Philippe Very

The Culture-Performance Relationship in M&A: From Yes/No to How

Do cultural differences have an impact on the performance of M&A? Despite the widely accepted myth that they do, and in a negative way, a review of extant research provides contradictory findings. In this article, we explore reasons for this contradiction and propose solutions in the form of propositions and a theoretical framework. We begin with a brief overview of extant research on the culture-performance relationship in M&A. In light of the contradictions emerging from this review, we move on to identifying three areas of complexity explaining this confusion, and for each one, we suggest propositions to guide future research. We then summarize our argument using a theoretical framework. Because of the long-term and dynamic nature of the M&A process, we argue that instead of studying the simple performance impact of cultural differences in M&A, we should move on to thinking how cultural differences impact on the M&A process and its outcome.

The acquisition process as a learning process: Evidence from a study of critical problems and solutions in domestic and cross-border deals

While mergers and acquisitions (M&A) are clearly on the rise, most deals do not create value. Researchers have attempted to explain poor performance by a failure to adequately manage the acquisition process. Following this research, this study first attempted to identify key problems faced and solutions employed by acquirers during the stages of the acquisition process for domestic and cross-border deals. Results were then interpreted from a learning perspective, which itself revealed that the acquisition process can be understood both as a learning process applied to the focal deal and as a learning process aimed at improving the acquisition process itself. Moreover, results indicate that both forms of learning are affected by an acquirers experience in a particular target country.

Control Mechanisms in Cross-border Acquisitions: An International Comparison

This paper analyzes the influence of national culture on the integration mechan isms exercised in international acquisitions. The study of 75 international acquisi tions in Europe (France and the United Kingdom) shows that firms are influenced by their national administrative heritage when they acquire companies abroad. For instance, the French exercise higher formal control of the strategy and the operations, and lower informal control through teamwork than the Americans when they buy firms in the United Kingdom. The Americans exercise higher formal control through procedures than the British when they buy firms in France. As some of these aspects of control were found to be linked with the attitudinal and/or economic performance of the acquired company, we argue that being conscious of the influence of a national administrative heritage should help anticipate cultural problems in the integration process following international acquisitions.

Origins of Corporate Governance in the USA, Sweden and France

We reason that agency theory’s behavioral assumptions may too closely reflect the US institutional context to explain the governance heritages that exist elsewhere. We propose that what constitutes opportunistic behavior and what can be done to limit it may vary due to differences in national background and formal institutions. We then test the validity of this nationally bounded model using historical sociology analysis of three nations whose corporate governance heritages are believed to differ (USA, Sweden, and France). Specifically, we review their political, cultural, and economic institutions to explore the different ways that their governance practices have evolved and infer causes for these historical variations.

Expatriation as a Bridge Over Troubled Water: A Knowledge-Based Perspective Applied to Cross-Border Acquisitions

Do expatriate managers fulfil the role of ‘value-seeking connectors’ in cross-border acquisitions? Building from the organizational knowledge and the MNC literature, this paper focuses on the use of expatriate managers for transferring experience-based knowledge within the MNC and its impact on the survival of acquired subsidiaries. Using a sample of cross-border acquisitions by Japanese MNCs, we analysed the impact of expatriate managers on the relationship between the acquirer’s industry, host country and acquisition experience and the survival of the acquired subsidiary. Results show that the contribution of expatriation to the acquired firm’s survival varies considerably depending on the type of experience considered. In fact, connectivity through expatriation is costly and only when appropriately sent abroad do expatriate managers build an effective bridge over the troubled water that characterizes the challenging post-acquisition integration.

Measuring Performance During M&A Integration

Abstract Once a target firm is bought, the most difficult job of the acquirer begins: to create the value that was expected from the deal through successful integration of the companies’ operations. Whatever the acquirer’s strategy, combining two firms will often constitute a challenging task for management. The acquirer must implement synergies in order to create value while simultaneously managing issues to avoid value leakage. Building on the findings of exploratory research made by The Conference Board, this article develops a contingency framework for measuring the progress of M&A integration. It addresses two questions specifically: which measures are relevant for monitoring integration, and when should acquirers set up these measures. Answers to these questions should help managers design the measurement tools most useful for supervising the progress of the integration of their acquisitions and for making any mid-course corrections to their integration plan that seem necessary.

Creating value through merger and acquisition integration

Successfully integrating mergers and acquisitions (MA Hubbard, 1999; Galpin & Herndon, 2000; Habeck, Kroger & Tram, 2000; Marks & Mirvis, 1998; Feldman & Spratt, 1999; Schweiger, 2002; Haspeslagh & Jemison, 1991; Schweiger & Goulet, 2000; Hitt, Harrison & Ireland, 2001). Almost everyone writing on this topic acknowledges that integration is a critical part of M&A value creation. In spite of these acknowledgements, the literature has not directly demonstrated a clear linkage between value creation and the integration process. It is the primary purpose of this chapter to do so.

Success in diversification: Building on core competences

Abstract This paper presents the findings of research into the relationship between operational and strategic ‘relatedness’ and the success or failure of 26 diversification moves undertaken by seven large French industrial companies. No direct relationship was found between operational relatedness and success. But the ability to exploit or strengthen competitive advantage through operational relatedness is linked with the success or failure of diversifications (conditional relationship). Managerial relatedness also appeared to be a condition of success. These results contribute to a better understanding of the importance of ‘relatedness’ in diversifications. The implications for practitioners should be useful considering that the rate of failure of these strategies is still high. The research makes it possible to develop a model of the diversification process.

Can We Predict M&A Activity?

Anticipating mergers and acquisitions (M&A) helps executives and investors to design their firms’ strategies and decide on their investments. However, a review of the literature shows that we know relatively little about the determinants of M&A activity, and that former research often falls short of theoretical foundations. Hence the question: in what conditions can we make accurate practical predictions of M&A activity? Relying on neo-institutional theory, we suggest that M&A activity gains from being predicted at national level and that its determinants tend to depend on the country under scrutiny. We also draw on economic contagion theory pertaining to linkages between national economies to identify possible foreign institutional influences on a countrys M&A activity. We tested our framework in three countries, the United States, the UK, and Japan, with a prediction model based on the Kalman filter that is rarely used in the field of international business. Our findings broadly corroborate our hypotheses, show the relevance of neo-institutional theory for studying the topic, and confirm that accurate practical predictions of M&A activity can be made at national level.

EXPLORING THE LIMITATIONS OF THE KNOWLEDGE PROJECTION MODEL IN MNCS: THE IMPACT OF EXPATRIATE MANAGERS ON SUBSIDIARY SURVIVAL

Few studies have explored how multinational firms (MNCs) use their experience when expanding abroad. According to the “knowledge projection” model of the MNC, appropriately disseminating industry experience, country experience and mode experience can a priori increase the chances of success of new subsidiaries. However, with inconsistent findings, prior research is of limited assistance in understanding this relationship. We argue that this situation can be explained by a focus on firm’s potential for experience accumulation, rather than on the actual transfer of experience. Deploying expatriate managers enable MNCs to apply organizational experience in foreign markets. It should also have an impact on foreign subsidiary’s chances of success and survival. Therefore, this paper examines how the use of expatriates to transfer experience can affect subsidiary survival.