Cross-Border M&A: You’ve raised the funding but how about your intercultural awareness?
by Tracey Grose
Critical to the timely success of any M&A deal is a thoughtful approach to the integration of the new team. Corporate culture can vary tremendously even between companies located in the same town. While a cross-border deal can deliver big returns, it also presents the added complexity of cultural differences, a risk that must be managed.
More mid-size companies are seeing the potential rewards of expanding overseas; however, without a standing M&A team, the venture can seem daunting.
Important insights collected from the field of cross-border M&A are presented below. Additional complexity plays out in day-to-day operations, management styles, business approaches, and interpersonal challenges. For example, what’s the official company language? In some cases, numbers are even written differently! To start, do what you can to ease the team’s integration even before the deal closes.
1. Establish a Bridging Presence to ease the transition. If you’re acquiring a company in a different country, the risks of a failed team integration are even higher. To ease the transition, you need someone who is regularly there who knows the local culture and can help interpret communications with the new HQ during the integration.
2. Management Styles: Communication is critical to motivating teams and varies widely across different countries. Business practices are not the same. The greatest returns arrive when the differences are recognized as assets, and people, especially leaders, do not get trapped into perceiving differences through the lens of right and wrong.
- Respectful Language from Leadership: When a strong culture is on the acquiring side, communication must be respectful. Do more asking than telling. Both teams must collaborate. Some people will be dealing with some sense of loss and other emotions during the transition. If the objective is to retain talent, respectful communications is compulsory.
- Deliberation vs Action: European business styles tend to be more deliberative than in the US. US teams prefer to end a meeting with a clear resolution, concrete action and move, move, move. Europeans can be more appreciative of the journey of the discussion. Clearly there’s value in both approaches, and all depends on the context. There’s humor in this, and the contrast could be communicated in a light-hearted way to help raise awareness of differences and diffuse potential tension.
- Speed of Change: In technology, US teams value being highly responsive to market changes, but there can also be risks. US teams can seem impulsive and will push the boundaries on how quickly a company should move. In the case of a French acquisition of a Silicon Valley company, the French management was less flexible to changing the product based on client feedback alone and preferred to consider longer term impacts. In general, a US software developer looks at things in the shorter term (12-24 months) while in this case, the French team wanted to consider next the 5-10 years. The most successful teams recognize the value in both perspectives. Leadership makes the decisions, but by demonstrating openness and encouraging fresh thinking, leaders can cultivate a positive corporate culture that supports innovation. Further, top talent will more likely stay with the company.
- Communication Styles: Some cultures are more open than others. For example, the networking culture is especially strong in Silicon Valley where people openly share information about their startup and their failures and successes. Pitching to investors is more about telling the story than drilling down into technical information.
3. Raise Intercultural Awareness across the combined company. There will be differences, there will be miscommunication, there may be hurt feelings at times, but there does not need to be dysfunction. An internal communications campaign can help raise awareness about common issues when different cultures intersect. Encouraging self-awareness and crafting the campaign with a good dose of humor can help bring a lightness to situations and prevent tension and distrust from developing.
- Celebrating All Cultures and Time Zones: The celebration of both/all cultures needs to be shared. Teams must be aware of holidays and events in different locations and plan accordingly. Differences in local culture, local standards and even the workdays of the week can be enormous between places like Tel Aviv and Tokyo. Be aware of time-zones: don’t make your guy in Tokyo be the one who must always get on the call at 2:00 am!
- Speed of Business: The speed of business some places can seem off-putting and even rude to people from other cultures. Scotty McLennan, Theologian and Legal Scholar who teaches leadership at Harvard and Stanford University business schools, describes American managers as individualistic, competitive and driven by the Protestant Ethic. Their “Get down to business” attitude can seem clock obsessed, schedule oriented, cold and unfriendly. On the other hand, predominately Catholic countries have a more convivial approach, “Let’s get to know each other personally first, and then talk about business.”
- The business culture in Silicon Valley can seem intense with its 24/7 work hours. Deals can be made anywhere, even at your kid’s soccer practice or on a group bike ride. Soon after getting off the plane in San Francisco, a German entrepreneur was introduced to two investors on Friday, and by midday Sunday, had already completed two appointments with them. “That’s something that would never happen in Germany. In Germany, the weekend is kind of like a holy thing that you don’t touch.”
- Acquiring in the US? Get a lawyer! Unfortunate but true, the US is a litigious society. Europeans are frequently stunned by the $1,000 per hour rate of a corporate lawyer. The hard-earned wisdom from a French CEO, seasoned in global acquisitions: hire your own lawyer. With your own in-house counsel on staff, you are better equipped to deal with a range of potential issues related to contracts with clients and suppliers or human resource issues like discrimination and harassment.
- Employment Agreements: Differences in laws and business practices affect the employment relationship. For instance, “at will” language common in the US does not apply in many countries. Some European countries require several months’ notice when an employee leaves or is let go. Language regarding cash and stock option compensation needs to reflect local laws. Insurances are handled and funded differently.
Even for domestic deals, how you manage the integration of the newly acquired team can make or break your investment. Organizational culture matters.
The key to success in cross-border M&A is recognizing the strength in differences, and this requires actively addressing and celebrating common differences. People, especially leaders, must not fall prey to the simplistic duality of right and wrong in how they perceive differences
Originally published on Channel Partner Insight, April 9, 2019.