What Part Does Cultural Compatibility Play in Determining The Success of Cross-Border Mergers & Acquisitions - Essay Example

Most often, considerations in relation to financing and strategies have become the main concern in obtaining the acquisition targets or merger partners that are most suitable for a company’s purpose. Usually, decisions are made depending on certain issues such as availability, price and probable earnings. When their activity fails, the analysis of merger failure or weak performance is often focused on the re-examination of certain factors that initiated the decision for selection (Schweiger & Goulet 2005).

Often, poor selection decisions for mergers and acquisitions are associated with an overly high purchase price, incompetence of managers in achieving goals, or that the companies simply do not match each other. These factors have been continuously examined yet M & A activity has not obtained the necessary improvements (Teerikangas 2007; Seo & Hill 2005). Because of this, international acquisitions make up inconsistencies: despite the fact that business practice and academic research have reported that many of these activities fail to achieve their objectives, cross-cultural acquisitions still remain to be a popular strategy for multinational companies.

Therefore, it is necessary that the causes of international merger and acquisition failure are examined as well as the strategies for addressing such problems. As reported by Galpin & Herndon (2007), in a study of 190 top executives who were involved in the global acquisition, it was believed that cultural incompatibility was viewed as the greatest barrier to the success of their M & A activities. Furthermore, the 1996 British Institute of Management survey reported that when merging two cultures is underestimated, it becomes a significant factor for failure (Carleton and Lineberry 2004).