Mergers & Acquisitions Framework

By July 23, 2020Video

Greg Burton describes the Mergers and Acquisitions Framework, giving examples about cultural differences and about the Nokia and Microsoft merger. Burton is an accounting professor at Brigham Young University.

Transcript

It’s a framework that helps businesses think about the cultural issues of a merger. And as we looked at this little bit further, we realize there’s some real cultural implications and bringing two companies together particularly from different regions. But you think even in the United States, there might be some differences, but then you get overseas when there’s some real differences and trying to bring two companies together can cause some real problems for success. And so some companies fails just because they don’t address the cultural issues. So we’ve taken the best of all of these frameworks and said, you know, if companies ignore certain things than that compounds of problems.

For instance. Let’s take a look just at how people treat each other differently. I know that when I have, for instance, travel to Asia, and I’m invited to give a presentation or work with a company or with a university that I met at the airport. I am escorted to my hotel. When I have a meeting I’m escorted back to where the meeting is going to be. Every dinner I have an escort who’s taking me where they need to go. In the United States, it wouldn’t be uncommon for us to say, hey, middle manager. We’re going to have some meetings on this day, and here’s the location. Take an Uber to the to the hotel. The meetings can be in this room in this building you just show up, and there’s no special treatment, and then you’re kind of left on your own. When you’re from a culture where everybody is respecting you because of your position, and people are thinking this is an important visitor. Let’s treat this person as an important visitor, and you come into another culture where you’re not treated that same way. You start wondering about your worth and even about how seriously the other company is about wanting you to be there in the expertise that you might bring with them.

Now, you think about Nokia and Microsoft, for instance, of the merger that took place in the early 2012-14 period of time what they didn’t realize is that Nokia and the national pride from the Fins around their star company Nokia, which have a worldwide reputation and a high respect for this company. They came in and didn’t manage that that reputation very well. First thing they did, starting see that there are some problems in the economy. Sales aren’t coming as they thought they might. So they lay off a length of a bunch of the workforce. Then morale in the whole organization just tanked, and consequently, the short story is, this merger, which took place with 6-7 billion dollars was actually invested. A few years later just in it lost millions of dollars in order to get to give them the company because it just wasn’t working. For us, as we study, this was a great lesson that Microsoft just did not manage the cultural aspects of this merger very well, and it ended up in a spectacular failure. And consequently, Microsoft not in the cell phone business.

Deliberately and thoughtfully considered before a merger or during the course of a merger, a lot of these misunderstandings can be alleviated. And we don’t have the problems in the tensions that would cause people not to work together, and consequently, then a company may not realize the synergies that they ought to have just because of the cultural differences.