Case Study of a Successful M&A—Concluding Thoughts on Lenovo’s Acquisition of IBM PC

Lenovo

Lenovo has yet to resolve all its cultural issues. As one global director said, “Until now, I think… [cultural integration] has not been completed…there still remain many cultural problems…I think this part is the most difficult one for the whole acquisition.”1This is an important reminder that the cultural integration process is measured in years, not months.

Regardless, Lenovo truly is an example of a successful cross-border M&A and is regarded as such in academic literature. Through attentive care and cultural awareness, Lenovo has been able to achieve cultural synergy. The current appointed “Chief Diversity Officer,” Yolanda Lee Conyers, is quoted on the company website saying, “We succeed when each of us respects and appreciates the diversity of the individuals we work with. We transcend traditional geographic and cultural borders to better anticipate and serve the complex needs of our customers around the world.”2 This synergy between the companies has been reflected financially. In 2003, Lenovo had income of $129 million3 and a global market share of 2.0%.4 In the same year, IBM PC Division had losses of $258 million5 and a market share of 5.3%.6 By 2016, although Lenovo was struggling with a $128 million loss due to economic fluctuations and restructuring costs, it had captured the largest global market share of the PC industry at 20.7%7 and had earned net income of $829 million the previous year, remarkable growth for what was once considered an underdog company.8

The Lenovo case is very useful for understanding the cultural issues that are central in M&A transactions and what integration looks like in practice. The lessons learned in the Lenovo-IBM acquisition can—and should—be applied to companies pursuing similar endeavors. To successfully prepare for an M&A transaction, further detailed research would be necessary to understand applicable cultural nuances, gain an educated perspective, and prepare to successfully integrate.

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  1. 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): 39
  2. Conyers, Y.L. (n.d.). Diversity. Retrieved from http://www.lenovo.com/lenovo/us/en/diversity.shtml
  3. 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): 41
  4. Sulei, T. & Siyi, N. (2004). China’s Lenovo Acquires China’s IBM PC Business. www.chinaview.cn Retrieved from http://news.xinhuanet.com/english/2004-12/08/content_2310317.htm
  5. Bloomberg News. (2004). IBM’s PC Unit Has Been Operating at a Loss. Los Angeles Times. Retrieved on June 9, 2017 from http://articles.latimes.com/2004/dec/31/business/fi-ibm31
  6. Gartner. (2005). Gartner Says Strong Mobile Sales Lift Worldwide PC Shipments to 12 Percent Growth in 2004. Gartner. Retrieved on June 9, 2017 from http://www.gartner.com/newsroom/id/492098
  7. Gartner. (2017). Gartner 2016 Marked Fifth Consecutive Year of Worldwide PC Shipment Decline. Gartner. Retrieved on June 13, 2017 from https://www.gartner.com/newsroom/id/3568420
  8. Lenovo Group Limited. (2016). 2015/16 Annual Report. Retrieved on June 13, 2017 from https://www.lenovo.com/ww/lenovo/pdf/report/E_099220160603a.pdf