business
THE DIFFICULTY OF INTEGRATING CHICKEN SOUP WITH GUMBO
By Connie Barnaba
In domestic deals and with global deals , a merger of two businesses takes place in three different arenas . Deals that are likely to achieve their financial objectives must be viable in all three . First is the business strategy that drives the deal , harnesses the strengths of two businesses , and results in the creation of a compelling business case that is likely to attract investors and to worry competitors or catch them off guard . Next is the legal arena in which legal risks and liabilities are uncovered , weighed , and addressed to ensure the assets of the merged business will not be overleveraged or threatened in some unknown or unexpected manner . And , in large deals , there is also the determination of whether the merger or acquisition creates an unfair advantage for competitors . In most cases , traditional due diligence can be relied upon to provide an accurate forecast in the first two arenas . However , it ’ s the cultural arena that tends to be the nemesis of half the mergers and acquisitions attempted by US businesses . In domestic deals and cross border deals , this arena tends to be overlooked because , through the lens of the dealmakers , the biggest risks associated with the deal usually tend to be the financial risks and the legal risks . While they may be aware of cultural differences between the two businesses and the differences dictated by cultural traditions of the countries in which the merged business will be
34 32 iF Magazine | April 2017 operating , the primary focus of dealmakers tends to be is on understanding the tax liabilities , import / export requirements , and fluctuating currency rates . Underestimated and unaddressed is the risk associated with cultural differences and how those differences can create formidable roadblocks to executing the business strategy .
In layman ’ s terms , little or no consideration is given to how loyalty to a culture can get in the way of transforming a tasty pot of chicken soup into a rich and flavorful gumbo . What appears at first blush to be deceptively easy can be very complex in practice , especially when people must adapt to change . Let ’ s assume you are the COO and your employer , a mid-sized business that seeks to compete with two globally-branded US soup companies , has acquired a reputation for marketing the best chicken soup produced by any food producer in the US . Your company has recently acquired a rapidly growing foreign business that markets a popular , spicy gumbo in a large foreign market . The strategy is to cross market the two products , expanding market share in the foreign market and developing the capacity to compete more effectively in US markets with a new product . Both businesses have been strong performers . Both are experts at the core business – making high-quality soups . The EU has supported the deal because it is likely to strengthen production in foreign markets resulting in job creation , better employee benefits , and increased consumer spending boosting foreign economic performance . The product is one that US competitors cannot quickly replicate , giving the merged company a distinct marketing advantage .
Ingredients for chicken soup are really simple and straightforward . They are also always the same ingredients . The workforce that produces the chicken soup takes great pride in the quality control that results in a consistent , highquality , just-like-homemade product . On the other hand , any good cook will tell you that the secret to gumbo is a well-prepared roux that gives the gumbo its unique flavor . When the roux is excellent , the remaining ingredients may vary according to the taste of the consumer . The workforce of the acquired business prides itself on the ability to innovate . In fact , the newly acquired business has been test marketing different varieties of its original gumbo recipe focusing on the prospect of creating a product line for marketing and distribution in established foreign markets and in US markets . Now as chief operating officer – the master chef – you have “ at your command ” two highly-productive workforces . All that is required is to determine what minimal changes in operations will be