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Cultural issues in Mergers and Acquisitions

Companies today are combining in record numbers. Executives pursue mergers, acquisitions, and joint ventures as a means to create value by:

  • acquiring technologies, products, and market access;
  • creating economies of scale;
  • establishing global brand presence.

There is an underlying belief that most markets can provide revenues to three large suppliers; when more than three exist the urge to merge is irresistible. That said, the business world seems littered with integrated companies that have lost value for shareholders. The question that inevitably arises is: “What forces are powerful enough to counteract the value-creating energy of economies of scale or global market presence?” Culture has emerged as one of the dominant barriers to effective integrations. In one study, culture was found to be the cause of 30 percent of failed integrations. Companies with different cultures often find it difficult, if not impossible, to make decisions quickly and correctly or to operate effectively.

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