silent forces identified in this dissertation. In the absence of such attention, one can ask – are buying firms fully aware of the challenges they involve themselves with upon making a cross-border acquisition, and do they tend to engage in cross-border acquisitions with too limited an estimation of the ensuing difficulties?
M&A, cross-border acquisitions, post-acquisition integration, integration management, culture, cross-cultural management, organisational fit, attitude, integration manager, cultural change, organisational identity, language, M&A performance