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likelihood, alien to that of the company they are considering
merging with—and vice-versa.
M&A Impact:
Mismanagement: Sony’s acquisition of Columbia pictures for
US$5.7 billion, Mitsubishi Estate’s US$846 million deal for a
controlling share in the Rockefeller Center, NTT DoCoMo’s
US$9.9 billion acquisition of stakes in AT&T Wireless: during
the late ‘80s and early ‘90s, a wave of Japanese buyouts
engulfed the West, but were soon followed by slumps in
Japanese outward M&As. Amongst the reasons, the Economist
Intelligence Unit (EIU) cited “the gulf between the highly
distinctive corporate culture of Japan and the very different
corporate cultures of the US and other countries [which]
resulted in the departure of key foreign managers.”
Dainippon Sumitomo Pharma: In September 2009 Japanese
pharmaceutical firm, Dainippon Sumitomo Pharma,
announced a US$2.6 billion bid for US company, Sepracor,
resulting in a merger the following year. The slow-moving
nature of the deal was widely criticized and by the time it came
to fruition, several changes had occurred within Sepracor’s
management, including the departure of its American CEO.
In the summer of 2010, the name of the combined group was
changed to Sunovion Pharmaceuticals. According to the EIU,
this change was an attempt to “foster a sense of unity” within
the organization and points to cultural conflict.1
JAPANESE STRATEGIES
FOR SUCCESSFUL
POST‑ACQUISITION
MANAGEMENT
Research from McKinsey & Company raises the centrality
of culture to the success or failure of cross-border M&As
and identifies four strategies for effective post-acquisition
management adopted by Japanese companies Toshiba,
Hitachi Construction Machinery, Suzuki Motors and Tadeka
Pharmaceuticals, all of which had entered deals that boosted
overseas sales. The strategies involved:
1. Implementing company-wide culture infusion programs.
2. Establishing mentorship or exchange programs to build
leadership talent.
3. Creating a special unit to effect change at the decision level.
4. Developing local trainers as change agents.
Source: ‘A Yen for Global Growth: The Japanese Experience in Cross-Border M&A’,
McKinsey & Company, 2012
The German Corporate Machine
In terms of organizational structure, Germany, too, is a world of
its own. The spectacular failure of the Daimler-Chrysler merger
revealed startling cultural differences between Germans and
Americans. One assumed that certain comforting commonalities
such as a driving work ethic, a linear approach to tasks and
keen results-orientation would facilitate smooth integration.
1 ‘Buying Up the World: Japan’s Outbound M&A Spree and the Bid for Value’, Economist
Intelligence Unit, 2012
This was a fallacy. An intercultural meeting of the minds never
took place. Misunderstanding and miscomprehension were
rampant. The merger triggered the loss of billions of dollars
as the share price plummeted. Where did German norms fail to
calibrate with other Western ones?
Hierarchy is much stricter and more firmly established in
Germany than anywhere else in Western business. Orders
are passed downwards to the person immediately below
you. Instructions are rarely horizontal; cross-departmental
communication is rare and may be frowned upon. US firms
usually have strictly centralized reporting. By contrast,
large German companies often feature decentralization and
compartmentalization. Germans are also class-conscious.
Senior managers are usually intellectuals. In classless America,
intellectuals are often called 'egg heads.'
In Germany, consensus carries more weight than
individualism. German collectivism is almost as potent as
Asian. Success is not based on profits but on the relation of
debt to equity. Incentives for employees may involve bonuses
but tend, as in Asia, to recognize departmental achievement.
Loyalty is expected in German companies and job tenure is
lengthy. Step-by-step hierarchical promotion is slow but sure.
In Germany, there is no substitute for experience.
Germans have their own distinct communication style.
Entering a room, they are initially unsmiling; though they
relax afterwards, their attitude remains formal. Greetings are
with surnames and official job titles. There are many Doktors.
Orders are given crisply and factually. Context is always
provided. Germans like to know why they are embarking on a
certain course of action, and why at this time.
Brainstorming is a rare event in a German company, and
while working for Deutsche Welle, I noticed that my German
colleagues, though friendly enough, were quick to pounce on
any mistakes I made. After a while, I realised that constructive
criticism is expected. It is personal, but seen as helpful to
the individual to avoid future mistakes. Some of my French
and British co-workers were offended by such directness.
Japanese and other Asians find it unacceptable.
As far as the German concept of time is concerned, it is
extremely linear. They wish to complete every phase before
going on to the next one—they do not like to be rushed.
Germans generally despise US-style three-monthly rolling
forecasts, considering the interval too short to be meaningful.
They prefer to write a detailed annual report.
Most German enterprises conform to the national reputation.
Ordnung (orderliness) is perhaps the most important word
in their language. German ordnung is more orderly than its
British or American equivalents. It demands orderliness in the
home, the office, and above all, in the mind.
Germans may be reluctant to abandon well-tried, proven
processes that have served the nation well in the past. Many
firms have lengthy manuals prescribing how tasks should be
carried out. Re-organizing or re-structuring a German firm
entering a merger will have to take into account the nation's
bureaucratic realities and deep-rooted national caution.
M&A Impact:
Daimler-Chrysler: The US$38 billion Daimler-Chrysler
merger of 1998 is probably one of the most famous international
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