M&A Synergies Framework—Communication

Clear communication between merging companies is critical to M&A success. Communication extends far beyond agreements and meetings with top-level management. Communication involves planning and determining effective ways to help all levels of employees learn about and understand the changes taking place. One main goal of effective and clear communication is to reduce uncertainty.

 Information Availability

Openness. Openness refers to the transparency of communication from both companies involved in an M&A transaction. In the business world, “…clear communication far too often gets buried in favor of more controllable formal processes, manuals, and procedures.” 1 However, open discussion is critical to establishing trust:

”Communication should happen as soon as possible for those concerned, with reassuring frequency to inhibit speculation that results from ignorance…. Speculation is also painfully slow to correct, as well as unpredictable in outcome…. It is critical that every stakeholder in the transition process has clear access to as much real information as strategically possible.”2

In the face of change and cultural adaptation, a lack of openness can intensify negative reactions. “Research shows that acquisition announcements – especially in combination with poor handling of the communication – increase uncertainty, stress, and absenteeism, while reducing job satisfaction, commitment, the intent to remain in the new organization, and perceptions about organization’s trustworthiness.”3

One example of failed information openness occurred in the Duracell (currently a subsidiary of Berkshire Hathaway) acquisition of Nanfu, a successful Chinese battery company. During the transition process, “the lack of sufficient communication between Duracell and Nanfu in post-acquisition integration, created much misunderstanding and operational conflict between the two companies for many years.”4 The closed-off communication resulted in poor management choices and lack of trust between the companies, which may have been prevented if there had been an open exchange of information and feedback. The knowledge provided to stakeholders through use of open communication prevents unnecessary stress due to uncertainty of the future direction of the new entity.

Language Barriers. Cross-border mergers may result in the combining of nationalities with different primary languages. The inability for employees to communicate directly in the same language can make integrating and working together very difficult. For instance, the merger between Age Engineering (England) and Nouvelle Compagnie (France) ran into difficulties due to language differences. The merged company decided to hold meetings in the language of the country of the meeting location. Since most meetings were in France, they were carried out in French. However, this proved to be quite difficult for the British:

”Most of their managers, and all but one of their directors, had an engineering background, and so might be expected to have generally poor linguistic aptitudes.  Those interviewees who had attended meetings conducted in French admitted that communication was a slow and laborious process, in which they frequently had to resort to drawing diagrams. At times this was extremely frustrating, particularly because their French counterparts, most of whom were professional managers, were more linguistically competent in English than they were in French.”5

Translation services may not have resolved the communication issues. Oftentimes with translation, subtleties and nuances are difficult to convey and time delays cause inconveniences or stifle the flow of collaboration.

Even when counterparts can speak the same language, there are still contextual differences and cultural nuances that can alter the relative definitions of certain words. For example, one American accountant, while in a business meeting in the U.K., used a term that in the U.S. is innocent in meaning, but is actually very offensive in the U.K. The awkward result in that meeting was the direct effect of a language barrier within the same tongue.

In addition, company-specific terms or slang can also prove to be a type of “language barrier”:

 ”A cross-border merger or an acquisition may also introduce a new ‘company speak’. For example, the American-based corporation, General Electric, acquired the Finnish company, Instrumentarium, in 2003. Not only did the employees of the Finnish unit need to activate their skills in English, but they also had to quickly pick up the codes and abbreviations widely used in communications within General Electric.”6

Absent proper explanation, company-specific terms could alienate new employees. Implementing a company-wide, primary language will help facilitate overall company communication during each phase in the cross-border M&A process.

Communication Style

High-Context vs. Low-Context (Meyer). In a merger between U.S. Gillette and Chinese Nanfu, “Liu, a 38-year-old researcher at Nanfu said: ‘I think that Americans are more open than us. It is easy to communicate with Americans because they are direct. They will tell you either they agree with you or disagree with you frankly.’ James, a 42-year-old manager from Nanfu agreed: ‘I think Americans are very straightforward. There are fewer mind games going on.’”7

In this example, the Chinese Nanfu employees noticed a cultural difference referred to as high- and low-context. High-context and low-context refer to the amount of information that is explicitly communicated as opposed to implied messages. In a high-context culture, information is transmitted with high levels of nuance. The intended message is often interpreted only through layers of nuance and sophistication. In contrast, the U.S. is considered one of the lowest context cultures in the world. U.S. nationals are more likely to express themselves in a straightforward manner and interpret communication at its face value.8 Figure 1.1 illustrates the spectrum of low versus high context countries.Figure 1.1: Adapted from Meyer 2014

This difference in context can cause misunderstandings between cultures. An American may not pick up on high-context cues common in countries such as India. One researcher suggested that if an American inquired about the progress of certain project, an Indian coworker might reply with statements like, “It turned out to be quite a big job, didn’t it?” and “When are they expecting to see the new application?” The Indian co-worker—likely knowing exactly when the application is due—is hinting that the project will not be done by the deadline. However, the American is not likely to recognize the Indian’s concealed message.9 U.S. businesspeople should be aware that when communicating with other cultures, it is best to be on the lookout for hidden meanings beyond word choice.

Although the American style of straightforward directions and opinions may be appreciated—as by the Nanfu workers mentioned above—it could also cause inadvertent offense. The U.S. tendency to repeat key points may come across as a sign of distrust of the other party. Best practices in cross-border deal making involve understanding the degree of context one’s audience uses in communicating, explaining personal communication styles, maintaining patience, and seeking understanding when needed.

Principles-Based vs. Applications-Based (Meyer). Principles- vs. Applications-Based learning refers to the different approaches required to teach and persuade various cultures.10 A principles-based culture prefers to have the “why” explained first. Persuasion using over-arching principles and high-level reasoning will be most effective. Application based cultures prefer to root their understanding of specific applications by using specific examples. They will respond best to an example of how the concept works. To achieve the best results, companies should tailor their communication style to that of the target company; this will lead to better results in the deal-making process.

Regardless of the quality of the presentation, an idea could be rejected simply because the order of its presentation does not meet the needs of the audience culture. For example, one American engineer (an applications-first culture) presented her findings to a German firm (a principles-first culture). She began with clearly presenting her recommendations, as an American audience would prefer. However, the Germans instantly expressed confusion at her reasoning and methodology, ignoring her results. Her German audience would have responded more openly had she began her presentation with her methodology and building thereon. The engineer’s proposal was rejected after this presentation, not because her ideas were unreasonable, but because she had been unaware of how to best present them to her German counterparts.11When planning meetings and presentations with a target company of a different culture, remember to consider that the way they best receive the message is not necessarily the manner in which you are most adept in communicating. Figure 1.2 illustrates the spectrum of principles versus application first countries.

Figure 1.2: Adapted from Meyer 2014

 Direct vs. Indirect Negative Feedback (Meyer). Direct negative feedback refers to the preference to receive bad news in a straightforward manner. Indirect negative feedback is the preference to “sugarcoat” criticism, cushioning the feedback with compliments and euphemisms. When giving and receiving feedback, it is important to adjust one’s delivery style or interpretation accordingly in order to convey the true message. Additionally, the understanding cultural setting is important; in direct feedback cultures, it is often fitting to give feedback to an individual in front of a group while indirect feedback cultures consider that offensive.

Meyer’s research suggests caution when trying to match feedback styles of another culture: “Don’t try to do it like them. Even in direct cultures, it is possible to be too direct and if you try to switch to their style you risk making things worse.”12 Instead, it may be most beneficial to start by clarifying one’s style of feedback by stating something along the lines of, “I am going to give you both positive and negative feedback, but all my points are equally important.” Leadership in merging companies should be highly aware of the feedback style of the other company’s culture in order to convey their message of needed improvements and praises to employees. Figure 1.3 illustrates the spectrum of direct versus indirect negative feedback countries.

Figure 1.3: Adapted from Meyer 2014

Mannerisms. The phrase “actions speak louder than words” is especially applicable to cross-cultural mergers and acquisitions. Although its implications are somewhat disputed, a famous study by Albert Mehrabian claims that over 50% of a communicated message is nonverbal.13 Body language and habits are often learned and interpreted since childhood and are likely to vary from culture to culture. If nonverbal communication methods are misunderstood, erroneous conclusions are likely to be made.

For instance, tensions arose subsequent to Lenovo’s (Chinese) acquisition of IBM’s PC division (American) due to misunderstandings related to differing views on the meaning of silence:

”In the meetings, the American staffs like to express their ideas, especially when decisions need to be made…while the Chinese employees always keep silence… In American culture, if you don’t express your idea, people assume you agree with the decision, and the proposal would be passed…. However, in Chinese culture, if you keep silence, that means you don’t agree… so at the beginning, we have made a few wrong decisions in joint meetings due to cultural differences.”14

This misunderstanding is just one of many that could occur based on mannerism differences, such as habits, hand gestures, or greeting styles. It may be useful to recruit the help of a native to navigate these complexities as well as to develop an awareness of one’s own cultural idiosyncrasies. Compromises or adjustments may be needed to facilitate clear communication.

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  1. Ray, G.D. (2016). Navigating the human landscape in cross-border mergers and acquisitions. Strategic Direction, 32(9), p. 12
  2. Ray, G.D. (2016). Navigating the human landscape in cross-border mergers and acquisitions. Strategic Direction, 32(9), p. 13
  3. Chakrabarti, A., & Mitchell, W. (2005). Corporate Level Perspective on Acquisitions and Integrations. In C. L. Cooper, & S. Finkelstein, Advances in Mergers and Acquisition, 4, p. 1-22. Amsterdam: JAI Press Inc.
  4. Gao, M. (2014). The Six-Tier Communication Gap for Multinational Corporations after Mergers and Acquisitions: Lessons Learned from the Case of Duracell and Nanfu. Global Business Languages, 19(7), p. 86
  5. Cartwright, Sue and Gary Cooper (1996). Mergers & Acquisitions, The Human Factor. Linacre House, Jordan Hill, Oxford: Butterworth-Heinemann, Ltd
  6. Welch, D., Welch, L., & Piekkari, R. (2005). Speaking in Tongues. The Importance of Language in International Management Process. International Studies of Management and Organization, 35(1), p. 22
  7. Gao, M. (2014). The Six-Tier Communication Gap for Multinational Corporations after Mergers and Acquisitions: Lessons Learned from the Case of Duracell and Nanfu. Global Business Languages, 19(7)
  8. Meyer, E. (2014). The Culture Map: breaking through the invisible boundaries of global business. New York: PublicAffairs, p. 39
  9. Storti, C. (2015). Speaking of India: Revised Edition: Bridging the Communication Gap When Working with Indians. Intercultural Press, p. 25-26
  10. Meyer, E. (2014). The Culture Map: breaking through the invisible boundaries of global business. New York: PublicAffairs, p. 104 Note: Meyer places Asian cultures on a related but distinct scale called holistic to specific, which embodies a similar concept, but emphasizes the Asian prerequisite of an all-inclusive understanding.
  11. Meyer, E. (2014). The Culture Map: breaking through the invisible boundaries of global business. New York: PublicAffairs, p. 89-91
  12. Meyer, E. (2014). The Culture Map: breaking through the invisible boundaries of global business. New York: PublicAffairs, p. 72
  13. Banham, A. (2013). The Myth of Nonverbal Communication. Toastmaster, 79(3), p. 5
  14. Zhou, S. & Huang, X. (2014). How Chinese “Snake” Swallows Western “Elephant”: A Case Study of Lenovo’s Acquisition of IBM PC Division. Journal of International Business and Economy 15(1), p. 37