Cross Cultural Factors Needed for Cross Border Mergers and Acquisitions - Capstone Project Example

Shimizu et al. (2004) reflected on the 1990s wave of mergers and acquisitions and concluded that through domestic M&A, firms incessantly look upon cross-border acquisitions as a lucrative and easy route to gain entry into foreign markets. Motives behind cross-border acquisitions have been identified to be achieving economies of scale, synergies from the marriage of two distinct and competent firms, and gaining competitive advantage by making use of product extension and expansion across borders and untargeted markets.

However, several barriers hinder the route to the successful implementation of cross-border acquisitions. Different authors and scholars have provided many factors hindering cross-border acquisitions. In its entirety, cultural factors need the biggest attention because of their influence in changing the fate of the merger or acquisition activity. Cross border M&A is termed as ‘marriage between two culturally separate entities’ and endeavors to manage M&A’s arise more from the tenets of cross-cultural management than any other factor.

Cultural knowledge has been found to facilitate organizations to come together for M&A with their partners. This view has been propounded by various theories like Hofstede’s and Trompenaars' dimensions, Schwartz Value survey, Kluckhohn and Strodbeck Framework, and many others. The application of cultural factors is involved across various activities and different functions that include expatriate management, leadership, motivation, decision making, managing diversity, and developing intercultural communications through managerial competencies.

Taking examples of some successful and unsuccessful cross-border mergers and acquisitions and relating these with related theories and models, a study has been conducted to determine how cross-cultural knowledge, awareness, and responsiveness helped the successful parties and vice versa. This research has investigated the cultural issues which are often not given utmost importance in regard to cross border M&A. The study has helped to gain an understanding of the significance of the determination of cultural factors affecting cross-border M&A and the necessity to deal with them before entering into a merger or an acquisition.