‘Integration of Organizational Culture in the Merger and
Acquisition Process Phases’
Supervisor Royal Philips Electronics: Mr. F. Roebroek
Academic Supervisors at the Faculty of Management and Organization: First Supervisor: Drs. R.W. de Vries
Second supervisor: Drs. J.J. Hotho Amsterdam, August 2007 Author
Anneke Hosang S1285467
Organization
Royal Philips Electronics www.philips.com
Institution
Acknowledgements
This thesis has been written during a four-month internship at Royal Philips Electronics (‘Philips’), Corporate Investments, which is the initiator and sponsor of this research. The aim is to study the approaches of the integration of culture aspects in the Mergers and Acquisition (M&A) process steps, resulting in a structured effective post merger integration approach.
Starting my internship at Philips Mergers and Acquisitions, I soon realized that the people side of M&A was something that particularly interested me. However, I did not expect to graduate on this topic since an M&A department tends to be primarily focused on hard facts and figures. Gladly Mr. Frank Roebroek, initiator and supervisor of this thesis, recognized my interests in this side of M&A and got me involved in this research. My first and utmost thanks therefore goes out to Frank Roebroek: your encouragement, support and ideas motivated me throughout the writing of this paper.
Through having given me the opportunity to do this research, I look back on these last months of writing my thesis as a learningful and enjoyable experience, and a great way of finishing my Masters in International Business & Management at the University of Groningen. I am very grateful for having been offered this graduation project, and the way you have guided me through the research process.
I would also like to thank all interviewees for their cooperation, time and effort in making this research possible: Mr. Maurice van den Broek (ABN AMRO), Mr. Frits Boerema (CapGemini), Ms. Shari Yocum (Cisco), Mr. Jan de Haes (Hewlett Packard), Mr. Francis Stickland (Hewitt), Ms. Brenda Hoelscher (NXP), Mr. Robert Jacobson (Unilever), Mr. Alexander Bakkeren, Mr. Jan-Willem Ruinemans, Mr. David Sneijder, Mr. Jeroen Veldboer, Mr. Jasper Westerink and Mr. Rene de Zeeuw (Philips). A special thanks to Francis Stickland, whose support and enthusiasm for the subject was very motivating and has been of great help.
Abstract
Cross-border merger and acquisition (M&A) activity has continued to increase at a high rate during the past decades. Despite the popularity of the M&A strategy, research indicates that 55-70% of mergers and acquisitions fail to meet the anticipated purpose. A major source of the problem seems to be the failure to adequately plan for the integration of the organizations after agreements have been signed, of which organizational culture is very often referred to as the root cause.
The focus of this paper is therefore to examine organizational culture in the context of M&A, and in relation to change management. Organizational culture in the context of this research was defined as ‘the way we do things around here’, covering both the level of visible structures, processes and behaviours as well as the underlying values and norms which support these actions and behaviours. Change management is particularly focused on the personal perspective, since M&A’s are often characterized as a traumatic event for the acquired employees involved.
How to manage the individual emotional responses of employees to the potential changes that M&A result in is therefore emphasized.
The data collection took place through both primary and secondary data collection. Secondary data was collected through a literature review relating to the following topics: the M&A process, organizational culture, organizational change and the integration of culture in the M&A process. To obtain primary data and find a benchmark on the current approaches of effectively integrating aspects of organizational culture through out the acquisition process steps, interviews have been conducted at 6 Multinational Enterprises across industries and 2 consultancies.
The findings show that there is a range of available measurement and assessment tools (both quantitative and qualitative) to account for culture in the integration plan. As well as this, various theoretical culture models are applied in practice, complemented by workshops, focus groups and interviews. It is shown that accounting for culture differences and making actions points aimed for overcoming these, helps employees though the emotional distress they suffer as a result of the M&A, and can reduce the chance of culture clash or merger syndrome.
human capital, buying within own industry and the size of the deal) all add to the fact that no one approach can be applied for culture integration plan to all companies or all deals.
Even though no ‘one’ approach could be recognized, there are three main critical success factors for the overall M&A process as found in this research. These are recognizing the culture differences and making a plan on how to overcome them; clear, regular and consistent communication; and specific leadership qualities for the change management with respect to organizational culture.
INDEX 1 INTRODUCTION………. 9 1.1 Research Subject……..………. 9 1.2 Problem Statement..………. 15 1.3 Disposition………... 17 2 LITERATURE REVIEW………. 19
2.1 Mergers and Acquisition Process……….. 19
2.1.1 Integration Process...……….. 19
2.1.2 Integration Mode………..…….. 22
2.2 Organizational Culture……….. 30
2.2.1 Levels of culture………. 30
2.2.2 Weak and strong cultures………..……. 32
2.2.3 Measuring Organizational Cultures……….……... 33
2.2.4 National culture……….…… 41
2.3 Organizational Change……….……. 44
2.3.1 Organizational Change Perspective……… 45
2.3.2 Personal Change Perspective………. 46
2.3.3 Corporate Culture Framework………... 53
2.3.4 Leadership and Management………. 55
2.4 Integration of culture in M&A……….. 60
2.4.1 Pre- combination……….…… 60
2.4.2 Combination……….. 63
2.4.3 Post- combination……… 64
2.4.4 Levels of Culture for Integration……… 66
2.5 Chapter Conclusion……….. 67
3 METHODOLOGY………..…... 69
3.1 Research Design……….... 69
3.1.1 Sampling………... 70
3.1.2 Unit of Analysis: Descriptives……….……. 74
3.1.3 Interview Structure and Technique………... 75
3.2 Quality of Research Design………..………. 76
3.3 Qualitative Data Analysis………. 78
4 RESULTS……… 81
4.1 Pre- Combination……… 84
4.1.1 Pre due diligence………. 84
4.1.2 Due Diligence………. 85 4.1.3 Announcement- Close……… 87 4.2 Combination………. 92 4.2.1 Day 1- Day 90……….…... 92 4.3 Post- combination……… 97 4.3.1. First 18 Months………. 98
4.4 Critical Success Factors……….. 99
4.5 Culture Models and Tools……….. 99
4.5.1 Comparison of Theoretical and Practical Models……….. …………... 100
5 DISCUSSION……….……. 103
6 CONCLUSION………... 110
List of figures
Figure 1 Merger Activity 2000-2006……… 10
Figure 2 Phases of M&A Process………. .20
Figure 3 Integration End State……… 23
Figure 4 Contingent Integration Modes……….. 24
Figure 5 Mode of Acculturation……… 26
Figure 6 Degree of Integration between Companies……….. 29
Figure 7 Levels of Culture……….. 31
Figure 8 Culture Assessment Dimensions……….. 37
Figure 9 Denison Culture Model……… 38
Figure 10 Kubler- Ross Emotional Response to Change………... 48
Figure 11 Stress and Commitment Cycles in a Combination………. 48
Figure 12 Adaptation to Transition by Hierarchical Level………. 49
Figure 13 Possible effects of Individual Corporate Cultures………. 52
Figure 14 Actors of Change and their Behavior………. 53
List of Tables
Table 1 Summary of Integration End State……… 28
Table 2 Comparison of Dimensions of Culture……….. 35
Table 3 Denison Cultural Dimensions……… 38
Table 4 Variants of Leadership in a Post Merger Context……… 56
Table 5 Company sample……….…. 72
Table 6 Consultant sample……… 72
Table 7 Characteristics of sample………. 74
1 INTRODUCTION
1.1 Research Subject
Mergers are commonly characterized as the consolidation of two organizations into a single organization. Acquisitions, by contrast, are commonly characterized as the purchase of one organization from another such that the buyer or acquirer assumes control over the other (Borys and Jemison, 1989).
Cross-border merger and acquisition (M&A) activity has continued to increase at an immense pace during the past decade and a half, to the point where it has become a major strategic tool for growth of multinational corporations (Cartwright and Cooper, 1993).
M&A activity has been described as occurring in waves (Cartwright and Cooper, 1996). The most sustained wave occurred in the 1980s, when the number of cross border acquisitions occurring each year had more than tripled, accounting for a significant portion of M&A activity by the early 1990s, 50% in the case of the European Union (Morosini and Singh, 1994, cited in Morosini, Shane and Singh,1998). In 1999, according to J.P. Morgan, companies worldwide spent US $3.3 trillion on M&A, 32% up from 1998. Also Mergerstat (2003) reports that the value of transactions between US companies and those outside the US peaked at almost US $ 436 billion in 2000, up 19fold from US $23.3bn in 1992. According to Laserre (2003) 3 particular events accelerated the movement of this merger wave: the Single European Market (SEM), followed by the advent of the Euro, the 1997 Asian crisis and the use of the shareholder value model of corporate governance.
hard to top the headline of 2006: the total of $3.79 trillion worldwide (Thompson Financial) beat the previous record set in 2000, and was 38% higher than 2005. Remarkable of this year’s high mergers is that private- equity firms played a bigger role than ever in the deal game: 20% of the world’s mergers and acquisitions.
Figure 1 Merger Activity 2000-2006
Source: Wallstreet Journal 2nd January 2007
Goals for this increasingly popular strategy converge around themes including corporate growth, diversification, vertical integration and achieving economies of scale (Buono, Bowditch and Lewis, 1985). Laserre (2003) also names increasing global reach and competitiveness. Growing this way can also be termed ‘Inorganic growth’, which is defined as growth in the operations of a business that arises from mergers or takeovers, rather than an increase in the companies own business activity.1
In addition to these rational reasons for acquisitions, Levinson (1970) names more unrecognized motives such as ‘fear’ and ‘obsolescence’ for acquisitions. Fear in this case represents the feeling for a need to grow as a result of being scared to be destroyed by larger companies, and obsolescence represents the need to obtain enterprising new blood to avoid becoming rigid and inflexible in adapting to a changing environment.
Overall, the main objective to acquire or merge is to create value which can only be created when the value of the new merged or combined entity is bigger than the sum of the value of the
independent entities prior to the merger (Laserre, 2003)
However, despite the popularity of the merger/ acquisition strategy, research indicates that 55-70% of mergers and acquisitions fail to meet the anticipated purpose (Carleton, 1997, cited in Schreader and Self, 2003). Growing literature underlying practices and systems for successful merger and acquisitions show a relatively low rate of success. A study by Radway (1991) also supports that management research points out that about two thirds of mergers and acquisitions fail to meet managers’ objectives. Nearly two thirds of companies lose market share in the first quarter after a merger. By the third quarter, the figure is 90% (Krug, 2003). In the long term, acquiring firms experience a wealth loss of 10% over five years after the merger completion, according to a study in the Journal of Finance (cited in Dyer, Kale and Singh, 2004).
Further supporting the low success rates of acquisitions are the following key statistics of M&A, taken from the article by Mitleton-Kelly (2005):
• On the announcement of an M&A deal, company stocks rose in only 30% of cases ( Coffey et al, 2002);
• Synergies are projected for M&A are not achieved in 70-80% of cases (Coffey, et al., 2002);
• Routinely cited as problems are people and cultural issues in failed integration (Coffey et al, 2002);
• Almost 95% of all new products fail as a result of poor M&A management
• 65% of strategy acquisitions and mergers result in negative shareholder value (Marcum et al 2003:18)
• Serial acquisitions are made in some instances to hide previous failed mergers and underlying financial problems (HRM Manager 2002, Vol 12)
• Customers and staff are forgotten (Deloitte and Touch, 2002)
global reach and competitiveness may still weigh stronger in the decision to acquire.
The next question is thus why and how so many mergers and acquisitions don’t deliver the promised values and synergies they planned to achieve. The reasons highlighted for failure of M&As by a Deloitte and Touche in a study of 540 firms (2002) (in Mitleton-Kelly, 2006) are as follows:
1. People and culture being ignored 2. Slow integration
3. Lack of communication
4. Failure to address attentions to retentions issues across all platforms: employees, customers and suppliers
5. Failure to clearly define roles, responsibilities and incentives and a clear structure
It is noticeable that all the above reasons are related to people and cultural issues. Slow integration relates primarily to the integration of the different cultures and ways of working that are often the critical factor. Cultural integration takes time and the effort involved is often seriously underestimated. Cartwright and Cooper (1993) additionally state that financial benefits anticipated from mergers and acquisitions are often unrealized because of incompatible cultures.
A major source of the problem thus seems to be the failure to adequately plan for the integration of the two (or more) organizations after agreements have been signed. Lack of compelling strategic rationale, as well as failing to successfully integrate are the two far most important sources for failure (Hewitt/Boston Consulting/ Towers Perrin/ Bain& Company, 2006). In turn, culture is very often referred to as the root cause for failure for integration of mergers & acquisitions.
cultural dynamics. Second, the way in which the merger/ acquisition integration process is managed.
Koob (2006) supports the second assumption by stating that according to some scholars, executives blame a failed merger on a culture clash, while just making an excuse for the real cause; creating a right integration plan. The right leadership, the right policies, the right perspective on cultural differences, with the right resulting strategy. Thus saying that accounting for the cultural differences correctly in the integration plan can avoid the culture clash which would other wise be the blame or reason for a failing merger. Creating such an integration plan though, is a major challenge and not easy to achieve!
Adding to this, while cultural differences between merging firms often is the most scape- goated cause of post-deal problems and regret, it is seldom examined correctly in the run-up to the purchase agreement and closure (Koob, 2006).
Consequently, when CEOs reflect on their merger experiences, they often wish they had given greater attention to the job of blending corporate cultures before the deal closed.
Accenture recently asked the Economist to survey senior executives and managers on the topic of post- merger integration (in Chanmugam, Shill, Mann, Ficery, and Pursche, 2005). ‘Cultural differences and the ability to adapt to change’ were cited most often (36% of respondents) as the thing that surprised them most during the post- merger integration process.
Considering this information it is remarkable however that it is still very common that deal makers focus on the collection and analysis of financial, commercial and operating data, forgetting to understand the culture of an organization, the roles and capabilities (Harding, 2007).
still of importance in organizational cultures as well. Another main reason for the exclusion of national culture is that organization culture is somewhat manageable while national cultures are a given for management (Hofstede, 1980).
The concept of organisational culture has become popular since the 1980s and there is no consensus about its definition but most authors agree that it is something holistic, historically determined, socially constructed and difficult to change (Hofstede, 1980). It is something an organization has but can also be seen as something an organization is. Simply put according to Drennan (1992) ‘its how things are done around here’. Elaborating on this definition, Drennan states that it is what is typical of an organization, the habits, the prevailing attitudes, the grown up pattern of accepted and expected behaviour. Accordingly, culture is said to come from causal factors such as the influence of a dominant leader, company history and tradition and is reflected in a company’s technology products and services, the industry and its competition, information an control systems, legislation and company environment, procedures and policies, reward systems and its goals, values and beliefs (Drennan, 1992).
In relation to these areas in which culture is reflected, Buono et al (1985) make a distinction of the interpretation of culture as subjective or objective. Subjective refers to the shared values and beliefs among organizational members. Objective on the other side refers to the artefacts in an organization, for example physical setting of office locations.
Both these aspects of culture are important for a full understanding of an organization’s culture. These two understandings of culture are included in the definition by Drennan: ‘the way things are done around here’, which is why this definition is the way culture is defined in the context of this thesis. This definition includes the mission, vision, goals, practices and processes as well as the underlying beliefs and ideas supporting these more tangible culture aspects.
Getting to know more about the targets organizational culture in advance and incorporating this knowledge into the post merger integration plan can help ‘introduce’ the new situation a merger or acquisition brings and reduce the people’s anxiety with this change.
Combining the statements made above, that M&As are becoming an increasingly popular strategy and that M&A activity as a fact has never been as high as 2006 in terms of deal value, as well as the fact that the integration of organizational cultures is cited as one of the main reasons for acquisitions failing, leads to the problem statement of this thesis.
1.2 Problem Statement
Integration planning and the role of culture within this planning, as previously mentioned, are crucial in determining the success of an acquisition. In relation to this, it would be of great interest to see how much attention acquiring firms across industries are currently actually giving to the integration of culture throughout their acquisition process and how they do so. To see whether the importance of organizational culture is recognized, how the similarities and differences of organizational cultures are measured and what is done to best cope with these possible culture gaps (similarities/ differences). Also, what ways and tools exist as to how to handle or avoid organizational culture clash and what factors should be given attention to do so. From this research it would be very valuable to extract those practices that have shown to be effective in assessing and managing organizational culture and which culture aspects could then be recommended to be systematically incorporated into the integration plan.
Following from this, the aim of this thesis is as follows.
Aim: To gain knowledge in the current approach of integrating organizational culture aspects in the acquisition process of Multi National Enterprises across industries, resulting in a structured integrated post merger integration approach.
How can organizational culture, as an important element of success or failure of an acquisition, be integrated in the several parts of the acquisition process, namely pre combination, combination and post combination?
Sub Questions:
1. How can the M&A process steps of integration be defined?
2. What are the different literature streams on organizational culture with relation to M&A? 3. How is organizational culture related to change management?
This thesis intends to contribute to existing literature in several ways. Gaining an insight of how firms treat the concept of culture in their integration plan and observing the pro’s and con’s of these different approaches can be of great use to multinationals planning to undertake acquisitions in the future as to how they can improve their future post merger integration. Existing literature is primarily concerned with how culture plays a role in the merging of two companies with different organizational cultures, but little is known as to how firms actually manage the aspect of organizational culture on a practical basis when planning and carrying out an acquisition. Existing theories on culture and organisational change as a result of an M&A are not yet clearly linked to the actual practices of multinationals undertaking M&As and which ways, if any are considered at all in real life applications, of integrating culture have shown to be effective in real life.
1.3 Disposition
The thesis will be structured as follows. Chapter 2 comprises of a literature review. This will provide an extensive background of theories relating to 4 main topics. These are the ‘M&A integration process’, ‘Organizational culture’, ‘Organizational change’ and lastly the ‘Integration of culture in the M&A process’.
The first theoretical topic ‘M&A integration process’ aims to provide an understanding of the different integration modes and objectives and is based mainly on the theory by Marks and Mirvis (2001) and Haspeslagh and Jemison (1991). The ‘organizational culture’ section is focused on the definition of organizational culture and its foundations as defined by the three culture levels by Schein (1992). The culture levels considered in the context of this research are related back to the definition of culture throughout the thesis: ‘ the way we do things around here’, from Drennan (1992). Measuring culture is discussed in this section relating to the dimensions of van de Berg and Wilderom (2004), Hofstede/ IRIC model (1990) and the Denison culture model (2007). The Hofstede dimensions (1991) are used to explain the relationship to national culture. In addition, qualitative approaches as described by Schein (1992) such as the clinical model and ethnographic approach are discussed.
‘Organizational change’ is explained from both an organizational and personal perspective. The human response to change is linked to the merger syndrome and the importance of the psychological contract. Further more, relating the human response to change, the assessment model by Krueger (1996) and a corporate culture framework of Goffee and Jones (1994) which links to employee attitudes, is discussed. The emotional response of employees in relation to the change as a result of M&As is described by the Kubler- Ross (1969) model.
The final topic is that of the ‘Existing approaches to the integration of culture in the M&A process’. This combines the previous topics and gives an overview of what literature has written. The following three main approaches are given, with corresponding authors, Human Due Diligence (Harding, 2007), Schools of thought: Sociological, Philosophical (Orsini, 2006) and the Culture Audit (Drennan, 1991).
qualitative research. This implies that the prime aim is to describe the characteristics of a specific population (and in this case their processes) at a specific point in time (Gill and Johnson, 1997). The type of qualitative design is in the form of a case study research, which pertains to the fact that only a limited number of units of analysis are studied (Yin, 2003). Population choice was done on accessibility and relevance with regard to the type of acquisitions the multinationals undertake, the fact they have a history of acquisitions, the recognition of being ‘best practice’, or having recently been involved in an acquisition and culture change. The firms in the sample are ABN Amro, Philips, Unilever, Cisco, NXP and Hewlett Packard. Additionally, 2 consultants were included, Hewitt and CapGemini.
Data collection took place through the conduction of interviews.
Chapter 4 give the results, which represent an overview of the interview data, where the possible ways of integrating culture at each phase as named by the interviewees is discussed. This is related to the literature findings, as to which assessments stated by literature are recognized in a real- life context and whether the theoretical approaches are feasible or match the practical findings.
Chapter 5 is a discussion of both the theoretical and practical findings, as to which findings were remarkable or unexpected, differences with relation to the national culture of the companies in the sample, which culture levels are touched upon with the different assessments used and why certain approaches are more effective than others. Apart from the limitations of this research, implications and suggestions for further research are also given.
The conclusion, Chapter 6, summarizes the findings and answers the research question, based on the results of the research data of the thesis.
2 LITERATURE REVIEW
The next section will discuss the theoretical elements related to the research topic.
First of all the M&A process; the definition of the process, and the way the end state of the combined organization can be defined. Secondly, organizational culture; the definition used in the context of this thesis, the levels that culture exists at, and the different ways of measuring organizational culture. Thirdly, organizational change; this is discussed in relation to an organizational and personal (employee) perspective, as well as the possible ways of assessing for change readiness from both perspectives. Lastly, the current approaches to the integration of organizational culture in the M&A process steps; this is a combination of the previous three topics as well as existing theories on the culture integration approaches.
2.1 Mergers and Acquisition Process
This section will define the M&A process by first giving an overview as to the different definitions of the M&A process steps defined by scholars and consultants.
2.1.1 Integration Process
company with various levels of ‘coupling’ in between. The degree of integration is typically determined by the operational and financial synergies between companies (Marks and Mirvis, 2001). There is general consensus among scholars that this process occurs in different phases and steps, as Laserre (2003) described. See Figure 2 for the different phases and stages that the process can be split up into, these steps describe the same process, however different scholars have used different terminology for these steps.
Figure 2 Phases of M&A Process
Source: Schweiger (2002)
Source: Marks and Mirvis (1998)
Source: Haspeslagh and Jemison (1991) adapted from Laserre (2003)
Source: Ernst & Young, February 2005 Strategic and
financial objectives
Transaction
Stage Transition Stage
Evaluation Integration Stage Pre-combination Combination Post- combination
Decision making process - Value Creation Logic - Target Selection
- Due Diligence and Valuation
Integration Process - Integration Framework - Transition Management - Consolidation Direction - Growth strategy Selection
- Target search, analysis and evaluation
Completion
- Integration Readiness - Pre close
These phases are interactive and the issues occurring in each separate stage need to be considered together (Haspeslagh and Jemison, 1991).
To go into more detail of the step contents on a practical level, and understand where culture can be integrated, further terminology in relation to the M&A process often stated in literature will be discussed next.
The M&A process usually starts with a request from a product division or the corporate business development department, who as part of their strategy wish to look into target companies to acquire. This request is passed on/ shared with the M&A department and after the screening of target companies, and the coverage of the obvious financial and strategic criteria takes place a due diligence will be conducted. ‘Due diligence’ is the term used for an investigation of the performance of a business, in the case of M&A this generally implies the gathering of financial, commercial and operational data. The investigation serves to ensure that the initial assumptions on the target company and deal can be verified, such as the business structure, business performance, processes, compliance, legal and tax issues etc. This can start at an early phase at high level (pre due diligence) in order obtain information on the target company, through for example publicly available information, target company stakeholders, or outsiders of the company. When there is access to the target company, a more deeper due diligence will take place. Typically, this then focuses on the assets and liabilities of the target company, both on and off the balance sheet and the sources of revenue, costs and profits (Schweiger, 2002). With relation to culture, Marks and Mirvis (1998) state that this should be extended to include assessments of human and cultural elements as well.
from which any physical and socio cultural integration should start and is usually between 0-6 months. The period between announcement and close could in particular be used to spent time getting to know the organization and its culture. After the official closing the integration plan must be implemented, usually a time frame of 90 days is taken in which the completion of predetermined aspects must be completed.
This thesis will use the definition of the integration process, as stated by Marks and Mirvis (1998). ‘Pre- combination’ is the period from pre due diligence up to close and ‘Combination’ is the period after close where the culture integration starts (Day 1 up until Day 90). There is no clear line between ‘Combination’ and ‘Post- combination’ (Marks and Mirvis, 1998). The specific timeline of the post combination phase may differ, but since this thesis is mainly focused on target company analysis, integration planning and implementation, the post combination phase in this context will represent the period up to the first 18 months.
2.1.2 Integration Mode
Having clarified the process steps, the important point to begin with is defining the end state of to be combined organizations.
Figure 3 Integration End State
Source: Marks and Mirvis (2001)
As shown in Figure 3, the combinations are based on the degree of change in the acquired company and the degree of change required of the acquiring company. ‘Preservation’ is an end state where the acquired company faces a modest degree of integration and retains its way of doing business. ‘Absorption’ is where the acquired company is absorbed by a parent and assimilated into its culture, the lead companies bring in new management and conform the target to corporate reporting relationships and regimes. ‘Reverse takeover’ is when the acquired company dictates the terms of the combination and effects cultural change in the lead company. ‘Transformation’ is when both companies undergo fundamental change following their combination. Lastly, ‘Best of both worlds’ implies partial to full cultural integration, the blending of both companies’ practices and policies. This mode is said to be most successful but with the highest level of risk.
Haspeslagh and Jemison (1991) further explain that integration means different things to different people. Most importantly, it means different things in different situations. While there are common ingredients in the process, each acquisition presents managers with a different situation and therefore, similar to Marks and Mirvis (2001), they also state this forces a choice of
Absorption Acquired company
conforms to the
acquirer Best of both worlds Additive from both
sides Preservation Acquired company retains independence Reverse Takeover Unusual case of acquired firm leading Transformation Both companies find new ways to operate High Degree of change in acquired company Low Low High
integration approach. The integration typology of Haspeslagh and Jemison (1991), start by defining the end state of the combination of the organizations according to the need for strategic interdependence and the need for organizational autonomy (see Figure 4). The nature of independence in an acquisition depends on how the value will be created. Haspeslagh and Jemison (1991) discuss three types of capability transfer (resource sharing, functional skill transfer and general management capabilities), as well as a combination of these benefits. Each of these four benefits require different requirements for interdependence and thus the degree to which the boundary of the acquired firm will have to be disturbed and eliminated, and, conversely, the degree to which the organizational identity of the organizational company should be maintained. Earlier writers have argued that differences in the integration task are also based on the relative size of the acquired firm, the acquired firm’s profitability, whether the synergies are in marketing or manufacturing, and whether the cultures are similar or not.
Figure 4 Contingent Integration Mode
Source: Laserre (2003:146)
Yet another approach to defining the end state is that of Cartwright and Cooper (1992). They Preservation
§ Keep business separate § Stimulate business
development
§ Accumulate learning and organize transfer of competencies (if valuable)
Symbiosis
§ Start with preservation
§ Identify joint sources of synergies § Develop common culture
§ Implement progressively needed interdependence
§ Preserve autonomy
Absorption
§ Consolidate and rationalize quickly
§ Adopt best practice § Instill dominant culture § Required Operational Interdependencies High Required Organizational Autonomy Low Low High
describe the different integration approaches of cultures as an ‘open’, ‘traditional’ or ‘collaborative’ marriage. In an open marriage the essence is that of non-interference by the acquirer and allow the acquired operation to operate as an autonomous business unit. In a traditional marriage the acquirer sees its own role as primarily being to redesign the acquired organization. The essence here is that of radical and wide- scale change, whereby the other party totally adopts the practices, procedures, philosophy and culture of the acquirer. The collaborative marriage is one wherein both parties have a contribution to make though a combination of different but complementary forces. The essence here is shared learning and is described as ‘best of both worlds’. A clear link can be made of this type of integration to the integration approaches as described by Marks and Mirvis (2001). Where open marriage is similar to the preservation mode, traditional links to the characteristics of the absorption mode and the collaborative as the best of both worlds.
Shiravstave (in Nahavandi and Malekzadeh, 1988) also focused particularly on the importance of post merger integration of the two mergers determining the success of the merger. He identified three different levels of integration: a) procedural, b) physical and c) managerial and socio cultural. In this last level of integration it may affect the members of the acquired firms most strongly because they are often expected to adapt to the practices of the acquirer. The process that involves mutual influence of two autonomous systems and firsthand contact between members of two groups has often been described under the topic of acculturation (Berry, 1980 cited in Nahavandi and Malekzadeh, 1988). Marks and Mirvis (1998) further add that acculturation results when contact between two autonomous cultures requires change in one group or both. Nahavandi and Malekzadeh (1988) suggest that the motive behind the M&A would influence the implementation strategy of ‘acculturation’. According to Mark and Sales (1998, cited in Marks and Mirvis, 1998) there are many possible levels of acculturation M&A of which the following they identified as the most prominent:
Cultural assimilation, where one company absorbs the other. Nahavandi and Malekzadeh, (1988) describe this as one culture voluntarily dominating the other.
Cultural pluralism, where the partners coexist. The companies remain separate with limited managerial and cultural exchanges.
Nahavandi and Malekzadeh (1988) further discuss a fourth mode, deculturation, which occurs when members of the acquired company do not value their own culture but do not want to be assimilated in the acquiring company. As a result the acquired company is likely to disintegrate as a cultural entity. This can cause a great deal of confusion and feelings of alienation, loss of identity for the individuals involved: what has been termed acculturative stress (Berry 1983, cited in (Nahavandi and Malekzadeh, 1988)
The choice of mode depends on the acquiring organisations’ degree of multi- culturalism (how many cultures exist within the organization) and the degree to which the acquired organization wants to preserve their culture. This is shown in Figure 5.
Figure 5 Mode of Acculturation
Source: Nahavandi and Malekzadeh (1988)
According to Nahavandi and Malekzadeh (1988) it is important to have congruence between the two companies on the preferred acculturation mode, as a variance would lead to stress. They argue that the variables can be determined by asking members of the acquired company the extent to which they are willing to let go of their culture and if there are elements they consider worth preserving.
However, when bringing this model to practice it may show some flaws. Considering the fact that
Assimilation
Deculturation Separation
Integration
How much do the members of the acquired form value preservation of their own culture?
Very much Not at all
Very attractive
Perception of the attractiveness of the acquirer
organizations often view their culture as superior and the right one, can one really believe that an organization would perceive their cultures to be dysfunctional and would they want to change as a result of this? This is what Nahavandi and Malekzadeh (1988) state occurs in the mode of assimilation; that the acquired company has been unsuccessful and wants to abandon its dysfunctional culture and practices. Also, considering the existence of subcultures to be evident in each organization (Deal and Kennedy, 1982:138) it will be very difficult, if not impossible for all organizational members to agree that their culture should be given up, especially when many important elements as stated in the theory of Schein, (2004), discussed in section 2.2.1, are unconscious anyway.
This thesis focuses on the integration mode where the acquirer’s culture, or ‘way of doing things’ has to be fully integrated into the acquired company’s way of working, relating to both the subjective and objective culture aspects as described by Buono et al (1985).
Relating this to the previously defined literate this implies that the integration end state is that of ‘absorption’ in terms of Marks and Mirvis (2001), or an acquisition mode which can be otherwise described as a ‘traditional’ marriage according to Cartwright and Cooper (1992). In the terms of Haspeslagh and Jemison (1990) this would imply high required operational interdependencies and low organizational autonomy by the acquired firm, also termed absorption. In the methods of merging cultures as described by Nahavandi and Malekzadeh (1988) this would be classified as assimilation, where one company absorbs the other and the acquiring culture is the dominant one. Managing this type of integration is an extreme challenge for the acquiring company, as it involves changing culture and especially, it strongly involves people.
Table 1 Summary of Integration End State
AUTHOR MODE END STATE IMPLICATION
Marks and Mirvis (2001)
- High degree of change acquired company - Low degree of change in acquiring company
Absorption - Acquired company
conforms to acquirer
Haspeslagh and Jemison (1990)
- Low required
organizational autonomy - High required operational interdependencies
Absorption - Instill dominant culture - Recognize
complementarities - Adopt best practice Cartwright and Cooper
(1992)
- Redesign primarily to the acquired organization
Traditional Marriage - Acquirer adopts the practices, procedures, philosophy and culture of acquirer
Nahavandi and
Malekzadeh (1988)
- Attractiveness of the acquirer is perceived as high - Members of the acquired firm do not value
preservation of their own culture
Assimilation - Acquiring company absorbs the acquired company, culture voluntarily dominates the other
This thesis will thus focus only on acquisition where the acquirer requires full integration of culture.
Figure 6 Degree of Integration Between Companies
Source: Marks and Mirvis (1992)
A note must be made to the theoretical assumption of full integration, which is that in many cases of acquisitions deal specific factors (which can be the driving force behind the success of an acquired company) may have to be maintained. These deal specific values may be the primary rationale of the deal and thus need to be considered. Therefore full integration includes the option for a level of customization of deal specific factors in the integration of some area or functions. It must also be noted, that when choosing full integration, this can take place as full and immediately after the closing of the deal, or on the contrary in a phased approach .
Schweiger (2002) further adds that two elements drive the timing of integration activities:
availability of accurate and relevant information and access to and cooperation with a target company.
As this thesis is primarily focused on the integration of culture, the concept of organizational culture and its clarified definition will be discussed next.
2.2 Organizational culture
The diversity in positions on organizational culture is reflected in an extensive range of definitions (Ott, 1989). Although there are many definitions of culture and there is no consensus about its definition, most authors will probably agree on the following characteristics of the organizational/corporate culture construct: it is (1) holistic, (2) historically determined, (3) related to anthropological concepts, (4) socially constructed, (5) soft, and (6) difficult to change (Hofstede, Neuijen, Ohayv, and Sanders, 1990). Culture involves beliefs and behaviour, exists at various levels and manifests itself in a wide range of features of organizational life (Hofstede et al, 1990). Simply put according to Drennan (1992) ‘its how things are done around here’, which is the culture definition for this thesis, which aspects of culture fall under this definition will be discussed in the following section.
2.2.1 Levels of Culture
Figure 7 Levels of Culture
Source: Schein (1992)
Artefacts are the visible products of culture: technology, art and visible and audible behaviour patterns. Espoused values are the values and beliefs that underlie these assumptions. They are testable in the physical environment and testable only by social consensus. Lastly, the basic assumptions about the world: the relationship to the environment, the nature of reality, time and space, the nature of human nature, human activity and human relationships. These unconsciously underpin the other three levels (Schein, 1992).
Artefacts may be level which is most open for comparison possibilities and even measure culture (Cartwright and Cooper, 1996), however it is important to move to the next level of culture to better understand the central values that provided day-to day operating principles by which members of the culture guide their behaviour i.e. the espoused values. As the essence of a company's philosophy for achieving success, values provide a sense for common direction for all employees and guidelines for their day-to-day behaviour. However, care needs to be taken that this level provides accurate information on organizational culture as Schein (2004) states that an organization’s true culture (underlying assumptions) may show deviations as to the ‘espoused values’ and the values in use. Therefore different approaches to examining culture will be
Artifacts
Espoused Values
Basic Underlying Assumptions
Visible organizational structure and processes
(hard to decipher)
Strategies, goals, philosophies (espoused justifications)
discussed further in the following sections.
In the context of this thesis the facets of the first two levels of culture will be taken into account. The fact that basic assumptions tend to be non- confrontable and non-debatable makes the inclusion of this level of culture outside the scope of this thesis. Including these two levels is consistent with the use of the definition of Buono et al (1985), who distinguishes these levels with the terms subjective and objective culture.
In relation to this, Appendix A gives an overview of what elements of culture are categorized under which level of culture.
Relating back to the definition of this thesis, ‘how things are done around here’ (Drennan, 1992) this would then include the first two levels of Schein (1992), ‘visible organizational structures and processes’ and ‘values’. This definition also includes both the conceptualizations of Buono et al (1985): the subjective and objective culture characteristics.
Cartwright & Cooper (1993) suggest that culture is to an organization what personality is to an individual- a unique identity that sets one apart from others (Stinchcomb and Ordaz, 2007). Like areas of a city, regions of a country, or groups of different ethnicity, organizations have their own distinct culture that establishes their core identity- determining what values are upheld, norms are followed, and behaviours expected (Schreader and Shelf, 2003). Such values, norms and behavioural expectations are viewed by outsiders in a framework, which tends to be either positive or negative. An organizations’ culture therefore shapes its reputation (Freiberg and Freiberg, 1996:144).
This supports that cultures are typically an integral part of an organization, and as such, Cartwright and Cooper (1993) suggest that cultures serves as forces that draw organizational members together, creating a sense of cohesion. ‘Social glue’ is unsurprisingly one of the commonest metaphors for organizational culture (Alvesson, 2002).
In the context of mergers and acquisitions, Fralicx and Bolster (1997, cited in Schreader and Self, 2003) describe organizational culture as a ‘make or break factor in the merger equation’.
2.2.2 Weak and Strong Cultures
that have addressed this issue have found that organisations’ cultures are not monolithic (Helms and Stern, 2001). Keeton and Mengistu (1992) (cited in Helms and Sterns, 2001) concluded that cultural perceptions vary even across management. Adding to this, Hofstede et al. (1990) showed that perceptions of organization culture might be affected by nationality and demographic characteristics. In addition, the various stakeholders will all have different interests in the business, and naturally different views about it.
The existence of sub cultures leads to the subject of the distinction between strong and weak cultures, since weak cultures are often associated with an organization that has sub cultures. Deal and Kennedy (1982) name several elements of importance in determining the strength of a culture; they state that companies have cultivated their individual identities by shaping values, making heroes, spelling out rituals and routines and acknowledging the cultural network, they have created a strong culture for guiding behaviour. They define strong culture as 'a system of informal rules that spells out how people are to behave most of the time' and one that 'enables people to feel better about what they do, so they can more likely to work harder'. Strong culture companies remove a great deal of uncertainty in the sense that they provide structure and standards and a value system in which to operate. According to Schearer and Self (2003) an organization's culture is strong or dominant to the degree that these goals, values and beliefs and so on are shared. It must however be said that in any company, there will be strong variations in the behaviour of different parts of the company. For example, different divisions and functions will have different requirements for success in their basic business needs.
Managers may need to have a clear understanding of the prevalent organizational culture before adopting one or several approaches to changing culture. In a strong culture, it may not be as complex compared to organizations that have a weak culture, that is sub- cultures in the organization (Rashid & Rahman, 2003).
2.2.3 Measuring Organizational Culture
perceptions, and it is as well to know what these facts and perceptions are before you begin (Drennan, 1992:42).
In the case of an acquisition where the acquiring company will impose a desired change in goals, values or priorities, Schein (2004: 149) states that it is of importance to proceed only when it is clear where the client (acquiring company) wants to proceed to and what group of people will be involved- this means deciding who the key ‘cultural carriers’ are perceived to be.
To gain an understanding of one's own culture Drennan (1992) suggests conducting an internal audit based on a list of factors, which he describes as key factors in describing company culture. The internal audit consists of questions related to the influence of a dominant leader, company history and tradition, technology products and services, the industry and its competition, customers, company expectations, information and control systems, legislation and company environment, procedures and policies, rewards systems and measurement, organization and resources and goals, values and beliefs. These are thus factors that should be taken into consideration when analyzing a company’s culture; it helps to understand where the differences in culture come from. Also, analyzing the target company this way in comparison to the acquirer will help to uncover capability gaps, friction points and differences in decision-making.
To have a better understanding of where an organization stands in terms of organizational culture, different scholars have made an attempt to ‘measure’ culture, either along dimensions quantitatively or though observation qualitatively as discussed in following section.
After that, corporate cultures may typified which is discussed in section 2.3.
Quantitative Culture Assessment
their objective occurrence. The following set of distinct dimensions are given, based on their literature review and empirical study, 1) autonomy, 2) external orientation, 3) interdepartmental organization 4) human resource orientation, 5) improvement. In addition to using a set of dimensions van de Berg and Wilderom (2004) state that identifying unique elements of culture may help better understand the culture and help in moving the culture to a new direction.
Table 2 gives a comparison of different scholar on the dimensions of organizational cultures. In case of an organizational culture change it will be of importance to assess these elements of both the acquiring as well as the acquired firm. This will help in knowing where the to be combined firms currently stands and as to which direction the firm wants to move to when clear targets are set on these dimensions.
Table 2 Comparison of Dimensions of Culture
Source: van de Berg and Wilderom (2004)
One of the approaches to measuring organizational culture, as shown in Table 2, is the 6 dimensions model of Hofstede et al (1990). The study was conducted on 20 organizations in
Organisational culture dimensions in several studies grouped with respect to similarity
Denmark and the Netherlands. This study empirically shows shared perceptions of daily practices to be the core of an organization's culture (Hofstede et al, 1990) in contrast to the literature on corporate cultures, by Peters and Waterman (1982) who insist that shared values represent the core of a corporate culture and Deal and Kennedy (1982) who state that values are the bedrock of any corporate culture. In terms of measuring culture this study concluded that it was more meaningful to account for differences between organizations in terms of their practices (i.e. conventions, customs, habits and moves) on the dimensions as named in figure 8. An organization’s relative position on these dimensions is considered to be the outcome of the type of business activity involved. The multidimensional model of organizational cultures does not support the notion that any position on one of the six dimensions is intrinsically "good" or "bad" (Hofstede et al, 1990).
Figure 8 Culture Assessment Dimensions
Openness Perspective
Diversity of people, view points, and communication styles are encouraged. Newcomers feel at home soon after arrival
There is a defined organizational type of person, viewpoint, and communication style. There are often lengthy induction and orientation periods which fortify our culture
Control Orientation
Activities, results and procedures are developed, managed, and maintained by the organization
Individuals, teams and smaller organizational units take accountability for their own activities, results, systems and procedures
Flexibility
We adhere to well- established standards and procedures to deal with customers
We adhere to standards, and procedures are flexibly applied to meet customer expectations
Source: Hofstede/ IRIC model (1990)
Another approach is that of Denison (2007), who studied management of cultural integration in mergers and acquisitions. The ‘Denison model’ measures four critical traits of culture (external/ internal focus and stable/ flexible) and leadership ( adaptability, mission, consistency and
People Perspective
We focus un getting the job done. Our concern for people is based primarily on what they deliver for the organization.
We focus not only on what people can deliver, but also on each person as an individual
Performance Orientation
We emphasize how things are done. A focus on the processes and activities that lead to high performance
We emphasize what is accomplished. The result is more important than the procedure
Identity Perspective Employees identify primarily with our organizations
Employees identify primarily with their professions
Job oriented Person oriented
Normative Pragmatic
System- Driven Self- Driven
Process Oriented Results oriented
Open System Closed System
involvement). See Figure 9. Each of these traits is further broken down into three indices (for a total of 12). See Table 3, this gives the different items per combination of cultural dimensions. According to Denison, the score on these culture traits can be found through a questionnaire of 60 survey items 2.
Figure 9 Denison Culture Model
Table 3 Denison Cultural Dimensions
Cultural Dimensions Internal Focus External Focus
Flexible Empowerment, Team Orientation,
Capability Development
Creating Change, Customer Focus, Organizational Learning
Stable Core Values, Team Orientation,
Capability Development
Strategic Direction and Intent, Goals and Objectives, Vision
Through this survey, scores on the dimensions can be recognized and placed on the model, which can then be compared with the culture of the targets’ company. This way differences and similarities can be recognized which will be useful in the planning and implementation of integration efforts. In addition, Denison (2007) states that it can help in the ‘prioritization of
intervention efforts - relative to short, mid, and long term integration demands and goals’ and in the ‘creation of a cultural benchmark for which the integrated organizations can strive.’
Another approach identifying cultural differences between merging companies is described by Orsini (2006) who relates the concept to two schools of thought: the sociological concept (‘business anthropology) and the other as a branch of philosophy, whereby both approaches point up the greater fragmentation of issues and their subsets in organizational cultures. He states that culture belongs to the world of values and hence to ethics. The social science approach to corporate culture is generally executed in a ‘values free’ setting and is used as a tool for identifying differences between procedures and practices between any two sets of corporations. This research stage is called the culture audit. A back fall of this approach is that the audit does not automatically come up with a solution. This is also a taking a quantitative approach.
In the philosophical approach the concept of value is incorporated (ethics). The patterns of values, which have become part of an individual or organizations way of doing things, represent the person’s or group’s ethical system; culture. This is of interest because knowing the values of individuals can help predict the quality of behaviour of those who share that value. This demands a much higher level of involvement and tends towards a qualitative approach, which will be further discussed in the next section.
Qualitative Culture Assessment
It is important to distinguish between qualitative and quantitative ways of diagnosing culture as both have its advantages and disadvantages in shaping an accurate measurement of culture when gathering information relevant during the M&A process.
analysis of stories, myths, rituals symbols and other artefacts. The clinical model has a fundamental assumption differentiating it from the ethnographic approach, as the aim of the ethnographic approach is to leave the system as intact as possible (Schein, 1992) and uncover concrete empirical evidence. The clinical model assumes that culture will not reveal itself that easily and one must actively intervene to determine where stable rituals and espoused values are located (Schein, 1992). Schein (2004) names other sources such as organizational structure, information, control and reward systems, myths legends stories and charters, and data from surveys instruments such as questionnaires on the Hofstede dimensions. Once again however, Schein (2004) states that even though results on structure or questionnaire data may be a clear visible artefact, its meaning and significance cannot be deciphered with additional data. Without observation or interview data one can treat these results only as an artefact from which to proceed further. As this thesis goes further than merely identifying artefacts, and thus moves to the second culture level of Schein (1992) including values, taking a qualitative approach may be highly necessary to conduct a more solid culture assessment.
See Appendix B for the strength and weaknesses of each approach.
It is thus up to the M&A process manager to decide which approach to take as to assessing culture. However, naturally, both facets of these approaches can be applied and further investigation through the research of this thesis should suggest which ones are most relevant and useful. According to the findings of this section, some form of qualitative data collection on the to be acquired company is essential. Relating to qualitative approaches, the ethnographic approach and the clinical model research, the ethnographic approach is most relevant in the context of this study. Reason for this is that clinical research tries to ‘decipher’ basic assumptions, which is not a culture level included in this thesis.
2.2.4 National Culture
Even though the main focus of this thesis is centred around organizational culture, the relationship of M&A to national cultures cannot be left unmentioned, especially as research findings suggest that national culture distance is relevant to cross border acquisition performance (Morosini 1998, in Morosini et al, 1998).
performance (Hofstede, 1980, Ghoshal, 1987). In other words, they might provide a way to access diverse routines and repertoires, having the potential to enhance the combined firms’ performance over time. Ghoshal (1987) even argues that in the context of a cross- border acquisition, benefits of national cultural distance between the acquirer and the target firm may offset the potentially disruptive impact of other sources of difficulty related to corporate cultural distance during the post- acquisition period.
A recent study by Ernst & Young by Read (2006) also states that cultural differences can enhance the combined company’s competitive advantage in a series of ways: by providing access to unique and potentially valuable capabilities that are embedded in a different cultural environment, by helping the company to develop richer knowledge structures; by overcoming rigidities and organisational inertia and by fostering learning and innovation. Collectively, Read (2006) says that these findings suggest that the cultural issues in cross- border M&As may not represent a daunting hazard, as lead managers involved in these M&As often pay greater attention to the socio cultural and people factors that are often overlooked in domestic M&As.
In contrast to this viewpoint, Nahavandi and Malekzadeh (1988) suggest that without question national cultural differences can add an additional layer of complexity over and above organisational culture and thus present double acculturation problems in cross- border M&As. Risberg (2001) also argues that national differences may cause more ambiguity in issues such as geographical distance, foreign languages, different understanding of the market, different societal and legal systems and different traditions. This shows that the statement of the advantages from high national cultural distance in cross- border M&A should be treated with care and is not applicable in all cases.
Having considered both viewpoints, the next section will explain why national culture will be given limited consideration in the context this thesis.
The reasons for not including the aspects of national culture in- depth can be explained as follows and is 2-fold.
vision and its underlying values, practices and policies are consistent within most companies, there is still the customization to local level considerations in operating at national levels which therefore reduces the need for emphasis on national culture differences. Local operations often include local management and employees who are familiar with the national culture of the country.
Secondly, the theoretical reasoning for not including this element, organization culture is somewhat manageable while national cultures are a given for management (Hofstede, 1980). Thus, in the context of changing or transforming organizational culture in the case of M&A, it is impossible to attempt changing national cultures, even though of course its importance should not be underestimated and be considered. Literature additionally states that national cultures do influence M&A but not enough to become a deal breaker: individual personalities are considered a stronger influence on M&As and organizational culture. Lastly, as the research by Morosini et al (1998) pointed out, deals between culturally distant countries tend to be more valuable, which is not the case with deals with high corporate culture distance. Taking this view point, where national cultural distance provides an element of competitive advantage and corporate cultural distance is said to be more of an issue in mergers and acquisitions, it can support why organizational culture is given the focus- it is apparently harder to cope with and presents more of a disruptive impact on the post acquisition period. It thus presents an interesting topic for further research and an element to improve on and exploit in a way to perceive as a possible competitive advantage when understood better.
Concluding on this matter, national cultures are definitely important. However, with relation to the change management and integration of firms in M&A, they are outside the scope of this thesis objective and are not included in detail for the reasons mentioned above.
and company way of working (processes, approvals, business controls). This definition can again be related back to ‘the way we do things around here’ (Drennan, 1992).
Ways to measure these different elements and practices can be done through the dimensions as given by van de Berg and Wilderom (2004) and Hofstede (1980). Values can be further evaluated with qualitative culture assessments such as clinical research and ethnography (Schein, 1992). However according to van de Berg and Wilderom (2004) the importance of values, also highlighted by Deal and Kennedy (1982), is also already reflected in a company’s practices.
2.3 Organizational Change
This thesis will focus on the strategy of M&A where the acquiring culture will have to be transferred to the acquired company. This means the acquired company will go though a process of major organizational change, which will have great impact on the organization as well as the individuals involved. The change as results of an acquisition often starts to become evident throughout the organization in the phase of the ‘first 90 days’ of the post combination stage. Depending on the way changes take place and the country of origin of the acquiring company a different approach may be taken. However, changes that take place as a result of the acquisition generally take place through a top- down approach, which means the direction of change is determined by corporate management. Linking this to the statement of Pettigrew (1985, in Krueger 1996) that ‘any change brings confusion and resistance, and therefore all but incremental change is resisted’, a light and phased approach may seem more applicable than a full and immediate approach.
This section will further discuss the aspects of organizational change from both an organizational and personal perspective of change (the human response to change) and the approaches of dealing with organizational change as a result of M&A, related to organizational culture.
