International M&a

International Business: Research Teaching and Practice 2007 1(1)

Successfully Managing International Mergers and Acquisitions: A Descriptive Framework

Daniel Rottig *

Kaye College of Business, Florida Atlantic University 777 Glades Road, Boca Raton, FL 33431

Although international mergers and acquisitions constitute the most frequently used means through which multinational corporations undertake foreign direct investment, the majority of these transactions are not successful. This paper identifies key difficulties that may cause the high failure rates of crossborder mergers and acquisitions, and develops a typology of strategies to facilitate the management of these problems. A descriptive framework is advanced which suggests that the performance of international mergers and acquisitions is a function of successful cultural combination during the postacquisition integration process. Cultural due diligence, cross-cultural communication, connection, and control are discussed as major determinants of successful cultural combination.

INTRODUCTION

International mergers and acquisitions1 are among the key corporate strategies multinational corporations (MNCs) use to expand, diversify, or consolidate their businesses. 2006 was a record year for acquisitions worldwide when, for the first time, the annual value of these transactions exceeded US$ 4 trillion, and cross-border acquisitions alone amounted to a record high of US$ 1.3 trillion (Larsen, 2007). This trend continues in 2007, given that the transaction value of global acquisitions in the first three months of the year reached US$ 1.13 trillion, setting up a record for the busiest first quarter in acquisition history (Saigol and Politi, 2007). Along with this recent upsurge in international acquisition activity, however, is the fact that up to 83 percent of these transactions are unsuccessful (KPMG, 1999; Moeller and Schlingemann, 2005; Sirower, 1997). Thus, international acquisitions constitute an...