Ethical Issues in Mergers and Acquisitions

Abstract

Companies today are combining in record numbers. Executives pursue mergers, acquisitions, and joint ventures as a means to create value by (1) acquiring technologies, products, and market access, (2) creating economies of scale, and (3) establishing global brand presence. There is an underlying belief that most markets can provide revenues to three large suppliers; when more than three exist the urge to merge is irresistible. That said, the business world seems littered with integrated companies that have lost value for shareholders. The question that inevitably arises is: "What forces are powerful enough to counteract the value-creating energy of economies of scale or global market presence?" Culture has emerged as one of the dominant barriers to effective integrations. In one study, culture was found to be the cause of 30 percent of failed integrations. 1 Companies with different cultures find it difficult, if not often impossible, to make decisions quickly and correctly or to operate effectively. What is "culture"? Culture consists of the long-standing, largely implicit shared values, beliefs, and assumptions that influence behavior, attitudes, and meaning in a company (or society). This definition has several important implications: Culture is implicit. People who share in a culture find their culture challenging to recognize. The most insightful cultural observers often are outsiders, because cultural givens are not implicit to them. Culture influences how people behave and how people understand their own actions. As a result, culturally influenced beliefs and actions feel right to people, even while their implicit underpinnings make it difficult for those people to understand why they act the way they do or why other ways of acting might also be appropriate. Culture is resilient. Its elements are long-standing, not a matter of fads. The resilience of culture is supported by culture being implicit. It is difficult for people to recognize their own culture and how it exerts an influence on them. The staying power of culture is that it feels right to people; new cultural values that are imposed on people seldom replace their underlying values and beliefs in the long run. Cultural issues in mergers and acquisitions Leading through transition: Perspectives on the people side of M&A 1 Isaac Dixon, "Culture Management and Mergers and Acquisitions," Society for Human Resource Management case study, March 2005. The most insightful cultural observers often are outsiders, because cultural givens are not implicit to them.