Case Study of a Failed M&A—Concluding Thoughts on Microsoft’s Acquisition of Nokia

The research conducted in this paper is based upon the Mergers & Acquisitions Synergies Framework, developed by combining outside findings by Geert Hofstede, Erin Meyer, and Sidney Gray.[1] It is limited to national culture factors, which play a different role in business than organizational culture. Further studies may need to be conducted to help distinguish differences between national and organizational cultures.

In reality, Microsoft’s acquisition of Nokia was doomed to fail. The deal was an exercise in futility, governed by the rationale that any attempt to compete with Apple and Google is better than none at all. Such rationale exhibits an astonishing lack of prudence, which is key in making any deal, let alone a cross-border deal. While Microsoft’s rationale for making the deal was poor, management’s lack of patience was worse. Cutting 25,000 employees only two and a half years after acquiring Nokia’s mobile unit effectively killed any chance Microsoft Mobile had of succeeding.

Microsoft Mobile is a study of how differences in national culture can add to already poor conditions. Though differences in national culture are not the primary reason Microsoft Mobile failed, they did add to the complexity inherent in the post-merger integration process. In fact, the differences were small and could have been easily reconciled. Had Microsoft exercised a greater level of patience, Microsoft could have realized many of the sought-after synergies which can arise when companies effectively execute cross-border deals. Microsoft Mobile could have prospered as employees from different cultures came together and cooperated.

Previous: Case Study of a Failed M&A—The Role of Accounting and Finance in Microsoft’s Acquisition of Nokia

Case Study of a Failed M&A—The Role of Accounting and Finance in Microsoft’s Acquisition of Nokia

Nokia provided financial reports using IFRS while Microsoft reported using US GAAP.  Differences in national culture combined with different reporting requirements creates accounting and finance cultural differences.  These differences can lead to financial reporting misunderstandings and possible valuation problems.  Though there is little public information surrounding the rationale behind Microsoft’s valuation of Nokia, a consensus is that Microsoft paid too much for a company that had not been profitable for several years.

Accounting Methodology

Very little information concerning cultural differences within the accounting and finance fields is publicly available for this merger. There may have been some cultural conflicts due to differences in reporting standards; however, during the time of the acquisition, both Microsoft and Nokia were operating as global corporations, so each company already worked with integrating financial information from one country to another. Differences in accounting approaches between the U.S. and Finland are described below to provide context of the differences that could arise between these two cultures in the accounting and finance.

The fact that Microsoft Mobile was headquartered in Finland meant that they would have to translate their earnings from euros into dollars for Microsoft to report its consolidated earnings. Additionally, Microsoft Mobile would have to record accounting entries in IFRS for national reporting purposes but then translate its financial statements to comply with US Generally Accepted Accounting Principles (GAAP). The complexity of accounting for differences in international taxes, accounting methods, and reporting requirements is a reality faced by any multi-national entity.

Accounting Standards. As a member of the European Union, Finland adopted the International Financing Reporting Standards (IFRS) in 2005.1 IFRS is principles-based in nature, leaving more room for management to use judgement in interpreting, recording, and reporting economic transactions. The U.S. follows GAAP, which, many consider to be more rules-based. Consequently, management tends to follow specific rules instead of looking at the economics of a single transaction.2 The U.S. has considered the idea of adopting IFRS, but the Securities and Exchange Committee has signaled that moving from GAAP to IFRS is unlikely to happen.3 The implication of the U.S. adopting IFRS would allow for easier preparation for financial statements for multi-national entities, such as Microsoft. The impacts of differing accounting method for deals akin to Microsoft’s acquisition of Nokia’s mobile phone unit are relatively muted. One area of concern for cross-border deal makers is how accounting is practiced. As GAAP is heavily rules-based, there is little room for professional judgement. In contrast, IFRS (used by Nokia) allows for considerable judgment. Room for professional judgment leads to a greater diversity of practice among accountants, which can lead to potential discrepancies.

Valuation. Microsoft saw Nokia as a gateway into the mobile phone industry. Because of this vision, Microsoft seemingly overvalued Nokia and subsequently overpaid for the acquired company. Since that time, Microsoft has written off most of the purchase price from the deal.

At the time the deal was announced, Microsoft proposed purchasing Nokia’s Devices and Services for EUR 3.79 billion and purchasing the license to use Nokia’s patents for EUR 1.65 billion, for a total purchase price of EUR 5.44 billion. (In U.S. dollars, this price equated to about $7.2 billion.)4 Along with other factors and fees associated with the acquisition, the entire purchase price grew from $7.2 billion to $9.4 billion. According to Microsoft’s annual 2015 report, the total price included: $7.1 billion purchase price plus Nokia’s repurchase of convertible notes of $2.1 billion plus liabilities assumed of $0.2 billion.5 What Microsoft didn’t fully realize at this point in the agreement was that Nokia had been losing revenue for the past few years and was failing. “By 2012, [Nokia] was actually a drag on [Finland’s] GDP. Taxes paid by Nokia went to zero. And recently, Samsung began outselling Nokia phones even in Finland.”

One reason that Microsoft overpaid for Nokia is that they were in a scarce market. Microsoft was feeling pressure from Apple and Samsung and feared being left behind. To compete in the market, Microsoft was left with the choice to build a mobile phone unit from scratch or acquire a well-established company. Microsoft made the decision to buy one of the few already established firms. Amazon shows what could have happened had Microsoft entered the mobile phone industry without an established partner. In 2014, Amazon released its own smart phone, the Amazon Fire. Amazon’s attempt to enter the mobile phone industry also fared poorly, as indicated by the $170 million write-down they took relating to the Amazon Fire at the end of 2014.6

Microsoft’s failure to value Nokia’s mobile phone division led to truly disastrous results. Given what we know of Nokia’s rocky financial foundation, the deal was doomed to fail. The amount that Microsoft paid for Nokia has slowly been written off each year since the acquisition finalized. In 2016, Deutsche Welle (Germany’s international broadcaster) stated, “Nadella has already written off most of the Nokia deal struck by his predecessor Steve Ballmer in 2014. Earlier this month, it agreed to sell its feature phone business to a new Finnish company HMD Global and Foxconn Technology Group from Taiwan for $350 million.”7

Professional Behavior

In terms of behavior, both the U.S. and Finland have established professional associations where accountants are accredited to provide assurance services regarding a company’s financial position. Having an established accounting association adds to the professional practice of judgment rather than one reliant on statutory control.8 While both U.S. and Finnish accountants are flexible in practice, Finnish accountants tend to display a greater amount of uniformity with regard to professional practice than Americans.9

In the accounting profession, optimism refers to a societies’ method of valuing assets and recognizing revenue and expenditures. Accountants in countries displaying stronger inclinations toward optimism are more likely to recognize revenue early and value assets at a higher level than accountants in countries where conservatism is practiced. In both cultures, asset measurements and profit reports are more optimistic than conservative indicating that both cultures lean on the side of risk-taking. Still, American accountants tend to be even more optimistic than their Finnish counterparts.10

Another key aspect in the practice of accounting is the dichotomy between secrecy and transparency.  Both Finland and the U.S. are transparent in financial reporting, with the United States being more transparent in how companies report and disclose financial information. Interestingly, societies demonstrating greater amounts of transparency in accounting culture are “societies where more emphasis is given to the quality of life, people, and the environment, will tend to be more open.”11

Fraud and Earnings Management. According to Transparency International, a global group that measures national corruption, fraud is very low in Finland compared to the U.S. Each year, Transparency International creates a Corruption Perception Index, where countries around the world are rated in terms of corruption and inequality. In 2013 when the Microsoft-Nokia merger was announced, Finland was given a rating of 89/100, whereas the United States was rated as 73/100.12 Scores approaching 100 indicate that a country is “very clean.”

Historically, Finland has had very little to no corruption. Since Microsoft acquired Nokia there has been no report of fraud or of earnings management on either side.

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Next: Concluding Thoughts about the Microsoft-Nokia Merger

Case Study of a Failed M&A—The Role of Environment in Microsoft’s Acquisition of Nokia

The citizens of Finland were unhappy with the announced Microsoft-Nokia merger.  The Finns had long felt national pride from Nokia’s success. Giving up control of this national company to a foreign entity was blow to their identity.  Microsoft did little to alleviate the Finns’ concerns.

Public Acceptance

Public Perception. News and media critics (as well as citizens) in both the U.S. and Finland expressed dislike for Microsoft’s acquisition of Nokia’s mobile unit. From Microsoft’s perspective, many viewed the deal as a gamble – and a poor one – as Nokia was perceived as a dying company. In fact, many decried the deal as a desperate attempt to get into the mobile phone market and gain market share from Google and Apple.

People in Finland reacted very critically towards the acquisition. Nokia was seen as one of Finland’s most successful companies, even though its market share had been declining. The sale of Nokia’s phone division “was a huge psychological blow for Finland and the self-confidence of the Finnish people.”1 The deal left many Finns with a sour taste toward Nokia. One Finns’ reaction to the acquisition displays Finnish resistance to the deal: “‘Nokia is one of Finland’s main brands, and it’s what I tell people abroad —that Nokia phones are from Finland,’ she said. ‘Now I can’t say that anymore.’”2

As Finns saw one of the biggest and most powerful companies from their nation swallowed by an American company, it was an emotional blow to their national pride. Nokia had been one of the biggest contributors to Finland’s GDP and now it would no longer be considered a “Finnish company” but would merely be a cog in an American corporation.


Location. With permission from Nokia’s leaders, Microsoft Mobile decided to take over Nokia’s original headquarters located just outside of Helsinki, Finland. One spokesperson from Nokia said, “As the majority of employees currently working at our corporate headquarters are focused on devices & services activities and support functions, Nokia House will become a Microsoft site once the deal closes.”3 Similar to before the acquisition, employees of the new merged company would have to fly to Finland in order to help with decision making or make long-distance calls at hours outside of the normal work day to compensate for the 10-hour time zone difference.

Regulatory Differences. Since the U.S. and Finland share a positive relationship, no lengthy legal procedures were required on either side of the acquisition. The only regulatory term discussed in the press was the lack of communication between the two companies and the public regarding the merger. As one reporter stated, “Neither party was legally allowed to discuss details about the acquisition in public.”4

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Case Study of a Failed M&A—The Role of Management in Microsoft’s Acquisition of Nokia

Management turnover during the period surrounding an acquisition is challenging, particularly when new leaders don’t share the same passion for the merger.  Leadership change created uncertainty for Nokia employees. Announced layoffs coupled with differences in leadership style created more suspicion and distrust of those leading the merged companies. Had Microsoft been sensitive and aware of differences in the way Nokia employees view and interact with management, many problems could have been avoided.


Leadership Turnover. Many Microsoft managers moved to executive positions in Nokia right before the acquisition. Stephen Elop, a former employee of Microsoft, joined Nokia as the company’s CEO and President in December 2010. Elop joined the Finnish company with the mandate to reclaim lost market share and increase profitability. Not even three months later, in February 2011, Nokia announced a partnership with Microsoft; this entailed Microsoft’s software being used on all Nokia devices. After a few years, Microsoft decided to turn its partnership with Nokia into an acquisition. September 2013 marked the beginning of the new Microsoft Mobile (the merged Microsoft and Nokia venture). With the acquisition, many executives from Nokia moved over to the newly-created Microsoft Mobile. This included Elop, who moved companies to become the Executive Vice President of Microsoft’s devices division.

Soon after the acquisition was complete, Steven Ballmer (then CEO of Microsoft) announced his decision to step down as CEO. He was succeeded by Satya Nadella. One critic claimed, “Mr. Ballmer agreed to the deal as he was stepping down as chief. It was almost a fitting dud to end his tenure.”1

Management turning over from Ballmer to Nadella meant that the newly formed Microsoft Mobile division would begin operating without the executive that pioneered the acquisition of Nokia’s mobile division. Worse still, Nadella displayed little interest in the Microsoft Mobile division and even “announced a strategy shift away from a ‘devices and services’ focus” a few months after acquiring Nokia.2 The management turnover, as well as the commentary on moving away from devices, dealt a psychological blow to Finnish employees, impairing their ability to design innovative products.

Employee Turnover. In addition to acquiring Nokia’s ailing mobile phone division, Microsoft acquired 32,000 employees.3 The employees functioned as part of Microsoft Mobile, though they were headquartered in Finland. This move may have been destructive because the Nokia employees were “coming from a completely separate culture.”4 While it can be difficult for employees to adjust to a new corporate culture, they can eventually thrive. However, it does take time for employees to acclimate. It is apparent from the quantity of cuts that Microsoft had little patience for its Microsoft Mobile experiment. Microsoft’s lack of patience is displayed by the number of layoffs related to Microsoft Mobile: 12,500 (July 2014)5, 7,800 (July 2015)6, 1,850 (May 2016)7, and finally, 2,850 (July 2016).8 In just three short years, Microsoft cut 25,000 jobs from Microsoft Mobile.  The layoffs led to a severe brain drain, depleting the human capital that Microsoft paid so much to acquire.

 Large Power Distance vs. Small Power Distance. Both Finland and the U.S. fall on the small power distance side of the scale. This indicates that people within an organization are less likely to accept hierarchical authority. In the case of these two countries, Finland is even lower on the power distance scale than the U.S., indicating that power is more decentralized in Finland than in the U.S. Thus, employees in Finnish companies tend to prefer and operate with more autonomy than those working for American firms.

This small difference between cultures led to problems when Microsoft merged Nokia’s mobile phone unit into its operations. “The combination of the two companies has created more disconnects and mistrust than continuity or synergy. There is (sic) lots of politics and click-ish behavior throughout all levels.”9 With power more equally distributed between organizational levels, it was easier for Finns to become closer with upper management and create a siloed atmosphere for the Americans coming into the merged company. Management did not provide any help in this regard; in fact, management created a sense of fear that permeated the company creating more distrust and confusion among employees and executives. “A culture of status inside Nokia made everyone want to hold onto power for fear of resources being allocated elsewhere or being demoted.”10

 Decision Making

Consensual vs. Top-Down. Finns are very consensual in their decision making; decisions are made as a group. The process of making decisions can be time consuming because each person within the group is consulted, but when the decision is made, it is implemented quickly and is generally inflexible to change.11 In the case of Nokia, decisions were made collectively with the executives in Finland. One employee commented that Nokia is “focused on the Finnish way of doing business.”12 Another former employee in the U.S. described Nokia as a “ship that can be slow to turn — patience, persuasion, and often travel to Finland are required to initiate change.”

Since the U.S. is a top-down decision-making culture, Americans working with Nokia before the merger found it hard to work with the “Finnish way” of decision making. Employees in the U.S. are used to short discussions and more implementation while Finns are slower and more detailed in the decision-making process.  Even though Microsoft is a U.S.-based company, Microsoft Mobile was headquartered in Finland, allowing the Finnish mindset of consensus decision-making to persist.

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Case Study of a Failed M&A—The Role of Behavior in Microsoft’s Acquisition of Nokia

Microsoft discovered than Finns’ views on work-life balance are different from those of Americans. Behavioral misunderstandings caused tension and friction between US and Finnish management teams and employees. Many problems could have been avoided had Microsoft embraced Nokia’s corporate and Finland’s national culture rather than expecting the Finns to adapt to their new owner’s native culture.

Core Values

Individualism vs. CollectivismWhile both the United States and Finland are considered individualist cultures, Americans display a higher level of individualism than the Finns.1 Individualism refers to the tendency for individuals within a society to display an individual-focused mentality rather than one focused on the collective society’s well-being. The degree of individuality expressed by Finnish employees generally leads to developments where the “employer/employee relationship is a contract based on mutual advantage….”2 Olli-Pekka Kallasvuo, a former CEO of Nokia, discusses the impact that individual gain seeking had on Nokia’s operations:

“The company did not pay sufficient attention to the emotional undercurrents caused by internal competition for resources…. As [Nokia] grew larger and richer, each department became its own kingdom, each executive a little emperor, and people were more concerned about their status and internal promotion than cooperating actively with other departments….”3

Nokia’s increasing competitiveness and Nokia’s culture of employees misleading management is an example of national culture influencing corporate culture. When Nokia’s employees mislead upper management, they preferred to further their own positions rather than the overall position of the team, or for the company as a whole.

The notion of individualism was not new to Microsoft. “Americans find their own frankness, self-reliance, and tenacity in the Finnish psyche.”4 The way Microsoft Mobile operated enabled both Nokia and Microsoft employees to remain in a siloed culture, which further impeded the success the newly formed entity. The siloes didn’t only exist between departments, they also existed between nationalities. One Nokia employee said, “You have to be a Finn or live in Finland to advance fast.”5 Another employee stated, “It’s hard to move up the ladder; too many foreigners with too few locals in higher middle management gives employees the impression that a glass ceiling exists.”6

The degree to which Microsoft Mobile catered to individualist tendencies led to many employees expressing dissatisfaction. Even individualists prefer the equal opportunities that come with higher degrees of collectivism. Microsoft Mobile retained the individual-focused corporate cultures of Microsoft and Nokia. While companies seek to hire ambitious, success-driven employees, they should seek to create a culture focused on the well-being and profitability of the company.

Masculinity vs. Femininity. Finland and the United States are on opposing sides of the masculine and feminine spectrum: The United States is viewed as a masculine society whereas Finland is deemed a feminine society. Competition and achievement drive Americans while general well-being, free time, and flexibility define success for Finns. Finns view Americans as being desperate for popularity, stardom, and money. This “single-minded pursuit of wealth conflicts with Finnish ideas about self-fulfillment, artistic goals, calm inventiveness, and concern with the environment.”7 [Finns are] “modest and not chauvinistic; they have an inner, deeply rooted conviction that Finnish norms are optimal.”8 Nokia provides an interesting study on how corporate culture can override national culture – evidenced by Nokia’s culture of intense competition. If one were to merely look at Finland on the Masculinity versus Femininity scale, one would assume that their employees would display a preference toward corporate unity. This contradiction shows that relying on mere research of national culture can fail to properly inform a due diligence researcher. In fact, this is one of many cases where taking the time to understand corporate culture can aid in the deal making process.

Belief Systems.The fundamental tenets within Finnish society come from two sources: nature and Christianity. From nature, Finns believe that life should move at a slower, more natural pace as compared to the rushed pace most Americans live. They make sure to take lots of holiday vacation time, even a month at a time, to create a sense of balanced life. Most of their vacation time is often spent in forests at family cabins enjoying the scenic nature of their country. The other source of Finnish beliefs is Christianity. Finns exhibit a deep sense of loyalty and trust in the way they interact with one another. Children are taught from infancy the importance of faith and respect towards others. The family is held in high esteem within Finnish culture.

Nokia emanated these values within its international operations. “Having strong Finnish culture, the company is extremely flexible on your work-life tradeoffs. You can practically agree any arrangement with your line manager.”9 Further, One American employee noted, “It is a family-oriented job, so you can take time off while your professional career can still progress.” With these ideals set in place, Finns at Nokia strive for a perfection of balance and oftentimes look down on those who don’t follow or keep the same values. Finnish views on family and personal time can conflict with American views. This conflict can lead to disagreements on how long one should take for vacation and paternity leave. These differing preferences about family and personal time can lead to difficulties in developing HR policies for the combined company.


Strong Uncertainty Avoidance vs. Weak Uncertainty Avoidance. Uncertainty avoidance is defined as “the extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions to try to avoid these.”10 Finland is considered a society of strong uncertainty avoidance while the U.S. is deemed to be the opposite. Finnish disinclination towards ambiguity is manifested in strict security rules to guarantee the country’s future stability (e.g., every male is required to serve in the Finnish military to secure citizenship). Finns are risk avoiders; they do not accept change easily — especially when the change comes from outside of the country: Finns demonstrate a “lingering uneasiness in the presence of foreigners.”11 When Microsoft announced its intention to acquire Nokia’s mobile unit, many Finns expressed uneasiness with the notion that a prized Finnish company would be taken over by outsiders and, subsequently, ruined.

Task-Based vs. Relationship-Based. Both Finland and the United States are task-based cultures. In both countries, relationships are based on business skills and accomplishments rather than on friendships. In a typical meeting, both Finns and Americans are focused on completing the outlined agenda rather than on creating a lasting relationship. The effects of failing to take the time to develop business relationships can weaken morale and undermine company unity. Though Finns and Americans display similar inclinations toward task-based work, the similarities can lead to merged companies failing to effectively cooperate and share ideas.

Confrontational vs. Avoids Confrontation. Americans tend to be classified as “confrontational” and more emotional while Finns are described as stoic people who avoid confrontation. Where Americans welcome disagreement, Finns generally view debate as something to be avoided and instead remain silent. Usually, Finns choose silence out of “not wanting to upset others for fear of social retaliation and not wanting to show they had limitations or weaknesses.”12 Nokia employees also followed the Finnish ideal and avoided confrontation. As a company, management was “more intent on defending and preserving existing successes than on attacking competitors.”13 Microsoft Mobile’s unwillingness to attack competitors likely contributed to its inability to recapture lost market share.

Linear Time vs. Flexible Time. In both the U.S. and Finland, people operate on linear time. Both cultures follow outlined schedules and consider tardiness to be rude. However, the U.S. culture is generally seen as more flexible than Finnish culture; Americans are more lenient in scheduling and are more accepting of tardiness. Finland is more rigid in using time wisely, and if someone shows up late to a meeting, that person is generally frowned upon. Thus, differing views on what constitutes “late” can lead to distrust and resentment within MNE’s, such as Microsoft Mobile.

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Case Study of a Failed M&A—The Role of Communication in Microsoft’s Acquisition of Nokia

Language differences impede communication. But communication is much broader than having employees who speak different languages.  Microsoft discovered that not spending time to understand and adapt to differences in communication styles, mannerisms, and culture made bringing Nokia under its corporate umbrella difficult.

Information Availability

Openness. Before being acquired by Microsoft, Nokia struggled to maintain open communication. According to several accounts, Nokia rarely communicated openly with employees, which led to distrust between staff members and management. Additionally, the company failed to articulate a set of core values and an overall vision to its employees. The lack of direction and communication further contributed to the culture of opacity among Nokia’s employees as the employees felt unable to truly communicate with management.1 The disconnect affected operations on a deep level: “Fearing the reactions of top managers, middle managers remained silent or provided optimistic, filtered information.”2

Microsoft’s acquisition of Nokia’s mobile line only contributed to the culture of unreliable communication. As stated in the press, “neither party was legally allowed to discuss details about the acquisition in public.”3 The prohibition on openly discussing the merger undercut morale and deepened the level of employee frustration with the lack of communication within the company.

Differences in American and Finnish Culture. Culturally, Finns are not open communicators, but rather maintain quietude and distrust verbosity. In contrast, Americans tend to be more open and forthright.4 Microsoft Mobile’s CEO provides an example of Nokia’s culture of blurring bad news in his letter to employees. In the letter, Elop communicates that corporate restructuring will result in “an estimated reduction of 12,500 factory direct and professional employees over the next year.”5 While the figure representing the reduction is clear, it is buried in the latter half of an email more than 1,100 words long.

The clashing styles of communication between American and Finnish employees of Microsoft Mobile likely caused frustration among employees and hindered their ability to collaborate across cultures.

Language Barriers. Since Nokia was an established multi-national entity, English was already a language widely used within the company. Still, many Microsoft Mobile employees noted that “not being able to speak Finnish makes you somewhat of an outsider.” With Microsoft Mobile’s headquarters in Finland, management from other countries encountered challenges speaking directly with top executives. In many cases, for management to communicate with top executives, they had to travel to Finland. Thus, differences in language caused barriers to arise between those who were and weren’t Finnish.6

Communication Style

 High-Context vs. Low-Context. Both Finns and Americans communicate in a low-context style, which means that communication in both cultures is clear and direct with no implied messages. Many American employees working for Nokia noticed the cultural similarity and noted: “Working with Finns [is] good. They speak straight forward and honestly.”7 Though similar in communication styles, differences do remain between the cultures. Finnish employees tend to be more reserved, and Americans are more aggressive and talkative.8 The differences in communication styles can lead to Finns perceiving the Americans as arrogant and domineering and for Americans to perceive the Finnish employees as distant and uninterested.

Principles-Based vs. Application-Based. The United States and Finland both exhibit an inclination towards application-based reasoning. This indicates that “individuals are trained to begin with a fact, statement, or opinion and later add concepts to back up or explain the conclusion as necessary.”9 However, as pointed out by Erin Meyer in her book The Culture Map, the U.S. exhibits stronger tendencies toward application-based reasoning than Finland. Though both cultures appear to be application-based, Americans will view Finns as more “principles-based.” This means that Finns, generally, learn more by theory than application in comparison with Americans. Although Finland and the U.S. exhibit strong predilections toward application-based learning, the fact that Finns are relatively more principles-based than their American counterparts can lead to misunderstandings. The misunderstandings can arise during inter-company communication, especially when discussing rationale behind decision making. Companies faced with similar situations would do well to remain cognizant of such differences and address them as needed.

Direct vs. Indirect Negative Feedback. Finnish people are typically perceived as being direct and honest. This style of communication may appear offensive or rude (especially to Americans). However, in Finland, direct communication is viewed as a sign of honesty and respect. Additionally, Finnish employees do not like to be “monitored, followed around, interfered with, or even praised when they are on the job.”10 Praise is viewed as insincere within Finnish culture. This view is founded on the understanding that Finns rarely alter or change an already formed opinion. Thus, with any sort of feedback, it is highly unlikely for Finns to change their minds about something. Without an understanding of Finns’ resistance to feedback, Americans may mistakenly view their Finnish counterpart as obstinate.

The U.S. culture is on the opposite end of this spectrum. Americans tend to wrap negative criticism with positive feedback, which outsiders can interpret as “false and confusing.” For example, if an American manager were giving feedback about a business proposal, the manager would first list the positive aspects about the writing before launching into the negative aspects. On the other hand, if a Finnish manager were providing feedback about the same business proposal, the manager would state each negative critique without any positive add-ins.

The stark differences in feedback preferences can cause deep divides between Finnish and American employees. Finnish employees will tend to view feedback from Americans as insincere and unhelpful. On the other hand, Americans will view critiques from Finnish managers as overly harsh and, perhaps, rude.

Mannerisms. Finns hold that, unless one has something pertinent to say, they should remain silent. In fact, silence is highly valued within Finnish culture as a time to think, ponder, and reflect. Many Finns take to the forests (often by themselves) to think clearly in silence. Because of their view on silence and direct communication, Finns tend to recoil when talking to more verbose people:

“Finns are reticent, often silent, and trained not to force their opinion on others.  If they disagree, they will often remain silent. Americans cannot stand silence during meetings, so they often take the Finn’s turn to speak. Finns, who distrust verbosity, may then go into their shell. Americans, used to open debate and give-and-take argument, will often interrupt a Finn when the latter finally decides to speak. This breaks a sacred rule for a Finn, who is taught from infancy not to interrupt.”11

Another mannerism that separates Finns and Americans is smiling. As natural introverts, Finns try to keep to themselves and engage as little as possible with strangers. They find Americans’ mannerism of smiling in business meetings and towards unfamiliar individuals as insincere.12 In fact, typical Finns will only smile at people they know personally.

American companies engaging in M&A with Finnish companies need to understand and display respect for Finnish mannerisms. As Americans understand that Finns are quiet because they value silence, they will cease to view Finns as uncaring, but will instead begin to view their counterparts as insightful and respectful people.

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Case Study of a Failed M&A— Introduction to Microsoft’s Acquisition of Nokia

On September 3, 2013, Microsoft announced that it would acquire Nokia’s mobile phone division for $7.2 billion. Through a series of missteps, many of them cultural mismanagement, Microsoft informed the public in May 2016, of its intention to write off most of the $7.2 billion it paid for Nokia and agreed to sell the mobile devices unit to HMD Global and Foxconn Technology for just $350 million. This series uses the Mergers and Acquisitions Synergies Framework to explore the cultural issues that lead to Microsoft’s failed merger with a highly regarded mobile phone company.


During the 1990’s and early 2000’s, one company dominated the mobile industry: Nokia. Established in 1871, the Finnish-born company gained a worldwide reputation for producing reliable, standard mobile phones that were internet-enabled and programmed with an array of multimedia features. Eventually, competition in the mobile phone sector rose in 2007 when Apple introduced the iPhone, and Nokia soon found its market share rapidly decreasing.1 Initially, Nokia predicted the smart phone craze would die out and consumers would return to standard mobile phones, but smart phones proved to be more than a passing trend. Nokia’s management failed to understand the wave of radical innovation that revolutionized the mobile industry—as Samsung and Apple produced and sold touch-screen phones. Nokia’s failure to react to the changing competitive climate is reflected in the precipitous fall in its share price from the iPhone’s introduction to Nokia’s own smartphone introduction: its market share faltered, losing almost 10 percent.2

On 10 September 2010, Nokia parted ways with its CEO (Kallasvuo) and hired Microsoft executive Stephen Elop. Hiring Elop was a significant move for a few reasons: he was the first non-Finn CEO in company history, and analysts predicted that hiring Elop would lead to closer cooperation between Microsoft and Nokia3.  Elop pledged to “reverse the company’s market share losses by ‘regaining [Nokia’s] smartphone leadership, reinforcing [Nokia’s] mobile device platform and realizing [Nokia’s] investments in the future.’”4

True to analysts’ expectations, it did not take long for a partnership to arise between Microsoft and Nokia.  On 11 February 2011 Nokia announced a “broad strategic partnership” with Microsoft. The partnership made a lot of strategic sense considering Microsoft’s dominance in software and Nokia’s in hardware – namely the production of mobile phones. The partnership was heralded by the media: “The deal makes Microsoft a key contender and gets Nokia back to the forefront of the smartphone revolution.”5 Despite optimism from analysts, the announced partnership was met with met displeasure among Finns, and Nokia’s share price tumbled 10 percent.6

In 2012 Nokia released its new smartphone, the Lumia, which ran on Window’s newly released OS – Windows 8. Initially, the release of the Lumia led to increasing, albeit tepid, sales for Nokia. Two years after announcing the partnership, Nokia was still losing market share to Apple and Samsung.  Microsoft’s performance during the period didn’t fare much better than Nokia’s. Microsoft’s poor performance was primarily caused by vehement resistance of Windows 8 from PC users, who detested its optimization for mobile devices. With both companies struggling to keep up in the fast-paced smartphone market, they were left to search for a more drastic solution than mere partnership.

On 3 September 2013, Microsoft CEO Steve Ballmer announced that Microsoft would acquire Nokia’s mobile phone division for $7.2 billion.7 Microsoft had been looking for a way to enter the mobile phone industry to better compete with Apple and Google. In acquiring Nokia’s services and devices unit, Microsoft took control of Nokia’s mobile phones and smart devices, design team, licensing agreements, and approximately 32,000 new employees. Given Microsoft’s prowess in software and Nokia’s in devices, the acquisition was anticipated to be a smooth, successful transaction. Furthermore, both CEOs (Ballmer and Elop) acknowledged the acquisition as something that would build upon the existing Nokia-Microsoft partnership.8 In a press release in 2013, Elop told reporters,

“‘Building on our successful partnership, we can now bring together the best of Microsoft’s software engineering with the best of Nokia’s product engineering, award-winning design, and global sales, marketing, and manufacturing. With this combination of talented people, we have the opportunity to accelerate the current momentum and cutting-edge innovation of both our smart devices and mobile phone products.’”9

February 2014 marked the beginning of the newly formed Microsoft Mobile (a subsidiary of Microsoft). Later, in October 2014, Microsoft Mobile announced that Microsoft Lumia would replace the iconic Nokia on the smartphones.10

Despite Microsoft Mobile’s best efforts, the union proved to be tenuous at best, with job cuts of 12,500 and 7,800 occurring in July 201411 and July 201512 respectively.  Finally, on 18 May 2016, Microsoft informed the public of its intention to write off most of the $7.2 billion Nokia deal and an agreement to sell the mobile devices unit to HMD Global and Foxconn Technology for just $350 million.13 The company also announced that it would no longer produce new phones. What had seemed to be a promising venture had feebly wilted.

Differences in national culture severely affected Microsoft’s deal with Nokia. The M&A Synergies Framework identifies the relevant cultural aspects of the Nokia-Microsoft merger and offers insight into what caused the acquisition to fail. These insights point us to things to consider when preparing for cross-border deals between American and Finnish companies.

M&A Synergies Framework

The M&A Synergies Framework was created to analyze culture’s effect on cross-border deal making. Differences in national culture can lead to increased creativity within companies; however, they can also incite bitter conflict. The framework directs dealmakers to better understand how culture can affect their ability to realize synergies, which are the primary rationale for deal making. The framework elaborates on the following cultural elements: communication, behavior, management, environment, and accounting and finance. The M&A Synergies Framework is discussed fully in another series that can be found on This case studies uses the Framework as the basis to understand the cultural reasons why Microsoft’s acquisition of Nokia was not successful.

Next: M&A Synergies Framework—The Role of Communication in the Microsoft-Nokia Merger