We all know that cross-border mergers and acquisitions bring unique opportunities to increase your global footprint and access new markets. But what we don’t talk about as much is that they present us with a set of distinct challenges during the integration process. There are lots of questions we must ask ourselves as leaders: how could we merge cultures internationally? Would we need professional regulatory advice? Is it possible to communicate effectively across time-zones? If your business is looking to expand internationally, read on as we delve into some of these hurdles and provide our very own tips for successfully navigating this complex terrain.
Cultural differences
Culture is one of the most significant challenges in any integration, let alone when operating internationally. Just think of your own experiences when starting out in a new job: you have to adjust to new communication norms, management styles and decision-making processes. Now imagine trying to forge two company cultures together — and they’re based on opposite sides of the world. It’s no easy feat! A culture clash became apparent when Finnish company Nokia had their mobile division bought by Microsoft in 2014. Nokia had a unique working culture, boasting a flat org structure and strong sense of collaboration where decisions tended to be driven by consensus. On the other hand, the multinational US-based tech giant Microsoft had a more hierarchical and competitive working culture. Cultural disparities arose, which hindered decision-making processes and created friction within the newly merged organization. The acquisition ultimately did not achieve the expected synergies and success due in part, we speculate, to the challenges in integrating the two companies' cultures. In 2016, Microsoft announced it would be scaling back its mobile phone business.
Solution: Prioritize cultural integration by conducting pre-deal due diligence to assess compatibility and appointing cultural ambassadors to help bridge the gap. Leaders should actively promote cross-cultural collaboration, facilitate open communication channels and implement training programs to foster cultural integration and a unified corporate culture.
Regulatory and legal compliance
Every country has its own set of regulatory frameworks and legal requirements to govern business operations and ensure compliance. Adhering to these obligations can be a daunting task, as failure to do so can lead to significant repercussions and financial penalties. Or even, as in the case of pharmaceutical giants AstraZeneca and Pfizer, the abandoning of their potential merger. While we don’t have the full picture of what happened, we can assume that there were an array of legal hurdles that the British-Swedish and US companies faced when attempting to join forces: navigating complex antitrust laws to obtain US and EU regulatory approval, examining IP laws for potential patent infringements, as well as assessing how employment laws differ across their multiple jurisdictions. It’s safe to say these regulatory issues thwarted the $119 billion deal and contributed to the failure of the prospective Pfizer and AstraZeneca merger, and to this day they sit as separate entities.
Solution: Engage experts familiar with the legal systems of both countries who can identify and address potential issues early on. Establishing a dedicated compliance team can ensure ongoing adherence to all regulatory requirements, safeguarding the merged entity's operations and reputation.
Communication and language barriers
We all know that effective communication is the key ingredient for any form of business success, particularly integration. It’s a tool that can be deployed to unite people from a variety of backgrounds and life experiences to make everyone feel connected to a shared goal. This becomes trickier when you add throw in different time-zones and language barriers. Here at Scion, we have been fortunate enough to work on a few UK <> US integration projects where some of these issues came to light. Even though everyone was speaking in the same language, it was still a huge challenge for staff to shift into a new mode of operating transatlantically. They needed to re-coordinate meetings (there are 6 time-zones just within the US!), adjust to different British/Americanisms and working styles, all while trying to build rapport with their new team members entirely over Zoom. To that end, communication became one of the key focuses within our integration plan: when teams are geographically dispersed, any miscommunication can lead to conflict, delays or, in the worst case, the loss of key talent and clients — all of which we wanted to avoid.
Solution: Collaboration tools and technology that facilitates real-time communication and document sharing can improve efficiency and foster effective cross-border collaboration. Employ professional interpreters, establish multilingual communication channels, and offer language training to help employees mitigate language barriers.
As we have seen, cross-border M&A integration comes with its own set of unique challenges, on top of all the obstacles you may face in a typical domestic integration. Our advice to overcome these hurdles is always the same: careful planning and proactivity. Whether you're considering a cross-border M&A or already in the midst of integration, addressing these challenges head-on increases your chances of a successful and mutually beneficial cross-border M&A integration. What tactics have you found helpful with international M&A integration? Comment below to join the conversation.
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