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Sources of Acquisition Cultural Risk

In: The Management of Corporate Acquisitions

Author

Listed:
  • Kenneth David
  • Harbir Singh

Abstract

Previous work on acquisitions, and especially on post-acquisition integration, has put more emphasis on strategic fit than on organisational and cultural fit of acquiring and target firms. Academic writings on corporate acquisitions approach the need to reassure employees in this stressful situation and to enlist their commitment to the new organisation. Yet cultural compatibility is frequently noted to be critical to the success of acquisitions in practice. Superior practice is exemplified by ARA Services, a company that — according to its CEO, William S. Fishman — has acquired over 300 companies and ‘maintained over 80 per cent of the acquired management through these years’. ARA’s criteria for evaluating acquisition candidates is a balance of traditional business criteria and people criteria. We select the candidate firms very carefully on the basis of their record of growth, record of performance, record of earnings, their reputations for integrity and good business practice, and very importantly, the quality of their management. We determine whether the personalities of the acquired company and ours will match. All marriages were not made in heaven and all acquisitions are not made in heaven. We’ve walked away from many acquisitions because we felt that the management of the company was not likely to be a good partner for us, nor we for them. (Directors and Boards 1984, 13)

Suggested Citation

  • Kenneth David & Harbir Singh, 1994. "Sources of Acquisition Cultural Risk," Palgrave Macmillan Books, in: Georg Krogh & Alessandro Sinatra & Harbir Singh (ed.), The Management of Corporate Acquisitions, chapter 10, pages 251-292, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-13016-0_10
    DOI: 10.1007/978-1-349-13016-0_10
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    Citations

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    Cited by:

    1. Boateng, Agyenim & Du, Min & Bi, XiaoGang & Lodorfos, George, 2019. "Cultural distance and value creation of cross-border M&A: The moderating role of acquirer characteristics," International Review of Financial Analysis, Elsevier, vol. 63(C), pages 285-295.
    2. Junichi Yamanoi & Hiroki Sayama, 2013. "Post-merger cultural integration from a social network perspective: a computational modeling approach," Computational and Mathematical Organization Theory, Springer, vol. 19(4), pages 516-537, December.
    3. Emmanuel Okofo-Dartey & Lungile Ntsalaze, 2021. "The Short- and Long-Term Value Gains to Acquirers of Emerging Market Targets in Mergers and Acquisition Deals," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 9(1), pages 1-18.
    4. Alexandridis, George & Hoepner, Andreas G.F. & Huang, Zhenyi & Oikonomou, Ioannis, 2022. "Corporate social responsibility culture and international M&As," The British Accounting Review, Elsevier, vol. 54(1).
    5. Agcayazi, Busra & Hibbert, Ann Marie & Morillon, Thibaut G., 2024. "CEO International Background and Cross-Border M&As," Journal of Banking & Finance, Elsevier, vol. 164(C).
    6. Günter K. Stahl & Andreas Voigt, 2008. "Do Cultural Differences Matter in Mergers and Acquisitions? A Tentative Model and Examination," Organization Science, INFORMS, vol. 19(1), pages 160-176, February.
    7. Reus, Taco H., 2012. "Culture's consequences for emotional attending during cross-border acquisition implementation," Journal of World Business, Elsevier, vol. 47(3), pages 342-351.

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