企业并购成功的要诀.doc

Cultural Integration-A Key to the Success of Mergers and AcquisitionsAbstract With the ever-increasing development of economic globalization, competition between companies is getting more and more intensive. In order not to be superseded, companies have tried their best to search for an effective means which can enhance their core competitiveness. Then, mergers and acquisitions (M&As) emerge. However, the result isnt encouraging. Even if there are numerous M&A activities every year, most of them result in failure. Negligence of post-merger integration (PMI), especially cultural integration, is just the cause of the failure. M&As will be associated with corporate culture closely and cultural integration must become the main content of M&As strategies. Meanwhile, certain constructive recommendations are provided on post-merger management. Besides, some cases of M&As will be analyzed briefly to confirm the significance of cultural integration. Key words M&As, PMI, corporate culture, cultural integration, cultural conflicts 文化整合-企业并购成功的关键摘要 随着经济全球化的快速发展，企业间的竞争日益激烈。为了能够不被淘汰，各企业都在努力寻求一种提高自身竞争力的有效方式。并购就这样应运而生。然而事实并不尽如人意。即使每年发生的并购活动数量繁多，成功率却不高。究其原因，就是忽视并购后整合尤其是文化上的整合造成的。并购将与企业文化密切联系起来，并购后的文化整合必须成为并购战略的关键内容。同时，一些关于并购后管理的富有建设性的建议衍生而出。此外，对一些并购案例进行的简单的分析也证实了文化整合的重要性。关键词 并购 并购后整合 企业文化 文化整合 文化冲突ContentsIntroduction.11. M&As and PMI.21.1 Definition and Categorization of M&As .31.2 Implication and Significance of PMI .42. Cultural Integration Running through Four Phases of M&As4 2.1 Phase of Preparation .52.2 Phase of Transition .52.3 Phase of Integration 5 2.4 Phase of Consolidation .63. Corporate Culture .6 3.1 Cultural Discrepancies and Risks 63.2 Cultural Conflicts .73.3 An Effective Executive and His Decisions on Risks-taking .84. Cultural Integration and Performances of M&As 9 4.1 Implication and Phases of Cultural Integration.94.2 Significance of Cultural Integration .10 4.3 Modes of Cultural Integration 10 4.4 Factors Determining Selection on Modes of Cultural Integration .11 4.5 Decisions on Cultural Integration .12Conclusion13Works Cited.15Acknowledgements.16iiiIntroduction16Mergers and acquisitions (M&As) have long been regarded as magic weapons of enterprises strategies updating and conversion. As major strategies for growth and wealth creation, M&As not only play an important role in the enlargement of enterprises scale, the improvement of productivity and the placement of resources, but also push the social economy forward dramatically. M&As have a long history of over 100 years in the West and there have appeared five tides of M&As in succession since modern industrial era (Ren Huaixiu 44). Each upsurge promoted the development of enterprises scale and monopoly capital, and thus encouraged the growth of relative countries economy to a larger extent. It must be mentioned that with the rapid development of information technology and economic globalization, the fifth upsurge with a property of “coalition between powers” raised in the West which swept across the whole world swiftly. Influenced by this international tide, since the mid-1980s Chinese M&As have gone through a long and complicated course of development, which transferred from relief mergers to strategic mergers and from immature mergers to relatively standard mergers (Wang Changzheng 9). During this period, there were lots of companies becoming stronger and stronger through M&As such as Haier, TCL, Lenovo, etc. Generally speaking, Chinese M&As are going forward at an incredible speed. It is believed that theory of M&As in China will also tend to reach perfection.However, although the purpose of M&As is quite clear and the prospect can also be expected, it is difficult to achieve a virtual consolidation in practice. In other words, the completion of M&A deal doesnt mean this consolidation is successful. While there are a great deal of M&As activities every year, M&As records of success arent encouraging. Drawing on the previous researches, at best no more than 50 percent of M&As activities achieve the level of success initially anticipated and as many as 80 percent never live up to full expectations (Yang Jie 2). Why does this happen? What key factor leads to failure? The key factor is just post-merger integration (PMI), especially corporate cultural integration. The origin can be found from the course of development in corporate management. Peter F. Drucker, a famous American expert on management, associates management with culture in his book. In his opinion, management is a culture and should be restricted by culture. From original “scientific management” to todays “cultural management”, it can be seen from this course of development that management and culture are closely connected in practice. It is just the reflection of cultural integration which is getting more and more important. M&As, as primary means of enhancing companies core competitiveness, have the biggest pitfalls which arent liabilities from the acquired firm but traditional culture. Therefore, the successes of M&As depend not only on the increase of assets, but also on how to form a completely new corporate culture which reflects the characteristics of new company after mergers through overcoming cultural conflicts. No one can deny that “cultural integration” has become the foundation of companies expansion and the top priority of integrated strategies. It plays a decisive and indispensable part in the success or failure of M&As.With the ever-increasing development of economic globalization and the removal of trade barriers, M&As have turned to an international activity. Meanwhile, China has become a main battlefield of M&As with the rapid development of Chinese economy. Although the number of Chinese M&As activities is increasing and many companies also want to become more and more powerful through M&As, the expansion of Chinese M&As market isnt consistent with the growth of M&As performances. The ignorance of post-merger integration is just the cause. Even though PMI is drawing more and more attention, there are a large number of companies which only focus on the integration of tangible resources such as assets, liabilities and so on. However, the integration of intangible resource, which is also important, is always overlooked. In a word, both todays internal and external economic situation and the tendency of M&As ask for an emphasis on M&As, PMI and particularly cultural integration. Only by strengthening cultural integration, can the corporate synergy be optimally realized. PMI is more important than M&As and acculturation outweighs the integration of other elements. That is the kernel of study in this paper.1. M&As and PMIM&As are not only remarkable phenomena in modern economic life, but also products of highly-developed market economy. M&As are composed of three important segments: strategic orientation, procedure management and PMI (Yang Jie 54). If companies only put emphasis on procedure management regardless of relevant strategic coordination, cultural integration and systematization, M&As never turn to success. 1.1 Definition and Categorization of M&As M&As consist of two words: mergers and acquisitions, which are both meaningful. Actually, consolidation and takeover also belong to M&As, but only mergers and acquisitions are involved in this paper. Thus, the main purpose of this paper is to study how to integrate two cultures into a new advanced culture after mergers and acquisitions.A merger is a statutory combination of two or more corporations, either by the transfers of all assets to one surviving corporation or by the joining-together of the companies into a single new enterprise (Yao Shuihong 20-21). It relates to the transfer of control of enterprises which results in disappearance of the acquired firms legal entity.An acquisition takes place when one company buys enough shares to gain control of another. Formal power relations are more clear-cut than in the merger case, the acquiring firm being the dominant partner (Gertsen 68).The majority of acquisitions are friendly-that is, the acquired firm solicits bids and enters into an acquisition voluntarily. As seen from above, the most obvious difference lies in whether entity of the acquired firm disappears. Among the numerous and intricate M&As activities, they can be divided into several groups according to certain principles. There are three principles: classification based on the relatedness of acquiring firm and target firm; classification based on means of payment and the attitude of acquiring firm. This paper focuses on the study of the first principle of categorization. Economists have grouped mergers based on whether they take place at the same level of economic activity-exploration, production or manufacturing, wholesale distribution, or retail distribution to the ultimate consumers (Weston et al. 6). The element of relatedness is also important in defining economic categories of mergers. According to that, M&As can be classified into three types: horizontal merger which involves two firms that operate and compete in the same kind of business activity; vertical mergers occurring between firms in different stages of production operation; conglomerate mergers which involve firms engaged in unrelated types of business activity. How to better cultural integration under the above three kinds of mergers will be analyzed in the last part of this paper. 1.2 Implication and Significance of PMI“Integration” is the basic concept of this paper. It can be defined as the making of changes in the functional activity arrangements, organizational structures and systems, and cultures of combining organizations to facilitate their consolidation into a functioning whole. As to PMI, it can be associated with corporate management. Management is not only an art but also a science. Likewise, PMI is not only an art but also a science on how to apply the theory of management to M&As activities. It must be mentioned that the concept of PMI is broad, including tangibles integration and intangible integration which is more important. In a word, PMI is a process during which a company integrates respective resources, production procedures and technologies into a whole part and converts a diversified culture to a single core culture, and thus enhances its core competitiveness.The implication of PMI is quite rich, including all aspects of a company. Deficiency in any aspect of PMI will lead to failure of the whole M&A activity. Therefore, PMI is a key factor determining success or failure of M&As and is a reliable guarantee of achieving ultimate goals as well.2. Cultural Integration Running through Four Phases of M&AsTo a certain degree, putting M&As activities into practice just equals to stepping into a minefield. If leaders, top level or executive level, are not ready to deal with cultural problems or even do not comprehend the essence of corporate culture, cultural problems occurring during M&As processes will not be resolved for good. If so, companies will be paralyzed suddenly when M&As activities enter into a certain stage. The worst result is that M&As end in failure. That means companies have been caught in a trap set by M&As. However, this situation can be avoided through an effective cultural integration.It must be emphatically pointed out that cultural integration definitely cant be realized just during a short time. Leaders must fully prepare for cultural integration and strive to make it become an indivisible part of the whole M&A activity-from preparation phase to consolidation phase.2.1 Phase of PreparationWhether the preparations before M&As activities are adequate or not，they will influence the results of M&As a lot. During the phase of preparation, cultural problems should be marked on the “map” clearly. It can be said that framework of the new enterprise has been shaped after the representatives from both sides of M&As start to communicate. If now cultural problems are still not placed on the agenda, the new enterprise has been actually close to failure. During this stage, not only technological problems but also problems about human resources must be considered. However, the reality is always opposite. The plans for M&As formulated initially often put an emphasis on the former ones and the latter ones especially cultural problems are always disregarded. It can be seen from above that if the preparations on dealing with cultural problems are not good enough or they are not carried out timely, M&As activities are doomed to failure. 2.2 Phase of TransitionDuring this period, both parties involved in M&As activities have started to work together and determined their respective positions. Meanwhile, they also get down to planning for the operation of the new company and the plans for M&As initially formulated will be implemented. Besides, in order to better the cooperation, both sides will set up a panel to work out some more detailed plans for M&As. If leaders of both sides still dont pay attention to cultural integration, the trouble is coming. That is because their differences have been exposed when staff from both sides work together. If not resolved timely, companies will find that they always stay in the stage of transition and dont know what to do with it.2.3 Phase of IntegrationIf the work of previous stage goes smoothly, the next stage is approaching-integration period. During this period, if a feasible plan has been formulated and implemented, staff from different companies will feel more and more comfortable and coordinative effects will also be more and more evident. Compared with previous stage, integrations on technology and culture tend to be consistent and most employees are really willing to accept a new sense of working.However, what would happen if cultural problems were not considered at the beginning? If it did happen, the new company would come to an untimely end during this period. Undoubtedly, morale and productivity of staff will drop dramatically and many employees will leave the company one after another. All these are harmful to companies revenue, profits and confidence of shareholders.2.4 Phase of ConsolidationIf any company integrates technology and culture at the same time, it will enter into the phase of consolidation about three years after M&As. During this period, the new company runs better and better. The shareholders gradually realize their initial decisions for M&As are completely right. Owing to integration on corporate culture, a new culture has been knocked into shape.3. Corporate CultureCorporate culture, the crystallization of corporation and culture, has long been regarded as the soul of a company. Each company will form a unique culture of its own during the course of development, which consists of corporate values, spirit, ethics, customs and images. Among these components, values, the innermost “skin of the onion”, lie at the core of a culture. Besides, values are the deepest manifestations of culture, which are difficult for an outsider to understand (Dou Weilin 48). However, the core values are invisible and thus can be easily neglected. Likewise, corporate values, the core of corporate culture, are often overlooked. A large number of cultural conflicts are just caused by the differences of cultures especially the differences of core values, which may threaten the successes of M&As. “Cultural discrepancies” are most likely to cause failures of M&As. Now that cultural risks during PMI are inevitable, it is important to figure out how to avoid and overcome them.3.1 Cultural Discrepancies and RisksDue to the uniqueness and stability of corporate culture, it is difficult for people from different cultures to communicate with each other. As a result, when M&As activities happen, differences between two cultures will inevitably lead to various kinds of cultural risks. As seen from the literal meaning, cultural discrepancies just refer to the differences between two cultures. Cultural discrepancies are the symbol of distinguishing different nations, countries and corporations. No cultural discrepancies, no different competitive strategies and results. Generally speaking, they are caused by four factors: different social backgrounds, different personalities of entrepreneurs, different ways of operation and different characteristics of enterprises. Cultural risks of M&As refer to those potential threats to normal production and operation which result from cultural discrepancies and will result in the lack of understanding and acceptance between organizations and employees. They can be grouped into six types: risks caused by cultural superiority complex of the acquiring firm, management risks, communication risks, operating conventional risks, perceptual knowledge and expectation risks. 3.2 Cultural Conflicts M&As activities often entail considerable risks and cultural conflicts associated with cultural discrepancies, which can hinder achievement of the intended strategic objectives. They cover three kinds of conflicts: spiritual culture conflicts, systematic culture conflicts and material culture conflicts.These conflicts are summarization of cultural confl