Effects of Management Cultural Integration on
Merger and Acquisition Failures
Section 1: Foundation of the Study
An organization’s survival and continued existence depend on the influence of
managers, organizational culture, and mergers and acquisitions (M&As). Stakeholders
often view M&A activities as a means to create wealth and returns for investors (Rossi,
Yedidia Tarba, & Raviv 2013). Strategic placement among competitors in an industry
also appeals to managers and stockholders pursuing wealth. Successfully integrating
assets acquired through M&A activities may increase the newly created entity’s
intellectual capital, market share, and competitive advantage (Das & Kapil, 2012). In this
context, M&A activity results in product and service development, improved work skills,
and increased skill diversity across the merging companies (Bharwani & Butt, 2012;
Kim, Kumar, & Kumar, 2012).
Not all M&As are successful. Investors generally have low expectations for value
creation or investment returns because the average failure rate of M&As is 50%
(Brinckmann, Müller, & Rosenbusch, 2013; Dauber, 2012; Himmelsbach & Saat, 2014).
This failure rate is a concern for business leaders as it implies M&A events may lower
stakeholder expectations and decrease value. Managers’ failure or success in an M&A
activity depends on their collective competence and the fulfillment of their fiduciary
duties to companies.
Background of the Problem
Information exchange between the merging organizations may facilitate the firm’s
transformation and expansion after a merger or acquisition. Patzelt and Schweizer (2012)
have suggested that exploring the factors aiding cultural integration might lead to
successful M&A activity. However, the literature on M&As do not yet have a conceptual
framework that applies to a variety of organizations. Ahammad and Glaister (2013) found
managers’ and stakeholders’ organizational involvement aids the organizational
transformation. Collaboration between managers and stakeholders’ also contributes to a
smooth transition in conceptualizing post-merger business processes to facilitate
organizational growth.
Brinckmann et al. (2013) found that three out of four mergers or acquisitions do
not survive the integration process, while various other studies show how implementation
has a role in these failures. Managers must have a vision and problem-solving skills to
deal with future events, even as they adapt to current events (Brinckmann et al., 2013).
Defren, Ullrich, and Wirtz (2012) argued that vision skills may often lead supervisors to
make major decisions during such times. Furthermore, lack of visionary skills these
pressures, is a prelude to M&A failures, other types of failed ventures, and previous
M&A experience may generate conflict in the newly formed business.
To create a successful M&A event, leaders should not ignore other firms’ efforts
to create diverse and successful companies (Angwin & Meadows, 2015). Dauber (2012)
noted that 50% of M&A deals end in failure, primarily because management lacked
comprehensive information exchange in the workplace. An M&A venture involves high
levels of risk, and failure often leads to massive stakeholder losses because of the
complexities involved (Dauber, 2012; Patzelt & Schweizer, 2012).
Problem Statement
The United States accounted for more than 40% of M&A failures between 2001
and 2010 (Das & Kapil, 2012; Himmelsbach & Saat, 2014). Deficient knowledge, flawed
alliances and networks, and ineffective communication can lead to M&A failures
(Francis, Hasan, Sun, & Waisman, 2014). Furthermore, managers may fail to create an
integrated development plan to strengthen the firm’s new culture if they lack clarity,
which may, in turn, ultimately increase the likelihood of M&A failure (Gunkel,
Rossteutscher, Schlaegel, & Wolff, 2014). I this study, I address the general business
problem of the high M&A failure rate (Cefis & Marsili, 2012), and the specific problem
of managers’ lack of strategies for culture integration during an M&A.
Problem Statement
The purpose of this qualitative questionnaire study was to explore managers'
strategies for cultural integration during an M&A. The questionnaire explored
participants’ experiences as they relate to the Denison model of leadership and culture
integration in M&As. The geographical location of the study was in Polk County in the
U.S. state of Texas. In addition, this study facilitated discussions with managers about
organizational best practices for the implementation, cultural involvement, and
integration of future M&As.
From the FluidSurveys/Survey Monkey database, I selected 94 managers with
prior involvement in M&A activity as participants in this qualitative questionnaire
survey. Managers with a comprehensive vision of organizational integration must have
experience communicating with employees during and after M&As. Such
communications of knowledge, values, and contributions may influence social change
inside the organization (Kukko, 2013). Determining the best management strategies and
practices might help mitigate many cultural integration issues during M&As and further
develop the merger process.
Purpose Statement
The purpose of this qualitative questionnaire study was to explore managers'
strategies for cultural integration during an M&A. The questionnaire explored
participants’ experiences as they relate to the Denison model of leadership and culture
integration in M&As. The geographical location of the study was in Polk County in the
U.S. state of Texas. In addition, this study facilitated discussions with managers about
organizational best practices for the implementation, cultural involvement, and
integration of future M&As.
From the FluidSurveys/Survey Monkey database, I selected 94 managers with
prior involvement in M&A activity as participants in this qualitative questionnaire
survey. Managers with a comprehensive vision of organizational integration must have
experience communicating with employees during and after M&As. Such
communications of knowledge, values, and contributions may influence social change
inside the organization (Kukko, 2013). Determining the best management strategies and
practices might help mitigate many cultural integration issues during M&As and further
develop the merger process.
Nature of the Study
In this study, I used a qualitative questionnaire design to explore the effects of
organizational culture on M&A failures in the United States. I selected a qualitative
methodology rather than quantitative or mixed method approaches because of time and
resource constraints. While quantitative methods are sufficient to validate theories based
on statistical measures, qualitative methods are appropriate for gathering data to
understand best practices related to M&As (Corley, Gioia, & Hamilton, 2013).
There are six qualitative research design frameworks: narrative research, grounded
theory, phenomenology, ethnography, case study, and questionnaire (Amarh, 2015; Petty,
Thomson, & Stew, 2012). A questionnaire study design was appropriate for this research
because it captures participants’ thoughts and knowledge, while the other qualitative
research design frameworks were unsuitable for a variety of reasons. Ethnography
involves the study of an entire cultural group, while grounded theory entails multiple
levels of data collection related only to participants’ views, without considering their
ideas. Similarly, the fundamental purpose of a case study is to gather information related
to a single event (Galli & Müller-Stewens, 2012), and so does not adequately identify the
patterns and themes relevant to this study (Galli & Müller-Stewens, 2012). Further,
narrative methods enable the identification of participants’ roles in a given storyline.
By contrast, the questionnaire-based framework captures participants’ thoughts,
and enables an in-depth data evaluation and analysis. Granot, Brashear, and Cesar Motta
(2012) stated open-ended questions simplify a broad range of topics, thereby allowing
researchers to draw conclusions based on participants’ thoughts and enabling them to
identify the relevant themes, patterns, and behaviors inherent in those thoughts. Thus, this
approach provides the data required to answer research questions exploring complex
topics. A qualitative questionnaire study geared towards evaluating the influence of
organizational culture during M&A events was thus suitable for addressing the research
questions in this study.
Research Question
In this study, I explored the factors contributing to the success or failure of
M&As, focusing on managers’ cultural involvement, alliances, and work skill
improvements during these events. Evaluating past M&A events may help organizational
leaders improve productivity during M&A activities. Therefore, in this study, I proposed
the following research question: What skills and strategies do managers use to facilitate
management and culture integration during M&As? I collected data using a version of the
Denison leadership and culture model (Denison et al., 2012) modified to focus on the key
factors related to culture integration. The qualitative questionnaire has two sets of
questions related to (a) transformational leadership and skills theory, and (b) cultural
involvement and M&A success or failure.
Interview Questions
This study addressed the following six questions:
•What is the most difficult barrier while communicating as a manager with your
colleagues at the firm?
•What are your experiences with your colleagues at the management level?
•What is your understanding as a participating manager of how a merger should
work?
•What did management communicate internally about company goals and
objectives during the M&A?
•How do you believe effective management at the management level affected the
M&A?
In your experience as a manager, what leadership goals were ambitious and
realistic?
Conceptual Framework
In this study, I used a conceptual framework based on transformational leadership
because leadership is an important construct within an organization (Antonakis & House,
2014; Dinh et al., 2014). Thus, I determined that transformational leadership theories
would facilitate my investigation of the role of culture during an M&A because
successful M&As rely on communication between employees and organizational culture
integration (Dinh et al., 2014).
Transformational leadership theory includes research on construct validity in
leadership, strategy diversification, profit creation, and stakeholders’ promises of due
diligence in dealing with return on investments (Antonakis & House, 2014;
GarcíaMorales, Jiménez-Barrionuevo, & Gutiérrez-Gutiérrez, 2012). Antonakis and
House (2014) found a link between issues related to leaders’ and managers’ contributions
to the organization’s long-term vision and organizational survival. Transformational
leadership theory posits that leadership from the firm’s strategic managers can determine
the theory's applicability to the organizational culture, thus influencing the success or
failure of future M&As (Antonakis & House, 2014). In this study, I used a conceptual
framework based on transformational leadership because leadership is an important
construct within an organization (Antonakis & House, 2014; Dinh et al., 2014). Thus, I
determined that transformational leadership theories would facilitate my investigation of
the role of culture during an M&A because successful M&As rely on communication
between employees and organizational culture integration (Dinh et al., 2014).
Transformational leadership theory includes research on construct validity in
leadership, strategy diversification, profit creation, and stakeholders’ promises of due
diligence in dealing with return on investments (Antonakis & House, 2014;
GarcíaMorales, Jiménez-Barrionuevo, & Gutiérrez-Gutiérrez, 2012). Antonakis and
House (2014) found a link between issues related to leaders’ and managers’ contributions
to the organization’s long-term vision and organizational survival. Transformational
leadership theory posits that leadership from the firm’s strategic managers can determine
the theory's applicability to the organizational culture, thus influencing the success or
failure of future M&As (Antonakis & House, 2014).
Operational Definitions
In this section, I define the terms used throughout this study. Some word
combinations denote atypical definitions, so this section aims to clarify the specific
meanings related to this study.
Acquisition: Business activities in which one firm within a given industry procures
another firm to grow within the market (Welbourne, Neck, & Dale Meyer, 2012).
Agglomeration: A cluster of companies in a geographical area (Böhm, Koh, &
Riedel, 2013).
Cross-border merger and acquisition: Procurements of companies from different
cultures (Dikova & Rao Sahib, 2013).
Cultural integration: The successful assimilation of culture by both the acquiring
and the acquired firms (Tarba & Weber, 2012).
Culture: Although it has a number of definitions, for the purpose of this analysis I
define culture as the collective beliefs and values held by the organization (Tarba &
Weber, 2012). Culture is typically a key determinant of the success of a merger or
acquisition.
Culture involvement: Refers to the managers’ culture, commitment, and
involvement in the organization before, during, and after the M&A process while
reducing cultural differences in the workplace (Tarba & Weber, 2012).
Human capital: Those elements of an organization related to the organization’s
employees. Accountability, issues related to working conditions, and the availability of
necessary information is intrinsic to human capital (Ahammad & Glaister, 2013).
Merger: A combination of two or more companies (Aktas, De Bodt, & Roll,
2013).
Stakeholders: Persons with a direct or indirect interest in the company and the
company’s performance (Di Marco, Mutti, Vazquez-Brust, & Yakovleva, 2012).
Transparency: The state of being free from pretense or deceit. Many industry
practitioners treat transparency as an indicator of accountability (Bhal, Bhaskar, &
Mishra, 2012).
Assumptions, Limitations, and Delimitations
Assumptions
This study I developed a method for exploring practices to encourage cultural
involvement and integration during M&As. The results may help managers understand
how to improve post-merger or post-acquisition integration (Rachman-Moore et al.,
2012; Tarba & Weber, 2012). Illustrating the themes and data patterns inherent in past
M&As may positively influence organizations in future M&As (Rachman-Moore et al.,
2012). Furthermore, the open-ended data collection process allowed me to explore
thoroughly the research question.
In a successful organization, managers, stockholders, and employees share a
singular organizational culture (Garibaldi de Hilal & Wagner, 2014). M&As often fail
because organizational leaders lack transparency, vision, knowledge, and responsibility.
Taking these elements together, I worked from the assumption that M&A success or
failure relates to organizational culture, managerial experience, skills, and judgment.
Limitations
Although this study’s results may provide insights into how organizational culture
affects M&As, I acknowledge some limitations. First, organizational cultures in firms in
the United States differ from those in other countries. The characteristics of foreign and
domestic firms might moderate the relationship between cultural involvement and M&As
in these contexts. I did not consider organizational cultures of firms outside of the United
States.
Furthermore, time and resource constraints restricted the number of study
participants with experience of an M&A event to 94. However, qualitative studies
typically require smaller samples to explore research questions (Fu, Yang, & Wan, 2012;
Lai & Peng, 2012; O’Reilly & Parker, 2013). I generalized the results from these 94
participants to the entire population available for the study (n=4,946). The study was also
limited by the fact that I did not incorporate participants’ thoughts prior to a merger or
acquisition event.
The mode of data collection that I used might also be considered a limitation of
this study. Buhrow, Gathercoal, and Kays (2012) and Fowler (2013) have highlighted
several limitations in paper questionnaires. Buhrow et al. (2012) found that some
participants do not respond well to questions presented on paper. In addition, missing
information can raise doubts about the inferences made from the available data, thus
leading to conceptual gaps in the research. I attempted to use all data in their original
form without omitting basic information in order to avoid casting doubt on the validity of
the findings (Benoit-Bryan, Johnson, & Lee, 2012).
Delimitations
In addition to the limitations outlined above, qualitative studies require
delimitations (confines) to avoid extending the research findings into unknown areas and
introducing biases that may limit the progress of future research (Lemétayer & Sheffield,
2013). This study’s participants have prior experience in responding to questionnaires
containing open-ended questions. However, the participants did not use the Internet or
pass details of the study to other groups (Lemétayer & Sheffield, 2013). The
questionnaire could become delimited if 94 response sets are insufficient for
generalization. However, I used multiple open-ended questions in order to relate
participants’ responses to cultural involvement (Fairweather & Rinne, 2012).
Significance of the Study
Contribution to Business Practice
This research may contribute to business practice by providing a better
understanding of factors that contribute to M&A failures. Himmelsbach and Saat (2014)
noted that M&A research has thus far failed to improve the typical failure rates which
remain around 50%. Rogers and Van Buskirk (2013) have contended that previous
researchers have not sufficiently accounted for firms’ controlling rights, given that
governance can contribute to organizational failures, influence cultural integration, and
help create a strong business (Avelar, Jordão, & Souza, 2014).
To avoid bias, researchers should include opinions from external participants
(Garbarino, Merrett, Slonim, & Wang, 2013). In this study, I thus attempted to link the
conceptual foundations from the literature to practitioners’ opinions. Hence, this study’s
results may encourage effective leadership by bridging the gap between theory and
practice, with the goal of transforming the findings into lessons learned to improve the
likelihood of successful M&A events (Ahammad & Glaister, 2013).
Implications for Social Change
The high M&A failure rates can have significant negative consequences
(Himmelsbach & Saat, 2014). For example, several scholars and practitioners have cited
M&A failures as causal antecedents of financial problems such as widespread layoffs
(Cho, Lee, Kim, Kim, & Kwon, 2013). However, many managers, stakeholders, and
M&A leaders have valuable information about implementing strategic changes that may
limit the likelihood of M&A failures, thereby reducing their associated adverse outcomes
(Himmelsbach & Saat, 2014).
Angwin and Meadows (2015) demonstrated how M&A failures affect managers,
individual employees, their families, and general social prosperity. Changes in
M&Arelated behaviors that improve knowledge transfer and cultural understanding may
allow organizations to retain their workers. While exploring culture and the effects of
culture on organizations, corporate managers often find innovations resulting from
organizational change that reduce the complexities of cultural integration. Hyder and
Osarenkhoe (2015) noted the positive effects an M&A has on an industry, including
increased employment rates, consistent innovation, and wealth creation for local citizens.
Therefore, leaders and managers should exercise social responsibility by the
implementation of culture integration and organizational culture (Hyder & Osarenkhoe,
2015).
Social responsibility occurs when an organization located in the community
supports programs contributing to the community to increase loyalty in culture
integration in a positive way (Hyder & Osarenkhoe, 2015). Moreover, courage relates to
the timely reporting of activities affecting their community to the proper authorities (Font
& Garay, 2012). Finally, this research may contribute to the body of knowledge on this
topic by demonstrating how leaders can implement M&As responsibly and promote
familiarity in terms of organizational culture, values, and beliefs, which could potentially
lead to socially responsible organizational practices, especially during an M&A event
(Himmelsbach & Saat, 2014).
A Review of the Professional and Academic Literature
The purpose of this qualitative questionnaire study was to identify the skills
managers need to understand the effects of management practices and the lack of cultural
integration on M&A failures in the United States. To ensure transparency and increase
the validity of the results generated by this study, I tracked, processed, and reported data
related to M&As. In this questionnaire study, I describe and evaluate strategic matters
related to M&As, and address how the implementation of effective communication
practices generates successful organizational results. By interpreting the results associated
with these two central themes, comprehension and communication, I have sought to
improve managers’ effectiveness in incorporating culture involvement into M&A
practices.
My review of the literature included 189 references, 85% of which are
peerreviewed articles. I collected references from the Walden University Online Library
and accessed multiple databases including EBSCOhost, ERIC, and ProQuest to retrieve
relevant studies. Using basic and advanced searches of these academic databases, I
retrieved articles from peer-reviewed, scholarly journals suitable for this literature review.
I included doctoral dissertations from these databases as part of the literature study.
Using a historical perspective, I sought to determine how the information gathered
contributes toward understanding how M&As progress. Because collaboration is an
important process involving managers and stakeholders (Bishop & Neale, 2012), I
included research focused on the key signals of future M&A occurrences and how
stakeholder or board member ideas and perspectives are integrated in M&As. This type of
research methodology produces actionable knowledge managers can apply to survive
(Bishop & Neale, 2012).
Culture involvement, brand name, and value growth closely relate to corporate
performance (Steenkamp, 2014). Groening and Kanuri (2013) found half of the M&As in
their sample failed to meet stakeholders’ expectations of value creation. In this section, I
explore the effects of culture, expectations for growth, and financial crises on M&A
successes and failures. Managers view M&A as a strategic management tool to meet
stakeholders' expectations by creating wealth and generating financial growth (Anteby &
Molnar, 2012).
Mergers and Acquisitions
Prior researchers established the role of several specific factors (e.g.,
communication, culture, and organizational value) in moderating the relationship between
an M&A and organizational value. One review of M&A impairment suggested
management communication failure as a possible factor impairing M&A growth
(Groening & Kanuri, 2013). Other research focused on the role of culture during M&As.
For example, Harvey, Mcintyre, Moeller, and Sloan (2012) explored cultural issues
related to organizational growth impairment or success during and after an M&A. Harvey
et al. (2012) and Tarba and Weber, (2012) found that organizational cultural integration
and involvement events created in the work environment may affect an M&A’s
implementation. Taken together, these findings suggest communication, cultural
involvement, and work environment as key determinants of an M&A’s success. In
addition to effective communication and cultural integration, successful M&A’s depend
on effectively incorporating employees into the decision-making process during the
M&A. Thus, managers have a significant impact on an M&A’s outcomes.
Organizational failure to achieve M&A objectives may reduce the degree to which
an organization can generate corporate wealth. Stakeholders expect managers to
effectively align the organization from top to bottom, provide direction, and determine
the organization’s future (Fontenot, Hsu, & Thakur, 2012). Dauber (2012) claimed 50%
of all M&A attempts lack the growth necessary to generate organizational value. While
managerial vision produces stakeholder wealth, organizational alignment during an M&A
requires cultural involvement as a critical component (Tarba & Weber, 2012). Moreover,
managers risk developing organizational expectations before providing or creating the
means to realize those expectations; this risk potentially impairs an organization’s
development (Erkutlu, 2012). As such, M&A objectives, the risks associated with the
M&A, and cultural involvement may reduce the likelihood an acquired company reaches
its expected performance goals (Ahammad & Glaister, 2013).
The merging companies' human resources departments play a significant role in
the successful implementation of a M&A. Employees must adjust to both post-merger
human resources management and new business practices following integration (Ahern,
2012). Several studies (e.g., Hagedoorn and Wang, 2012; Wu, 2012) indicate that an
M&A strategy characterized by the acquiring firm’s access to the acquired firm’s
resources can yield future benefits for both firms during the corporation’s growth.
Managers use the acquired firm’s resources because any M&A has the ultimate goal of
generating wealth, thus improving market performance and product development (Davis,
Robertson, & Yang, 2012).
Aside from creating wealth for organizational stakeholders, M&As may facilitate
other positive organizational outcomes. For instance, mergers represent an opportunity to
integrate useful businesses (Amal, Andersson, Baffour Awuah, & Raboch, 2013) and
may promote culture involvement within the organization as a relative and definitive part
of the integration. Because two merging companies may differ culturally, human resource
departments should emphasize areas of common interest (Bjørn, Krishna, & Søderberg,
2013), but should do so carefully (Brinckmann et al., 2013). Human resource department
managers have a critical role in cultural integration during an M&A, and are pivotal to
assuring that the organization avoids negative outcomes associated with integration
following the M&A (Higgins, Kuvandikov, & Pendleton, 2013).
An M&A’s success depends on innovation and organizational performance. To
this end, Brinckmann et al. (2013) argued that cross-border M&As (and the necessary
cross-cultural integration) may increase organizational growth and improve
organizational performance. Furthermore, effective cultural integration, growth, and
performance may create wealth for the organization both during and after an M&A.
Wang and Wang (2012) posited that researchers and practitioners may effectively analyze
growth and performance by exploring the different ways in which employees in merging
organizations transfer knowledge between them. By streamlining knowledge transfer,
managers may effectively promote culture involvement.
Communicative transparency may also contribute to successful outcomes. M&A
architects should emphasize communicative transparency while exploring opportunities
to strengthen firm values (Gröschke, Kogler, Podsiadlowski, Springer, & Van der Zee,
2013). In M&As, the purchase of one company by another is the central event
(Teerikangas, 2012). Some studies have found that cultural integration may be as
important as appropriate purchasing method for predicting the corporation’s future
success following the M&A. M&A related negotiations should feature an equal exchange
of information by all parties (Harvey, Kiessling, & Moeller, 2012). In an empirical
illustration of open negotiation between merging firms, Teerikangas (2012) reported that
demonstrating goodwill and providing fair market value for shares were crucial for the
future firm's success. In contrast, weak corporate governance devalues a firm’s shares
(Avelar et al., 2014). Although stakeholders focus on managers’ and owners’ diverging
interest or accounting methods that increase risk during integration periods, methods to
promote communication and transparency remain integral (Bernardis, 2012).
Transformational leadership theory combined with communicative transparency
facilitates an understanding of how managers and other stakeholders can use cash flow to
invest in other ventures (Bergh & Sharp, 2012), a prospect requiring managerial
foresight. Thus, understanding managerial vision and the implications of this vision may
contribute a more nuanced interpretation of M&As (Battistella, 2013). Managers oversee
M&As and implement them to add value to the overall organization (Ahammad &
Glaister, 2013). Ahern (2012) found that companies with similar products, management
practices, or leadership philosophies tend to successfully merge strategies.
Moreover, Campa and Moschieri (2014) found that competition and reduced
barriers to entry increase the likelihood of a successful M&A, and increased competition
in various product markets also drives stakeholder expectations related to the firm’s
ability to secure a large market share. Consequently, such expectations increase the
pressure to manage a corporation successfully following an M&A. Theories of business
association based on competitive market share suggest how an M&A implementation can
affect organizational performance (Akhter & Fernando Pinto Barcellos, 2013).
For managers, effective planning may include studying and analyzing
businessrelated theories while creating practices to create corporate wealth. Reviewing
theories may also illustrate successful strategies for wealth creation through M&As and
mitigate the likelihood of organizational failure following a firm’s acquisition (Shoham et
al., 2012). Additionally, having knowledge of culture integration can inform the
integration of two firms’ respective innovative capacities, thus providing managers with
another source of information to plan an effective M&A (Foss, Heimeriks, Winter, &
Zollo,
2012).
Successfully combining talent, skills, and knowledge related to entrepreneurship
serves as a conceptual foundation for organizational development. Managers need
talented individuals to develop a company, and secure their services by seeking capital
and adopting risk (Du & Zhao, 2012). Venture capital firms or institutional capital firms
thus invest in start-ups base on entrepreneurs’ knowledge and skills (LiPuma, Park, &
Prange, 2014).
When developing an organization, managers must be aware of the regulations
affecting internal and external controls, for example, those related to bankruptcy. A
thorough knowledge of bankruptcy-related restrictions could deter entrepreneurship and
reduce economic risk (Tomasic & Zhang, 2012). In the United States, bankruptcy laws
are complex, and do not benefit entrepreneurs who either fail or need time to recover
financial losses (Lockett, Lyon, Shepherd, & Ucbasaran, 2013).
Stakeholders’ expectations related to wealth creation increase when two firms
incorporate through a merger or acquisition (Harrison & Wicks, 2013). Fabel and Kolmar
(2012) found the scope of an M&A, managerial compensation, organizational
performance, and adopted risk relate to organizational size and stakeholder expectations.
When M&As are successful, there are positive associations between organizational size,
culture, and management compensation (Bausch, Mueller, & Rosenbusch, 2013).
Longestablished business improves organizational culture integration, stakeholders, and
boards of directors vision of an agency cost manager's view as intended to reduce the
costs associated with future investments (Harrison & Wicks, 2013).
Despite the benefits of M&As, the resulting organizational changes may pose
significant challenges. Though managers must adjust the organizational culture corporate
development and growth, these changes can have negative consequences (Fairweather &
Rinne, 2012). Drzensky, Lupina-Wegener, Ullrich, and Van Dick (2013) found that a
company’s performance before, during, and after an M&A event significantly relates to
the purchasing company’s resistance to organizational change. Employees of companies
involved in a merger fear the possible negative outcomes associated with change. For
instance, Drzensky et al. (2013) demonstrated how, prior to a merger, employees
experience increased levels of stress and concerns about the possibility of the firms’
financial failure. Similarly, Wang and Wang (2012) showed how employee fear of an
M&A’s failure places financial strain on both firms in the transaction.
Historical Views of Mergers and Acquisitions
There have been six waves of M&A activity since the 19th century (Tanimura &
Wehrly, 2012), The first wave was characterized by horizontal mergers between 1897 and
1904 (Vancea, 2012) in which one company attempted to take control of another
company’s key mechanisms for production (Vancea, 2012). The second wave, from 1916
and 1929, was characterized by vertical mergers that resulted from one company’s
owners attempts to control every aspect of production and transportation (Vancea, 2012).
The third merger wave came in the middle-to-late 1960s and ultimately produced
conglomerates (Tanimura & Wehrly, 2012). In this wave, diversified companies
competed directly, and many large companies (e.g., 3M) transformed into the companies
of today (Brauer & Wiersema, 2012; Tanimura & Wehrly, 2012). In the fourth
“shareholder value approach” wave from 1981 and 1989, companies increased payments
to stockholders (Tanimura & Wehrly, 2012) and saw a proliferation of corporate raids
and hostile takeovers (Tanimura & Wehrly, 2012). The fifth M&A wave took place when
the effects of globalization materialized between 1992 and 2000 (Tanimura & Wehrly,
2012). During this wave, managers realized the need for their organizations to collaborate
across disappearing global borders (Tanimura & Wehrly, 2012). Finally, in the sixth
wave (2003-2008), shareholder activism and private equity mergers and takeovers were
commonplace (Tanimura & Wehrly, 2012).
Tanimura and Wehrly (2012) identified a relationship between the unexpected
announcement of a merger and a firm’s stock value, and determined how financial
markets respond negatively to undisclosed information. The effect relates to assumptions
of insider trading (Bozanic, Dirsmith, & Huddart, 2012). The restrictive nature of the
investment environment precludes outsiders from gaining any benefit from insider trading
practices (Tanimura & Wehrly, 2012). From n historical point of view of mergers the
continued refinement of the process has resulted in a better system to avoid failures.
Regulations are also determinants of M&A outcomes. M&As often fail because of
the controls and premiums imposed by regulators. In the United States, for example, the
Securities and Exchange Commission (SEC) develops and implements laws related to
investment (Clark, Paulovic, Whipple, & Wink, 2014). However, the SEC’s practices are
imperfect. Childs, Cook, Lomas, and McLeod, (2014) have criticized the SEC for
imposing strict regulatory measures on domestic targets while effectively ignoring
international targets. Governmental entities’ regulatory control can be restrictive, and as
such, are a key determinant of an M&A’s success (Childs et al., 2014).
A firm’s positive performance piques potential investors’ interests in a merger. As
such, managers must recognize and comprehend the predictors of firm performance.
Caglayan and Demir (2014), for example, have noted that foreign and domestic firms’
performance depends on the cyclical rises and falls of the stock market. Furthermore,
Balcaen, Buyze, Manigart, and Ooghe (2012) explored the ways in which a firm’s failure
relates to the trajectory towards bankruptcy. By reducing the cost to issue public shares,
the American stock markets contribute to M&A turnover associated with effective market
distribution. While large firms can withstand changes in the market, small firms may fold
under the forced conditions of market turnover (Kuivalainen et al., 2012).
Transformational leaders
Transformational leaders may create profitability for the organization (Byrd,
Cegielski, Hanna, Hazen, & Overstreet 2013). Employees, representing human capital,
may experience increased stress during an M&A (Teerikangas, 2012), though due
diligence may act as an incentive for employee involvement and motivation in an
organization while creating profitability (Tung, & Verbeke, 2013). The transformational
leader’s management skills may facilitate culture involvement during M&As. Moreover,
leaders' management skills include communication when an organization’s performance
changes during the M&A's integration process (Nikolaos & Yiannis, 2013).
Allio (2013) showed how transformational leaders’ treatment of M&A situations
might illustrate the similarities and applications of different leadership styles.
Researchers can better describe transformational leaders by examining their skills in
managing group emotions related to critical moments in an organization (Armenakis,
Carter, Feild, & Mossholder, 2013).
Allio (2013) considered how transformational and transactional leadership traits
are essential in an organization. Transformational leadership associated with an
organization’s decision-making and risk management, may be instrumental in solving
critical culture problems that depend on transformational leaders' performance
(GarcíaMorales et al., 2012). Consequently, transformational leadership styles may
positively affect M&A problem solving in hard-to-manage organizations (Allio, 2013).
Furthermore, transformational leadership attributes include inspiration, positive
attitude, vision, and skills contributing to an organization’s future performance (Allio,
2013). A transformational leader’s attributes and performance connect to company
performance and employee motivation and commitment to the organization (Allio, 2013;
Chiang & Hsieh, 2012). A transformational leader’s motivation might enhance the
relationship between an organization and employees, and influences how the organization
performs during and after an M&A (Allio, 2013). In addition, charismatic leadership
skills involve charisma centered on values, beliefs, and the realization of a job well done
(Grandy, 2013). A transformational and charismatic leader’s vision and leadership might
contribute to job satisfaction (Grandy, 2013). This leadership style facilitates an
organization's culture involvement and performance in the workplace (Grandy, 2013),
and may help a company retain and recruit talented and experienced followers (Grandy,
2013). Further, intellectual stimulation involves leaders’ ability to empower and
encourage their followers and trainees to think while developing innovative solutions and
applying them to improve the firm’s performance (Consoli, D’Ippolito, & Miozzo, 2014).
A transformational leader’s intellectual skills and vision might contribute to a firm’s
growth in business functions or activities (Consoli et al., 2014).
Transformational leaders use their management skills to inspire followers to deal
with situations while balancing the requirements of their roles as members of an
organization (Allio, 2013), and influence employee and stakeholder expectations related
to company performance (Allio, 2013). A transformational leader enables culture
involvement with the vision and direction expected of an organization (Allio, 2013;
García-Morales et al., 2012). A transformational leadership strategy is about influencing a
firm’s members to generate the best possible results within a shared organizational
culture (Allio, 2013).
Moreover, transformational leadership motivates individuals to become high
achievers for the good of the company (Allio, 2013), may similarly motivate individuals
during and after an M&A, and can successfully resolve breakdowns in culture
involvement in organizations (Allio, 2013). Combining two styles of transformational
leadership requires strategy and vision (Chreim, 2014), and transformational leadership
facilitates the comparison between them as it relates to organizational culture
involvement (Chreim, 2014).
Chreim (2014) demonstrated how empowerment contributes to employee
retention. Moreover, the transformational leadership style and the subsequent satisfaction,
commitment, and intentions contribute to culture involvement during an M&A (Venema,
2012). Transformational leadership, satisfaction, and empowerment, when combined with
culture involvement, contribute to stakeholders' satisfaction during an M&A (Chreim,
2014). A transformational leader’s skills in this context suggest how perceptions of
transformational leadership behaviors, while influencing empowerment, facilitate
individuals’ sense of purpose in an organization (Chreim, 2014).
Transformational leadership indirectly motivates subordinates in a supervisory
capacity in an organization (Krishnan, 2012). Moreover, transformational leaders’
personal outcomes, such as motivation, are likely to manifest in work-related functions
and do not relate to management behaviors (Krishnan, 2012). Transformational leaders,
as managers must care for employees' well-being and productivity. Therefore, a
transformational leader must communicate clearly while empowering employees in an
organization (Krishnan, 2012).
Strategy and Structure
Managers employ M&A as a strategy to absorb the goods and services of a target
firm while creating new value for corporate stakeholders (Angwin & Meadows, 2015).
Despite strategic utility, an M&A may result in unfavorable organizational outcomes
(Dauber, Fink, & Yolles, 2012). Consistent with some of the historical waves of M&As,
Ahern (2012) found three types of M&A strategies: horizontal, vertical, and
conglomerate approaches differentiated by the communication and organizational
dynamics between the purchasing and purchased firms (Ahern, 2012). Chang, Chang,
Chen, Chi, and Deng (2012) suggested human resources practices are critical for
strategically integrating two independent firms. Similarly, Collings, Scullion, and Vaiman
(2012) found human resource departments providing information, training, and job
security offer multiple benefits to employees. Depending on how managers’ design and
implement a merger, the results produced by this study may assist managers in
overcoming the challenges associated with creating organizational value.
The geographic proximity of two merging companies may offer some benefits to
the resulting organization, employees, and the surrounding community following the
M&A event. For example, Ahern, Daminelli, and Fracassi (2015) and Yeo (2013) found
managers’ with experience in developing and implementing M&A strategy were more
successful when two merging companies were geographically proximal. By drawing
human capital from the surrounding community, managers in developing organizations
commit to improving the community (Hale, Lepak, Moliterno, & Nyberg, 2014). One
critical managerial strategy relates to identifying promising companies yielding a logical
merger (Gnyawali & Srivastava, 2013). Yeo (2013) argued overseeing takeover targets
involves evaluating key performance indicators, such as human capital, knowledge,
growth potential, and professional goals. The target company’s resources can ease
reciprocity between the two organizations and effectively move the corporation forward
following the merger. In this way, a keen understanding of the industry’s nuances and the
due diligence related to the acquisition increase the likelihood of M&A success (Day,
Dixon, & Meyer, 2013).
Managers must have knowledge of the target company’s industry was critical for a
successful M&A, as managers must know and implement methods to cultivate this
knowledge. For many managers, their industry knowledge grows through extensive
experience (Grave, Vardiabasis, & Yvas, 2012). Almeida, Phene, and Tallman (2012)
determined managerial consideration of the acquired firm’s past performance was a key
factor during M&A negotiations. Historically, M&As tend to increase during market
downturns. Han, Li, and Porterfield (2012) posit how various markets have extreme
barriers to entry and increasing competition. Managerial strategies must align with the
organization’s culture of diversity and goals for future performance (Almeida et al.,
2012). Furthermore, by law, managerial strategies must link to regulatory controls
affecting the firm’s internal and external environments (Bozanic et al., 2012). Therefore,
the merged firm’s future prosperity also relates to government controls and adherence to
local and federal regulations concerning social responsibility. Currell and Henderson
(2014) found M&As affect how businesses evaluate their expenses and legal compliance.
Moreover, Rubino and Vitolla (2014) argued the Sarbanes-Oxley Act 2002 (SOX)
incorporated useful guidelines and facilitated appropriate financial reporting practices and
evaluations of corporate compliance with the law.
Multiple complex factors may affect the degree to which merged organizations
must adhere to various laws. For example, Kuivalainen et al. (2012) found for a firm’s
size, financial liquidity, cost, and expenses can affect regulatory compliance.
Alexandridis, Mavrovitis, and Travlos (2012) found financial markets respond to local
and federal laws by forcing the management personnel of two firms to integrate into a
single firm. Furthermore, Rubino and Vitolla (2014) argued in favor of remaining small,
thereby limiting the expenses associated with legislative compliance. Therefore, by
issuing only a limited amount shares, an organization can remain below the local and
federal SOX thresholds (Rubino & Vitolla, 2014). Hence, a firm can remain profitable
while avoiding the financial stresses larger firms endure (Beckmann, Hielscher, & Pies,
2014).
Managers and other organizational stakeholders develop and implement strategies
intended to create wealth, spur innovation, or secure market share (Almeida et al., 2012).
Furthermore, during periods of organizational transition, financial returns and investors’
opinions provide a viable proxy measure for organizational growth (Almeida et al.,
2012). Stakeholders also expect organizational performance, wealth creation, and
simplified integration during M&As from future managers, who must use their past
experience to achieve these outcomes (Acquaah, 2012).
Managers with experience in mergers may create growth through an M&A
(Dauber et al., 2012). Furthermore, Alexandridis et al. (2012) suggested companies with
inexperienced managers benefit from purchasing or merging with another company with
experienced managers. As such, stakeholders of firms without strong managers may
develop expectations indicating a need to analyze the managerial potential within an
acquired company.
An M&A event may affect stakeholders and managers alike. Stakeholders may
have delays in their return on investment. Comparatively, M&As affect managers’
capacities to promote organizational growth (Anand, Dussauge, Moatti, & Ren, 2014).
Dauber (2012) explained how strategic management and integration are critical factors
related to an M&A. Since the circumstances surrounding one M&A event are transferable
to those of another (Dauber, 2012), strategic management in this context means applying
the lessons learned from past integrations to a current M&A event.
Anand et al. (2014) argued for the use of financial markets and projections as a
useful means to determine when to buy or sell and to measure the effects of M&As.
M&As relying on market forecasting to measure the effects of environmental changes
successfully create wealth (Barros, Bonfim, Kim, & Martins, 2014). Antitrust agencies
understand the benefits of evaluating corporations in the wake of a merger and are eager
to discover new, competitive markets (Beladi, Chakrabarti, & Marjit, 2013). Seru (2014)
contended markets with a number of merged firms are more competitive. Conversely,
markets with less agglomeration have fewer innovative products and strategies (Wu,
2012). The research in this literature review may clarify the differences between markets
with multiple mergers relative to markets with few mergers.
Managers might lack the experience required to comprehend the effects of M&As
on stakeholders during and after a merger’s failure, particularly in competitive markets
(Kato & Schoenberg, 2014). Furthermore, an M&A’s positive or negative implications
may take three to five years to manifest (Ahern, 2012). Moreover, Anand et al. (2014)
found expansive M&A events within a given market mitigate competitive issues in an
industry.
The overriding notion of organizational value is the vision representing financial
performance. Managers’ actions or lack thereof may lower financial performance or limit
growth, both of which represent forms of organizational / merger failure (Baker &
Niederman, 2014; Gemino, Reich, & Sauer, 2012). Empirical M&A studies showed
merger failures of this type result from poor leadership (Baker & Niederman, 2014).
Firms have limited resources to develop a strong brand to compete with others in a
given industry (Page & Pike, 2014), potentially making the firm an M&A candidate
(Fidrmuc, Paap, Roosenboom, & Teunissen, 2012). Firms also seek to tie their brand
names to socially responsible practices (Lindgreen, Maon, & Vallaster, 2012). By
preserving the environment and producing value for the organization, managers can
effectively create wealth (Arif‐Uz‐Zaman & Karim, 2013) and increase the value of the
company’s stock (Ahammad & Glaister, 2013).
Busenitz, Kacmar, and Tang (2012) explained how understanding the process by
which merged organizations leave the financial sector influences the merger’s results.
When large firms exit the financial market, entrepreneurs can be a valuable asset for
management simplicity (Blazenko, Eddy-Sumeke, & Pavlov, 2012) and because
entrepreneurs are a flexible structural basis for an organization. Busenitz et al. (2012)
found firms exiting profitable markets often cite a lack of investment capital as the
principal impetus for the decision. Managers often secure financial liquidity through
mergers or acquisitions (Harford & Powell, 2012). Small businesses with private funding
may have positive organizational performance (Harford & Powell, 2012). In this study, I
sought to identify the tools managers need to effectively implement a merger.
To sustain organizational growth and development during and after an M&A
event, managers may keep the acquired firm as a subsidiary of the parent company’s
brand to retain customers (Kim et al., 2012). This designation fosters future
organizational growth and allows the acquired company to diversify the firm’s culture
overall (Barkey & Godart, 2013). M&A negotiations often failed to factor in the
importance of informational transparency related to the company’s brand (Tapio &
Varho, 2013).
Cai and Sevilir (2012) found the nature of M&As varied on a case-by-case basis,
including the managerial perspectives related to fairness in planning and implementing an
M&A event and successful processes associated with acquiring a firm. Relative to small
organizations, large organizations tend to hold perspectives representing the majority
opinion of other investors pertaining to mergers (Cai & Sevilir, 2012). Furthermore, Cai
and Sevilir (2012) suggested actions during and after a merger influenced by managers’
opinions related to fairness tend to align with stockholders’ expectations of wealth
maximization and loss minimization. Moreover, M&As benefit from communication
about the need for different types of fair practices, and communicative transparency
reduces conflicts of interest and increases accountability and compliance during
organizational transactions and processes (Cai & Sevilir, 2012).
When selecting targets for merger or acquisition, an acquiring firm must consider
protecting their resources and the resulting effect on stakeholders (Chen & Lai, 2014).
Once two firms form an alliance, trust within the organization may extend to future
acquisition events (Ahammad & Glaister, 2013). Individual trust and collaboration
benefit both the individual firms and the resulting merged organization as success may
depend on the ability to trust future alliance partners to safeguard sensitive, firm-specific
data (Haunschild, Khanna, & Lavie, 2012).
Organizations as members of intercontinental exchange markets creating
international subsidiaries require protection and resource control (Loon & Zhong, 2014).
Denk, Kaufmann, and Roesch (2012) clarified the difficulties managers face in creating
trust and mutually beneficial alliances while properly safeguarding proprietary
knowledge, as subsidiaries in international locations potentially incur multiple liabilities.
For example, the failure of an international subsidiary affects stakeholders in terms of
financial damage and loss of resources (Trąpczyński & Wrona, 2012), illustrating one of
the complexities of creating wealth through international mergers.
Both internal and external organizational pressures related to governmental
regulations may negatively influence M&A success. The lack of knowledge related to
bankruptcy regulations among American entrepreneurs ensures neither the success nor
failure of an M&A. Chen and Yu (2012) analyzed the degree to which entrepreneurs
comprehend bankruptcy regulations and their associations with managers who engaged in
behaviors with differing levels of risk. Fruin, Lynn, Meil, and Salzman (2012) proved
bankruptcy laws force stakeholders to recognize economic changes in the environment
and comprehend the nuances of conducting business in the United States. The
relationships between entrepreneurs, venture capital, and risk help avoid bankruptcy and
mitigate the likelihood of a merger’s failure, though are ineffective mechanisms for
managing capital and risk (Fruin et al., 2012).
Businesses possessing sufficient capital to cover expenses have an advantage over
capital-deficient firms during the acquisition process (Schneider & Wallenburg, 2012).
Arthurs, Chahine, Filatotchev, and Hoskisson (2012) suggested managers should work to
avoid capital erosion by inexperienced managers. Capital financing is difficult to acquire,
and once secured, requires preventive measures to avoid overruns to complete a project
(Dominic & Smith, 2014). Resource mismanagement affects acquisition stakeholders and
can translate into merger failure and wealth erosion (Arthurs et al., 2012).
Frijns, Gilbert, and Tourani-Rad (2013) argued insider trading reduces
organizational profitability and indicates organizational failure. To mitigate the negative
effects associated with insider trading, regulators from the United States and the United
Kingdom have enacted regulations within their respective financial markets (Bozanic et
al., 2012). Insider trading regulations prevent losses in profitability from insiders with
privileged information (Bozanic et al., 2012). For example, the 2010 Dodd-Frank Act
addressed insider trading and other types of transactions not available to the public
(Madura & Ngo, 2014). Moreover, in February of 2012, the United States Congress
formed the China Commission and Review Committee to protect investors (Hemphill &
White, 2013). The committee sought to increase public confidence in mergers and
develop future regulations to eliminate insider trading by reducing the degree to which
insiders with privileged information can generate profits for themselves or their
organizations (Frijns et al., 2013). Despite the associated negative consequences, Frijns et
al. (2013) found insiders possessing and using firm-related information increase firm
value. However, there exist only limited extant research on the history of insider trading
infractions, and it is unclear how insider trading affects firm value. Tanimura and Wehrly
(2012) evaluated regulations from 1900 related to M&A approaches to insider trading and
found the business environment required supplemental regulations to control external
influences on M&A practices. Despite the need for these restrictions over a century ago,
the regulations and restrictions from 1900 had little effect on insider trading outcomes in
the year 2000 (Tanimura & Wehrly, 2012).
M&A failures negatively affect stakeholders, particularly in terms of how they
secure financing for the M&A (Baker, Pan, & Wurgler, 2012). Bidders using cash to
acquire another firm tend to dictate the acquisition process and future organizational
development (Baker et al., 2012) because they may not need to finance the acquisition.
These organizations are attractive M&A partners because of their financial liquidity
(Hofmann & Lampe, 2013). Moreover, the instrument used to finance an M&A (e.g.,
cash) serves as a barometer with which potential investors can gauge risk, thereby
improving the acquisition process. Additionally, the financing instrument determines the
rules dictating the bidding process (Baker et al., 2012). Because M&As contribute wealth
by controlling risk factors during negotiations, mergers favor cash-rich partners (Almeida
et al., 2012).
M&A planning affects stakeholders during a failed merger because the effects of a
failure may negatively influence the organization’s current and future performance. For
example, Baker and Niederman (2014) found managers failing to plan the merger to meet
local legislation received fines or other financial penalties. Similarly, organizations
failing to address their social responsibility during a merger may face fines or prosecution
(Baker & Niederman, 2014). Moreover, compliant firms may be attractive M&A partners
as they potentially create stakeholder wealth, and may also avoid negative financial or
legal outcomes (Krishnan, Masulis, Thomas, & Thompson, 2012).
Integration Process
M&As require dynamic changes in vision and forecasting to deliver on
stakeholders’ expectations (Bell, Soybel, & Turner, 2012). Groening, Mittal,
Swaminathan, and Thomaz (2014) determined creating organizational value relates to the
similarities between companies and is therefore significant during an M&A. Managers
and stakeholders must consider governance issues and the ideal approach to implement
the integration because similar companies are likely to engage in M&As (Karolyi, 2012).
Groening et al. (2014) noted M&A-generated value is both feasible and realizable during
resource distribution in horizontally organized firms. M&As characterized by early,
frequent, and transparent communicative practices may mitigate the negative effects of
overlapping resources while creating value with existing resources (Rachman-Moore,
Tarba, & Weber, 2012). In their evaluation of positive and negative outcomes associated
with the integration of two companies, Cheng-Fei Tsai and Shih (2013) suggested coping
with a firm’s layoffs and assets requires extensive human capital. Moreover, poor
leadership and organizational performance may result in a loss of human capital.
Managers may overcome this issue by displaying different behavior during and after
M&As (Kim, Lee, & Park, 2014). These changes relate to parallel changes in leadership
and ownership (Cartwright, Rouzies, Teerikangas, & Wilson-Evered, 2012).
Tarba and Weber (2012) noted organizations with different cultures may act
differently as the M&A integration processes is complex and suggested human capital
contributes to positive and negative outcomes, requiring diligent management
supervision. Effective leadership includes clear communication between managers and
employees to overcome potential resistance to the substantial changes from an integration
(Lutgen-Sandvik & Tracy, 2012).
Choi, Chung, and Du (2014) support Tarba and Weber’s (2012) assertion that
employees behave differently during a substantial M&A transition, and this may lead to
the merger’s failure. Managers may use training and performance controls for individuals
involved in the integration process to implement change before and after a merger.
Moreover, Tarba and Weber (2012) noted senior management commitment increases the
potential for a successful merger. Managers should possess the key qualities required to
facilitate integration, including creativity, transparency, and the ability to meet
stakeholders’ expectations (Carter & Greer, 2013).
Managerial leadership determines the degree to which culture contributes to a
firm’s success or failure. M&As involving proactive managerial leadership and
organizational vision improve cultural integration and wealth creation (Gunkel et al.,
2014). Furthermore, Gunkel et al. (2014) claimed managers with conflict resolution skills
mitigated integration failures before and during M&A events. M&As based on a poor
investment strategy produce results below stakeholders’ expectations, thereby causing the
merger’s failure (Dauber et al., 2012). In contrast, Almeida et al. (2012) demonstrated
organizational success requires open communication and corporate knowledge
(particularly with regard to employee retention) following a merger; moreover, managers
and their local environments influence the degree to which an organization can retain
employees.
Post-M&A consolidation requires training for corporate managers to improve
organizational outcomes (Srivastava, 2012). A merged firm must integrate company
brands effectively to remain economically viable and competitive in the marketplace
(Srivastava, 2012; Amal et al., 2013). Moreover, the integration of the firms’
organizational cultures influences the success or failure of the union (Cao, Gu, Hoffman,
& Schniederjans, 2014), and serves as a key goal of the merged firm’s human resource
department following an M&A event (Tarba & Weber, 2012).
Talented teams comprised of managers and stakeholders identify and garner
sources of revenue obtained through the company brand (Angwin & Meadows, 2015),
and explore tangible and intangible assets for organizational growth (Griffith, Harvey,
Moeller, & Richey, 2013). Horizontal M&As form the cornerstone of wealth creation by
focusing on brand integration (Srivastava, 2012; Prakash & Srivastava, 2014). Although
Bond and O’Byrne (2014) indicated how brand integration was a critical factor in a
successful merger, different cultures relate differently to the effective consolidation of the
new firm. If management fails to incorporate employees’ experiences into the integration
process, then it is difficult to seamlessly acquire a company (Bond & O’Byrne, 2014). In
contrast to the European model of organizational governance, a horizontal M&A
improves the company’s ability to align, thereby improving performance and the capacity
to generate stakeholder value (Angwin, Gomes, Tarba, & Weber, 2013).
Pre-merger perceptions and other issues related to human capital also determine
the outcome of a newly formed venture (Lin, 2014). Considering culture before and after
the merger may contribute to positive outcomes from an M&A event (Lin, 2014).
Furthermore, Lin (2014) explained how and when organizations integrate, and proposed
the interdependence of each organization’s employees can form the basis of an integrated
professional acumen to help achieve the goal. Managers and stakeholders must commit to
creating a positive work environment to foster wealth creation and embrace two different
cultures in unity after a merger (Chatzkel & Ng, 2013). Even if two disparate firms
successfully integrate, the resulting entity could still perform poorly (Lin, 2014).
Managers of non-performing organizations must realize how to effectively
implement organizational structure, create value, and facilitate wealth creation (Almeida
et al., 2012). Through seamless integration facilitated by culture involvement, M&As can
improve organizational performance and increase firm value. A failed M&A integration
transaction process reduces the acquired firm’s effectiveness, thereby creating a barrier to
market entry (García-Morales et al., 2012). Moreover, the effects of integration may
hinder the firm’s success if implemented ineffectively.
Many other factors depending on culture, managerial vision, and integration
strategy (Rachman-Moore et al., 2012) affect a firm’s future performance. An acquired
company changes during the M&A process (Dauber, 2012) as an outcome of the act of
integration, organizational culture, and how managers implement processes before,
during, and after the M&A event. The changes may involve integrating the company
scope, cultures, structures, and customer interaction methods (Bock, Gann, George, &
Opsahl, 2012). Managers and stakeholders may develop different ideas about future
performance related to culture integration (Dauber, 2012) as an outcome of the merger.
Complexity increases the likelihood of integration failure if not supported by human
capital (Björkman, Sarala, Stahl, & Vaara, 2012). Moreover, managers experience
difficulties in responding to employee negativity (e.g., perceptions of cultural
degradation), another factor that can also limit an M&As success.
Managers and stakeholders must address culture involvement issues. For example,
managers must cope with existing cultural differences between employees of merging
firms. Globalization has prompted businesses to change the basic trading processes to
remain competitive in the marketplace (Bond & O’Byrne, 2014). Although globalization
presents opportunities, differences among people of different cultures may impede
integration. For instance, Bond and O’Byrne (2014) indicated managers must overcome
culture distance to facilitate efficient entry into a new market, and must consider culture
distance to successfully implement an M&A (Yildiz, 2014). Global M&As require
comprehensive understanding and instruction, both to create wealth for stakeholders and
to harmonize interactions and cooperation between employees from different cultures
(Ahammad, Glaister, Liu, & Tarba, 2014).
Thus, global M&As force international cultures to cultivate productive
relationships and a respectful tolerance of each other. Effective management practices
enable multiculturalism and international acquisitions (Baker & Niederman, 2014).
Cultural similarities or differences do not themselves cause declines in organizational
performance (Allio, 2013), as these often result from managerial failure to integrate
different visions and knowledge pools.
Managers must focus on the process through which different individuals and
organizations can integrate to enable cultural involvement and to apply solutions to M&A
related issues. Baker and Niederman (2014) identified cultural involvement related to
organizational innovation processes to retain the best employees and address the
professional aspects of the organizational value of an M&A. To avoid negative
postmerger performance, human resource departments have used different approaches to
cope with the difficulties of multiculturalism.
Human resource departments seeking to mitigate employee reluctance to embrace
organizational change should adopt successful guidance and innovation practices from
past M&As and insist on high performance standards for the integration despite
difficulties with collaboration (Bond & O’Byrne, 2014). The structure and processes of a
human resource department reflects the organization’s strategic approach to generating
wealth and innovation. Effective human resource departments can help develop a culture
within a firm with employees’ involvement and pride in sharing.
Multicultural achievements during the integration process facilitate knowledge
transfer among the different cultures coming together during M&As. Bharwani and Butt
(2012) evaluated strategies to manage integration and the human resources department,
indicating certain organizational functions (e.g., capacity to transfer skills) are significant
predictors of future success. Bharwani et al. (2012) also found managers’ capacity to
facilitate knowledge transfer reflects the organization’s ability to generate wealth for
stakeholders. As such, acquiring new skills and effectively transferring knowledge
between employees of merging firms can ease the transition process during an M&A.
The cultural integration process may yield the skills to create growth. Cultural
involvement and integration facilitates knowledge transfer geared towards diversifying
the internal human resource components of an organization (Lin, 2014). Merged firms’
interdependence is critical following the merger. Therefore, opportunities for technical
and cultural learning might significantly and positively affect skill-building and other
organizational outcomes. Managers and stakeholders who ignore new business trends
across cultural borders risk poor organizational performance and limited wealth
generation (Lin, 2014).
The effects of M&As on stakeholders and managers extend beyond the
boardroom. Managers must address several organizational challenges to ensure a
successful outcome from a merger (Coombs & Holladay, 2012). Lessons learned from
past sub-par M&As are the most useful tools to address these challenges. In essence,
Coombs and Holladay (2012) indicated how managers can learn to improve M&A
outcomes based on prior successes and failures.
Dauber (2012) indicated how an integration manager could effectively describe
why some M&A attempts succeed while others fail by introducing strategic management
teams. Integration managers can thus steer firms toward successful M&As. Managers
with diversified skill sets are useful for effectively integrating two firms and guiding a
merged organization toward positive financial outcomes. Businesses must safeguard
organizational secrets and alliances to retain their competitive advantage in their markets.
Ahammad and Glaister (2013) discussed managerial challenges related to
premerger alliances. Cultivating alliances through acquisition or integration represents a
significant organizational step, as these alliances may directly benefit the entire
organization. Two merging firms can benefit from selecting alliance partners and
developing economies of scale. However, alliances have some negative outcomes, as data
related to merger performance is difficult to catalog or verify (Ahammad & Glaister,
2013).
In their analysis of acquisitions, Angwin and Meadows (2015) found a number of
relationships between the merged firms' future performance and human capital. For
example, employee skills, culture, geographic location, and work environment affect the
integration process as well as the merged organization’s economic performance.
Managers must communicate clearly, promote innovation, manage human capital, and
create economic wealth while working to create future positive performance for the
merged firms.
Culture
Enterprise resource planning promotes a focus on fundamental changes and
influencing an organization’s culture, governance structure, and environmental
achievements (Du & Zhao, 2012). Ultimately, managers seek to create wealth by
complying with internal controls, such as the organizational culture and issues in the
external environment (Du & Zhao, 2012). Stakeholders expect managers to emphasize
and promote innovation and adjust business activities to positively influence the
organization. Du and Zhao (2012) and Ndofor, Sirmon, and Trahms (2013) supported
organizational success from a focus an organization's turnaround with findings suggesting
organizational culture, vertical management support systems, and flexible training as
elements to address unforeseen events affecting mergers.
An organization’s internal and external environments significantly influence
performance (Mundy & Owen, 2013). For instance, an organization may gradually
improve when managers and stakeholders recognize the firm’s internal culture (Mundy &
Owen, 2013). Managers are also motivated to innovate production activities to gain
competitive advantage over competitors (Mundy & Owen, 2013). Moreover, managers
can develop an organizational culture mostly emphasizing transparency and honesty to
improve organizational performance with respect to compliance and reporting.
Leekha, Chhabra, and Sharma (2014) described the effects of managerial attempts
to overcome cultural barriers on the organization and found evidence for how managers
and stakeholders address culture during and after M&As significantly improves
organizational performance. The firm’s ability to retain highly qualified individuals also
affects organizational performance (Ahammad et al., 2014).
Similarly, successful organizations have effective managerial leaders with a vision
and skills to recruit highly skilled employees. These managers seek to cultivate an
environment suitable for capturing and utilizing employee qualities representative of the
firm to create wealth (O’Cass & Sok, 2013). The firm’s environment, employee skills,
and managerial passion contribute to organizational performance, and may therefore
translate to M&A successes (Kleanthis, Nicolaidis, & Tsirikas, 2014; Leekha Chhabra, &
Sharma, 2014). As such, managers and stakeholders should simultaneously embrace
changes in the market and recruit individuals who fit the organization’s culture while
developing and implementing the organization’s plans for innovation.
M&A processes should influence organizational performance and continuity
because managers’ skills in identifying industrial cycles of opportunities improve. For
example, an industry’s agglomeration eliminates geographic borders to improve
employee performance (Duanmu, 2014). The literature in this domain emphasizes
improving organizational performance, expanding employees’ skill sets, preserving the
environment, exploring profitable markets, and using managerial talent. Moreover, the
increasingly global environment facilitates international trade (Duanmu, 2014). Human
resource departments are vital to developing this capacity (Duanmu, 2014). Managers
expedite growth and improve performance by eliminating language and cultural barriers
between companies or employees.
Industrial globalization introduces a number of cross-border challenges to
consider when planning a merger. One of the most significant relates to diversified
intercontinental demographics. During and after an M&A, managers must consider the
demographic and geographic factors affecting an employee’s skills and organizational fit
with the culture (Colombo & Turati, 2012). Managers and human resource recruiters
should seek professional talent capable of building the employee pool to balance the
organization’s current and future cultural elements (Al Ariss, Cascio, & Paauwe, 2014).
Recruiting employees with a focus on diversity may indicate strong leadership qualities
among managers within an organization.
U.S.-based businesses entering foreign markets illustrate the extent to which
merging firms may differ. However, organizational objectives tend to motivate managers
in emerging countries targeting American firms for mergers (Allio, 2013). American
firms often seek to invest in distinct cultures, regardless of their experience with those
cultures. Despite this inclination, M&A performance related to cultural diversity can
negatively affect managers’ abilities to create wealth for their firms.
Dauber (2012) recognized organizational culture as an important component of
organizational wealth creation. Although corporate managers and stakeholders treat
organizational culture as an individual-level variable, organizational growth requires a
broader consideration of the term. Dauber (2012) further explained how future
performance implications relate to managerial strategies to address organizational culture
in the process of wealth creation, including providing generous wages, training to develop
exceptional skills and innovation, and activities to address the organization’s social
responsibility.
M&A failures disappoint investors and may require active participation in
activities to promote a unified organizational culture. Kehoe and Wright (2013) studied
the behavior of two different groups of employees in the same organization, and found
organizational change to be inevitable, regardless of prior success. When effectively
utilized in the context of organizational growth and development, employees’ experiences
and relationships may promote organizational wealth.
Organizational responsibilities often relate to finance, the environment, and
managing others. Taken together, these responsibilities contribute to organizational value
and returns to investors (Lee, Paek, Song, & Xiao, 2013). Managers must often be
flexible in their strategies to realize these objectives, as M&A failures often prompt
stakeholders and managers to design new methods to create wealth. Activities related to
social responsibility help cultivate shared perspectives among stakeholders in terms of the
appropriate size of investments and reductions in existing free cash flows (Lee et al.,
2013).
From an organizational culture perspective, performance represents one
component of a firm’s survival dictating whether managers consider cultural integration
as a strategy. Current organizational performance may affect future performance by
attracting quality employees with stronger skill sets and motivations for organizational
change (Dauber, 2012). Rompho and Siengthai (2012) found a positive work
environment and effective knowledge transfer to new employees contribute to
organizational performance.
Managerial and stakeholder involvement in the M&A process can facilitate
intraorganizational knowledge and information transfer. The degree to which a firm
possesses diverse information sources affects an organization’s ability to innovate and
operate in a global environment. Collings, Scullion, and Vaiman (2012) recognized how,
in their attempts to create organizational capital, companies benefit from diverse types of
information before and after a merger. Specifically, Collings et al. (2012) described how
information related to employee leverage, location, age, and gender can create
organizational capital.
Although open communication and diversity in human capital afford
organizations a number of advantages, effective knowledge transfer mechanisms are
equally important. Chreim (2014) found two key factors affecting how employees bargain
for wages: job advancement and support for their families. These factors help managers
anticipate and formulate the information related to wages, job advancement, and
employee vested interests within the organization. In addition, managerial consideration
for and handling of organizational culture may contribute to either successful M&A
practices or reduced stakeholder wealth. The key to developing this consideration is clear
communication with employees in terms of expectations related to organizational
performance while developing transparent interaction practices with employees (Chreim,
2014).
Although clear communication can increase the likelihood of an M&A’s success,
researchers have some concerns as to whether M&A is an efficient strategy in terms of
resource allocations to create value for managers and stakeholders. Agency problems may
arise when a CEO’s decisions about the company direction do not align with the values
championed by the firm’s stakeholders (Mingione, 2015). Although cash compensation
for CEOs does not impose additional costs on the firm (Mingione, 2015), if CEOs’
attitudes sufficiently diverge from those of corporate stakeholders, preexisting cash
resources can decline and degrade current and future investments. Through M&As,
employees seek to resolve issues about how to avoid negative outcomes for the newly
acquired firm (Baker & Niederman, 2014).
Baker and Niederman (2014) also illustrated how, during and after M&As, many
employees experience uncertainty regarding the future with respect to wage increases or
decreases, career advancement, and family security. To maintain organizational harmony
in this period of transition, managers and directors should combine efforts to mitigate the
negative effects associated with employees’ perceptions of potential gains or losses.
Employees determine the organizations’ wealth creation process, culture
involvement, and performance and thus the firm's future value. An M&A’s success
depends largely on managerial ability (Fabel & Kolmar, 2012). Given the importance of
employee talent in a successful merger implementation, stakeholders sometimes accept
less compensation to recruit and retain talented employees, perceiving the long-term
gains from generating profit as offsetting offsets the short-term loss from lower
compensation. Fabel and Kolmar (2012) also found managerial skills contribute to
improving the quality of an organization’s output as well as future attempts at mergers
with other companies.
Failure to implement a merger or perform an acquisition may further harm the
business. In contrast, successfully acquiring another firm can provide stakeholders with
more economic resources (Fabel & Kolmar, 2012) to offer appropriate compensation
packages to talented employees. Fabel and Kolmar (2012) further suggested increasing
compensation for managers to improve post-merger organizational performance (Fabel &
Kolmar, 2012).
Activities related to corporate social responsibility could improve a firm’s image
and social standing in the surrounding community (Lee et al., 2013). However, this is also
true at the individual level, as managers and stakeholders who perform their social duties
can help an organization generate economic resources. Although investing in activities
related to corporate social responsibility is an important component of wealth generation,
managers and stakeholders often differ in their perceptions of the degree to which value
generated from these investments is a real return on those investments (Lee et al., 2013).
Creating value from cross-border M&As optimize managerial strategy. Peng, Ren,
Sun, and Yan (2012) established cross-border M&A efforts typically encounter negligible
barriers to market entry. In contrast, regulatory agencies and government activities
significantly impede market entry, particularly in domestic markets. Hence, a merger’s
success may depend to the degree to which the host country regulates the merging
organizations in terms of value generation and geographic diversification (Peng et al.,
2012).
Financial markets incite multiple (and sometimes contradictory) effects on firm’s
performance and their ability to create economic resources. Collings et al. (2012) found
how managers’ strategic efforts to create wealth through organizational performance did
not have access to a talented pool of potential employees. As a result, both domestic and
foreign governments face a shortage of qualified talent related to M&As. To overcome
this shortage, managers have turned to local education centers to recruit personnel with
the skills to engage in M&As effectively. Moreover, by collaborating with local
education centers, organizations can fulfill a social responsibility by cultivating a local
pool of qualified talent for the business sector.
Furthermore, local culture can influence how two organizations create wealth.
Integrating knowledge with a consideration of culture and values creates economic
growth (Almeida et al., 2012). Moreover, the firm’s size and degree of managerial
turnover can serve as predictors of employee retention, which in turn relates to a firm’s
financial market performance, regardless of whether the firm acquires another firm.
A comprehensive knowledge of mergers, acquisitions, and their respective effects
on stakeholders and managers can produce actionable guidance for business leaders.
García-Morales et al. (2012) indicated the value of supporting the dynamics of M&As in
improving organizational performance and creating value, and found how understanding
M&As might yield efficiency, thereby giving a firm an advantage over rivals.
Furthermore, a manager’s efforts to grow the firm can face challenges associated
with government regulations, employees (e.g., a bad work environment, lack of
knowledge), and insurance premiums (García-Morales et al., 2012). These constraints
play a key role in organizational decisions related to continuing or ending the business.
Managers and stakeholders primarily seek to produce capital, and when certain conditions
prevent value creation, the business’s operations fail. If the organization is incapable of
producing value, it may be economically prudent to cease business operations.
M&As illustrate competitive processes designed to increase profits and secure
larger market shares. Dykes, Haleblian, Kolev, and McNamara (2012) found how the
premium payment during and after the M&A bidding processes relates to organizational
culture in terms of risk appetite. The tendency to pay large premiums during the bidding
process may maximize a bidding advantage over competitors in the same market, but
poses a notable business risk. A manager’s ideas about market competition and
performance may not reflect M&A-related trends. Instead, managers face a number of
unique challenges related to current and future market trends during and after M&As. As
such, there are never any guarantees an M&A will produce value (Alalwan &
Weistroffer, 2012).
Craig, Dibrell, Neubaum, and Van Gils (2014) found how financing affects
stakeholders, managers, and firm value. Debt financing, for example, plays an integral
role in the acquisition process. If the merging firms involve a bank in the M&A process,
investors tend to believe the stock value reflects the current market value. Managers
believed angel equity investors possessed the expertise to properly evaluate performance
and create wealth for a firm while simultaneously protecting members’ investments. This
belief was ultimately false, as forecasters cannot guarantee market value (Kim, 2013).
Furthermore, Balcaen et al. (2012) discussed how some strategies managers and
stakeholders employ to mitigate negative organizational performance serve to analyze
information from the stock market and control internal and external cash flow. Balcaen et
al. (2012) showed how the firm’s relative advantages reflect the amount of cash the firm
had on hand and could serve as a proxy for a firm’s promise as a potential acquisition
target (Balcaen et al., 2012). Large firms explore fundamentals as the market fluctuates,
which gives them the ability to retain large amounts of cash and survive corporate
takeovers.
Many leaders rely on their own experiences to make relevant decisions. Coombs
and Holladay (2012) illustrated how organizations experiencing unmitigated failures tend
to use those experiences to bring about positive changes to create a successful firm. The
authors further suggested how managers’ use of experience as a tool to guide corporate
strategy represents a diverse and comprehensible narrative. For firms, the same holds true
for learning from others’ successes. However, applying past lessons learned is not a
perfect process.
Factors other than value creation can motivate an M&A event. To illustrate one
possibility, Kantanen (2012) showed how desperation can motivate engagement in a
merger. Payments of exorbitant premiums create conflict between managers and
stakeholders related to free cash flow, making internal growth difficult. Organizations not
growing from within tend to overpay during a merger, thereby taking a large risk in
search of a solution to the organization’s problems (Degbey, 2015). Negative outcomes
associated with this risk include less resources and wealth creation due to a lack of
managerial expertise. When managerial experience with M&As assists in the negotiation
of the most lucrative deal, managers should consider the organization’s potential for
current and future internal growth (Degbey, 2015).
Desperation from managers and stakeholders reflects poor leadership within the
organization (Degbey, 2015). Leaders who control the disbursement of high premiums
for acquisitions can mitigate financial losses and improve the quality of future M&A
processes. There exist few benefits to preemptively improving an organization’s
performance through rash, urgent actions. Nevertheless, stakeholders often place
substantial pressure on managers to generate value, forcing managers into unwise
decisions (Degbey, 2015).
Additionally, managers must balance promoting brand recognition with future
growth and performance. Isberg, Pitta, and Saji (2013) found the acquisition, the acquired
company’s name, and associated brand provide the acquiring firm with useful tools to
conduct business. Because the company’s name may provide familiarity to paying
customers, managers should avoid alienating customers by changing the acquired firm's
name. Moreover, managers may consider changing the names of underperforming
companies to provide them with stronger brand images (Isberg et al., 2013).
By observing and drawing from past M&A successes, managers can acquire better
information about future mergers. Castaner, Souder, and Zaheer (2013) revealed
companies with prior alliances were more likely to emerge from subsequent M&As in a
position to grow than firms without prior alliances were. Stakeholders and managers
prefer mergers as a value creation method in firms with prior experience in M&As
(Castaner et al., 2013). Further, information flow was a critical factor for performing an
M&A in which the resulting corporation retains a competitive advantage over industry
rivals (Castaner et al., 2013).
For overseas subsidiaries and their activities, managers and other stakeholders are
primarily concerned about salient, proprietary information falling into competitors’
hands. Arthurs et al. (2012) illustrated how managers can safeguard capital resources by
providing managers with roles of unmitigated leadership and retaining subject area
experts. Managers of subsidiaries in overseas locations identified the challenges related to
acquiring resources and the host country’s pressure to share proprietary knowledge
hinders operational success (Denk et al., 2012). Furthermore, by allowing open
communication between management and employees, a company can cultivate
substantial intra-corporation trust. Positive relationships within the organization may
reduce the likelihood of organizational failure and resource losses.
When coping with waste associated with fraud and abuse of resources, managers
should limit stakeholders’ involvement if they cannot effectively contribute. Keating and
Keating (2013) found how, in many firms, contractors forfeit the right to negotiate in
return for a fixed commission. Furthermore, by offering contractors a fixed commission,
managers seek to reduce the effect of variable costs on cash flow, and to avoid cost
overruns and schedule delays (Keating & Keating, 2013).
There is a close relationship between the success of an M&A and the presence of
financial officers within firms (Cheng-Fei Tsai et al., 2013). Specifically, Cheng-Fei Tsai
et al. (2013) found how financial officers facilitate an understanding of the M&A process
for boards of directors, and assist shareholders in creating wealth and complying with
necessary regulations. Moreover, the degree to which a financial officer has experience
creating value is a key factor determining whether an M&A will succeed.
Firms in developed countries acquiring firms in underdeveloped countries
represent a new type of global market competition. Li and Zahra (2012) found how firms
in underdeveloped nations offer higher premiums than firms in developed countries do.
When engaging in cross-border acquisitions, the acquiring firm’s managers must
understand the national sentiment in the target firm’s country of operations. Purchasing
overpriced goods and services can substantially affect citizens of underdeveloped
countries sentiments towards the firm producing those goods or services (Li & Zahra,
2012). These sentiments, in turn, can affect the long-term profitability of the company
from the developed nation.
Challenges likely emerge once management personnel have successfully
developed a vision for the organization’s future and integrated culture. Baker and
Niederman (2014) showed how employees’ knowledge of the workplace culture dictates
their organizational behavior. Specifically, employees form expectations of and
commitments to their work-related responsibilities. The commitments may translate into
increased feelings of loyalty to their employers. Typically, employees develop loyalty to
their company during and after the integration process. To facilitate this process,
managers should identify and address employee concerns during and after the merger to
ensure the firm continues to perform well (Baker & Niederman, 2014).
As companies become more globally recognized, appreciating and
accommodating the needs of different cultures becomes essential. Gyrd-Jones and
Kornum (2013) illustrated how developing cross-national diplomacy between global
businesses develops trust, and cultural synergy can facilitate this accommodation.
Managerial strategies for a corporate vision related to the successful integration of foreign
companies helps to eliminate gaps in comprehension caused by language barriers
(Gyrd-Jones & Kornum, 2013).
Furthermore, managers must appreciate the organization’s cultural codes
representing the firm’s main philosophy about communication with internal and external
cultures. M&As characterized by basic knowledge of an organization’s cultural codes
might facilitate the integration of the two companies. In contrast, an unfamiliar code can
generate organizational conflicts leading to miscommunication and loss of information
through language barriers. Project managers’ experiences may provide them with the
expertise needed to simplify problems related to language and foster organizational
integration. To secure positions of greater merit within the newly structured organization,
employees must contribute particular skills to benefit the organization financially
(Gouvea da Costa et al., 2013). Although creating wealth is the primary goal of most
M&As, the acquiring firm may break communication channels by unexpectedly
eliminating jobs within the organization. The remaining employees may then develop
feelings of resentment toward the company (Gouvea da Costa et al., 2013).
An M&A structure is a series of guidelines for managers to produce the best
results for all parties involved in an M&A, though the newly created corporation’s
structure can pose a risk to all parties concerned. Tarba and Weber (2012) discussed how
a firm’s purchasing motives, managers’ due diligence, and negotiation and integration
strategies inform the organization’s structure. In their evaluation of company structure
and multiculturalism within global firms, Tarba and Weber (2012) found appreciating
organizational culture and diversity might increase the firm’s transparency following the
merger.
Despite the extensive literature on M&As, research continues to emerge
demonstrating employees’ effects on organizational performance. Chreim (2014)
explored the effects of employee performance, emotions, attitudes, and behaviors on
organizational outcomes, a unique perspective as prior research largely ignored emotions,
attitudes, and behaviors during and after M&A integrations. Chreim (2014) discussed
how managers of multicultural companies considered individual employee performance
in organizational decision-making (Chreim, 2014).
Another line of research explored how the relationship between employers and
employees serves as an indicator of organizational performance. For example, Grace and
King (2012) treated employee and employer commitment to an organization as promoting
a good working environment. In addition, managers must identify and recognize
differences associated with employee generation so they can apply the lessons learnt to
future M&A efforts (Grace & King, 2012).
The Denison model of cultural leadership is a method to consider the concept of
cultural involvement, as managers and stakeholders have advocated. The model consists
of four constructs: adaptability, consistency, involvement, and mission (Denison et al.,
2012). These constructs provide a general understanding of organizational culture, though
this study specifically focuses on cultural involvement. Culture involvement improves the
comprehension of organizational culture change and performance (Denison et al., 2012;
Gupta & Kumar, 2013).
Lemétayer and Sheffield (2013) argued culture may serve as a definitive factor in
predicting a firm’s success, so managerial vision must incorporate cultural involvement to
create organizational value for stakeholders. Successful culture integration and
involvement breeds a common language of openness, communication, and cooperation
among employees and customers. In this way, managerial innovation and success may
correspond with the attributes identified in the Denison model (Lemétayer & Sheffield,
2013).
Transition
M&As offer strategic opportunities to create company wealth. Although M&As
often fall short of stakeholder expectations, M&As can also fail in terms of organizational
continuity and sustainability. M&A failure rates cause significant concern in both foreign
and domestic markets. The purpose of this chapter was to review M&A related literature
and analyze past M&A failures.
In Section 2, I present a detailed explanation of the purpose of the study, role of
the researcher, and participant selection. Additionally, in Section 2 I elaborate on the
research method, research design, population and sampling, and ethical concerns. Section
3 presents the findings and concludes with recommendations for future research.
Section 2: The Project
With this qualitative questionnaire study, I aimed to determine what skills
managers needed in order to understand the effects of management and cultural
integration on M&A failures in the United States. During mergers, stakeholders must
consider how integrating the merging firms’ cultures can ensure the new organization’s
future growth. I adopted a qualitative research methodology because it allowed
participants to describe their experiences. In particular, I used questionnaire studies to
analyze individuals’ experiences and opinions (Rowley, 2012). Thus, the results obtained
from the data collection methods presented herein and analyzed through qualitative
approaches may improve our understanding of M&As, particularly culture involvement
and integration.
Purpose Statement
The purpose of this qualitative questionnaire study was to explore managers'
cultural integration strategies during a M&A. The questionnaire explored participants’
experiences as they relate to the Denison model of leadership and cultural integration in
M&As. The geographical location of the study was in Polk County in the U.S. state of
Texas. In addition to exploring cultural integration strategies, this study addressed
organizational best practices for the implementation, cultural involvement, and
integration of future M&As.
From the FluidSurveys/Survey Monkey database, I selected 94 managers with
prior involvement in M&A activity as participants in this qualitative questionnaire
survey. I worked from the assumption that managers with a comprehensive vision of
organizational integration must have experience communicating with employees during
and after M&As, and that communicating knowledge, values, and contributions may
influence social change (Kukko, 2013). Determining the best management strategies and
practices might help mitigate many culture integration issues during M&As and
positively impact the merger process.
Role of the Researcher
In this study, I intended to qualitatively explore ways to improve the M&A
process by analyzing and interpreting the gathered data (Elo, Halinen, & Törnroos, 2013).
Translating participants’ experiences into analyzable narratives ensured consistency
(Coupland & Cunliffe, 2012). I used open-ended questions to collect data on participants’
experiences according to (Chetwynd, Donelan, Kear, & Williams, 2012) and M&A
practices by (Dikova & Rao Sahib, 2013). Open-ended questions must be flexible and
transparent in order to capture participants’ experiences (Radcliffe, 2013) and ensure
unbiased data analysis (Chambers & Kim, 2012; Fowler, 2013). Specifically, I used an
adapted version of the Denison organizational and cultural model questionnaire to collect
data and experiences from 94 participants who had participated in M&A transactions.
In my role, I recognized the differences between a structured questionnaire used in
quantitative research and an open-ended questionnaire used for qualitative studies.
Chetty, Partanen, Rasmussen, and Servais (2014) found that ideas and representative
energies typically lead to the development of a qualitative study. I aimed to maintain
transparency while interpreting the data, and used data analysis only to clarify the end
users’ opinions of the role of culture in M&A activities. The research questions require
open-ended questions and flexibility to capture participant experiences (Radcliffe, 2013).
My role entailed applying ethical principles and guidelines to protect the human
subjects of this research. I also worked to eliminate biases from this questionnaire study
by using on questionnaire study. Prior to initiating research, I had no prior experience of
M&As, and the study participants and their places of employment and geographic
locations remained anonymous. Anonymity was maintained by using computer generated
ID numbers to identify each participant. Finally, my role also involves mapping the
events leading to the findings for the reader to understand, reflect, and follow the story
(Kuo, Lien, Pauleen, & Wang, 2014).
Participants
The participant pool consisted of 94 general business professionals with insight
into M&As working in the manufacturing and technology industries in Polk County in
the state of Texas. The Cint.com database list over 400 potential respondents living in the
State of Texas (company employee, personal conversation, 2014), though for proprietary
reasons, the exact figure is not available. The final pool of participants consisted of 46
females (48%) and 49 males (52%) with both pre- and post-M&A experience. The
participants represented several managerial levels in their respective organizations.
To meet the goals of this study, I encouraged and expected participants to share
their individual experiences as managers and employees, and to provide detailed views on
M&A activities based on their experiences of actual M&A events (i.e., mergers,
takeovers, and changes in business structure involving two or more firms). Moreover, I
selected participants randomly to maintain anonymity in their names, places of
employment, and positions in the organization.
The trustworthiness of qualitative research depends on the credibility,
dependability, confirmability, transferability, and authenticity of the study (Elo et al.,
2014). The researcher can enhance these elements using a sample size calculator to
calculate the number of participants required to generalize the results for a given
population. Confidence level is another measure of rigor in qualitative research (Kane &
Rosas, 2012), with an optimum level of 95% for such research studies (Camfield &
Palmer-Jones, 2013).
I selected potential participants from the FluidSurveys/Survey Monkey database.
FluidSurveys/Survey Monkey contacts participants from the audience pool while
preserving their anonymity, even from the researcher, in order to protect their ethical
rights (Kaminski, Olsson, Rönkkö, Stefan, & Svensson, 2012). The invitation email
contained a link from FluidSurveys/Survey Monkey directing the recipient to my study’s
questionnaire. All email invitations implied the participant’s qualification for the study,
and respondents could acknowledge receipt of the email by completing the questionnaire.
The questionnaire instructions include the conditions for participation. Furthermore,
Cloud, by Carbonite.com, safeguards the data collected for 5 years after the completion of
the study. Participants must agree to these data collection conditions to complete the
questionnaire. This qualitative methodology is in line with Cheung, Kong, and Song’s
(2012) suggested approach, and resulted in an average response rate of 70% for emailed
questionnaires.
I selected the first 94 respondents as final participants based on a
surveysystem.com statistical sample size calculator to determine the sample size for this
study (Fu et al., 2012; Lai & Peng, 2012; O’Reilly & Parker, 2013). Sample size
calculations provide important measurements while facilitating the proof, authentication,
and reproduction of current and future studies (Abraham et al., 2012). Sample size
calculations may vary for the interpretation of small and large sample sizes (Abraham et
al., 2012). Too small of a sample size may yield inappropriate results (Abraham et al.,
2012), and inappropriate interpretation of the data during research leads to the potential
replication of inappropriate results in future studies (Abraham et al., 2012). Too large of a
sample size may affect the research by introducing biases (Abraham et al., 2012). An
appropriate sample size supplies the research result with reliability and credibility
(Abraham et al., 2012). Walden University’s standards specify an ideal sample size as 20
participants for qualitative phenomenological studies, while the literature suggests a
minimum sample size of 15 for qualitative research and 25 for small projects (Lai &
Peng, 2012). Both Fowler (2013) and Lai and Peng (2012) noted the importance of
sample size in achieving representative data collection in qualitative research.
Research Method and Design
In this section on methodology, I begin with a brief description of the purpose for
the study. This also includes my rationale for selecting this methodology over
quantitative and mixed methods. The qualitative questionnaire design facilitated pattern
and theme coding for analysis. This section concludes with the description of the
qualitative questionnaire methodology and its implications for the study.
Research Method
For this study, I used a qualitative method to explore the effects of cultural
involvement on M&As. Although quantitative approaches are effective for validating
theories by using statistical measures, a qualitative questionnaire methodology is more
appropriate for gathering data to determine best practices for M&As, and for capturing
participants’ experiences (Petty et al., 2012; Rowley, 2012). O’Boyle, Pollack, and
Rutherford (2012) have marked significant differences in the features of qualitative and
quantitative research. For example, data and sample collection are independent of the
study findings in qualitative research (Ioannidis et al., 2014), while quantitative methods
use closed-ended questions. However, time and resource constraints often prevent an
approach using a combination of both methods, as was the case with my study. Given this
limitation, I determined that the qualitative questionnaire method was suitable for this
study because of my need to capture participants’ diverse M&A experiences.
Research Design
The research design is fundamental to qualitative research because it enables
pattern identification during data analysis, and because the design implementation
becomes the focus of the study (Fowler, 2013). I created the research design to improve
the inferences from this study’s findings. Thus, based on participants’ experiences, the
opinions of participants, and my comprehension, the qualitative research design for this
study produced useful results.
There are six fundamental qualitative research design frameworks: narrative research,
grounded theory, phenomenology, ethnography, questionnaire study, and case study (Petty et
al., 2012). In this study, I used a questionnaire to explore the influence of cultural
involvement in M&A failures. By comparison, I found the other qualitative research design
frameworks to be unsuitable for my needs. Ethnography involves the study of an entire
cultural group (Meyer, Munzner, & Sedlmair, 2012), while grounded theory entails multiple
levels of data collection of participants’ views but does not consider their experiences
(Meyer et al., 2012). Similarly, narrative research involves storytelling by one or two
participants (Petty et al., 2012), while the purpose of a case study is to gather information
related to a single event (Bilhuber Galli & Müller-Stewens, 2012). By contrast, the
questionnaire-based framework I employed in this study was able to capture participants’
experiences, allowing for in-depth data evaluation and analysis.
A questionnaire study using email responses is appropriate for extracting data
from participants with diverse backgrounds and locations and without the need for further
inquiry (Angwin & Meadows, 2015). A case study design, by contrast, requires
semistructured questions that often require follow-up. My questionnaire study provided
me with sufficient data to capture and comprehend participants’ experiences in order to
determine the effects of M&A failures and culture integration (Angwin & Meadows,
2015). For example, the objective was to determine the mechanics of cultural
involvement and integration of the merging organizations (Angwin & Meadows, 2015), a
crucial part of studying business mergers. The questionnaire study thus provided a view
of M&A failures through the lens of cultural involvement and integration based on the
experiences of the 94 study subjects. The sample size of a qualitative questionnaire study
must be statistically valid. Saturation does not apply to a qualitative questionnaire using a
statistically valid sample. If needed, the researcher can reissue all or parts of a survey
questionnaire to achieve a statistically valid sample size. A questionnaire with openended
questions and a sample size of 94 participants should provide sufficiently unbiased data
(Chambers & Kim, 2012).
Population and Sampling
The sample size of a study serves as a measure of the findings (Lai & Peng, 2012).
A random selection of participants with a 95% confidence level requires a sample size of
94 participants from a population of 400 (Goodie, Hall, Wu, & Young, 2012). I used data
from the U. S. Census Bureau database (2010), listings 4,518 companies in Polk County
Texas to determine the sample size of the population. Population sampling yields
knowledgeable, reliable, and representative participants (Li & Siuly, 2014). Furthermore,
statistical sampling enables participants to share their experiences, in this case,
participation in M&A activities (Baker & Niederman, 2014), and the representation of
multiple sectors of domestic industry in the sample presents an accurate picture of the
success or failure of M&A activities.
The email invitations sent to potential participants contain a detailed consent form,
guarantee of anonymity, and a list of eligibility requirements for participation in the study
(see the Ethical Research section for more details) (Kaminski et al., 2012). Each
participant was required to agree to the terms and conditions stated in the invitation
email, including those related to privacy, anonymity, and eligibility (Betty Pfefferbaum et
al., 2012).
Participants remained anonymous throughout the process, with no disclosure of
personal names, company names, or industries of origin. Because I contacted all potential
participants through the audience pool at FluidSurveys/Survey Monkey in collaboration
with Cint.com/solutions/access-pro/, my approach assured participant anonymity.
Furthermore, the data in this study refers to participants as P1, P2, P3, and so on to avoid
revealing their names (Patino, Pitta, & Quinones, 2012). I regard the information
collected from consenting participants as personal; therefore, anonymity was a significant
concern.
When the collected data ceases to offer new insights into the main topic of study,
the researcher must then analyze the data already collected. For instance, the number of
participants given the open-ended questions during the study may determine the sample
size (Lai & Peng, 2012). Similarly, O’Boyle et al. (2012) have noted the correlation
between the sample size and impact when the sample size may be statistically significant
in other research findings.
I avoided introducing personal opinions into the sample size to prevent systematic
bias. A qualitative scholar has a dynamic and compliant nature and needs to avoid bias by
preparing an objective questionnaire to discover new information. In particular,
questionnaires containing open-ended questions are adaptable to diverse study
populations (O’Reilly & Parker, 2013). Additionally, participants’ records of events may
influence the results in the context of answering the research question (O’Boyle et al.,
2012). Because collecting qualitative data may create knowledge (O’Reilly & Parker,
2013), the population size of a qualitative study may improve our understanding of
M&As, as demonstrated by the Denison questionnaire instrument used in 2012 in the
United States (Denison et al., 2012).
Ethical Research
In this study I adhered to all ethical research guidelines and standards (Choi,
Chun, Kim, & Shin, 2013). Ethical scholars safeguard their data to explain the value
associated with an event or study (Camfield & Palmer-Jones, 2013), and should have
relevance in terms of findings in the literature to allow replication. In particular, I
recorded participants’ thoughts and opinions related to their experiences of M&A events.
Moreover, because I used an email-based questionnaire, I acknowledge the Internet as a
part of most cultures internationally, including the United States, thus presenting
challenges in terms of data access.
Researchers must take a flexible approach to secure participants' permission when
collecting data (Bishop & Neale, 2012). The questionnaire study mandated consent from
all participants before participation in the study. All participants had to complete the
demographic form (Appendix B) and agree to the conditions in order to participate
(Appendix C). The information collected remains confidential for 5 years, as specified in
the consent form. Moreover, participants’ contribution and involvement are commitments
without reservation, which they may end at any time. In addition, I confirm and
revalidated the data collected by using the cultural involvement questionnaire.
The consent forms participants had to sign included a confidentiality assurance,
voluntary permission to participate in the study, and the option to leave the study at any
time (Carroll, Carter, McCaughey, Stride, & Turner, 2012). During the study,
participants’ permission to participate is stated and verified. I collected participants’ data
to explore ideas, themes, and patterns. Data collection is important and entails the correct
interpretation of participants’ recollections of their experiences as well as morally
responsible reporting.
Furthermore, as per the agreement, participants may remain anonymous and can
refuse to answer any questions or can end their participation at any time during the study.
No personal or professional information about the participants, who remain anonymous,
is available upon the termination of the study. Participants did not receive compensation
from the researcher or in-kind benefits to participate in this study.
This study required approval from the Institutional Review Board (IRB) at
Walden University, who safeguard participants’ interests by adhering to current
legislation (Childs et al., 2014). I am safeguarding the collected data for 5 years after the
completion of the study, in accordance with Walden University’s guidelines. After 5
years, I will shred and destroy all related material. Walden University follows
government guidelines related to protecting human subjects.
Electronic data security also reduces conservation issues and participants’
concerns in this regard (Lekkas & Zissis, 2012). Electronic data security options include
creating a backup system to protect data against loss and theft (Small, 2013). Only
approved personnel have access to the password-protected policies and procedures.
Additional precautionary controls include antivirus protections and firewall controls
(Childs et al., 2014). I will destroy the electronic data by permanently deleting the files
from the storage hardware and physically destroying any CDs 5 years after the
completion of the study.
Data Collection Instruments
Gathering qualitative data involves documented use of questionnaires and visual
materials, and requires due diligence to keep the research professionally organized (Tapio
& Varho, 2013). Data collection may provide dependable answers to research questions
(Beniston et al., 2012). Benoit-Bryan et al. (2012) stated how the data collected should be
free of errors if intended to contribute to the truth and reliability of the study. I used
openended questionnaires as the instrument to discover the role of culture in M&A
activities (see Appendix B). Davis, Flint, Gammelgaard, and Golicic (2012)
recommended five steps for collecting qualitative data: finding the participants’ site,
gaining access, engaging in statistical sampling, maintaining ethical reporting data,
collecting the data, and creating a record of the information. I did not require the first two
steps and focused instead on the last three, which are ideal for this questionnaire study.
Benoit-Bryan et al. (2012) argued that data collected through the Internet reduces
questionnaire errors and reflects the quality expected of a researcher based on the
methodology and an analysis of errors. Furthermore, by collecting data using an email
questionnaire, the data management process benefits from a decrease in errors during and
after collection and analysis (Merigó, Palacios Marqués, & Peris Ortiz, 2013).
FluidSurveys.com/Survey Monkey contacts participants from among audience pools and
preserves their anonymity, even from the researcher (Andriotis, 2009).
Pan (2010) received an average 31% response rate for mailed questionnaires. I
selected f participants from the FluidSurveys/Survey Monkey database, creating a pool
with different organizational levels including managers, supervisors, and employees, thus
incorporating diversity into the study and boosting its internal validity. Of the 100
invitees, I accepted the first 94 respondents as final participants, with valid answers used
to address the purpose and research questions. Ganster and Nesterkin (2012) highlighted
the importance of awareness biases in the data related to the estimations of “no response”
by assessing the sensitivity of multilevel results.
The Denison model of organizational culture increases the study’s external
validity and was appropriate because it captures participants’ experiences with M&A
activity. Companies worldwide use the Denison Organizational Culture and leadership
model solutions (Denison et al., 2012) to identify potential integration weaknesses before
and after an M&A transaction (Denison et al., 2012). The model also identifies culture as
a valued factor in M&A transactions (Gröschke et al., 2013). Appendix C contains a copy
of the permission to use the questionnaire instrument. The results from this study align
management strategy with human capital. Using the Denison model, leadership
organizations gain advice for managers regarding the skills to develop in order to
complete an M&A transaction successfully. The following questions from the modified
Denison Model Organizational and Cultural leadership fit an open-ended online
questionnaire format (see Appendix A).
1. What is the most difficult barrier while communicating as a manager with
your colleagues at the firm?
2. What are your experiences with your colleagues at the management level?
3. What is your understanding as a participating manager of how a merger
should work?
4. What did management communicate internally about company goals and
objectives during the M&A?
5. How do you believe managing the company effectively at the management
level played a part in the M&A?
What leadership goals were ambitious and realistic in your experience as a
manager?
Data Collection Technique
I used data collection technique that provided me with the ability to select
participants with exposure to the research topic, and choose the sites and organizations
for this questionnaire study (Corley et al., 2013). The selected participants have
experience with M&A transactions, drawn from a pool of potential respondents created
by FluidSurveys.com/Survey Monkey. Participants’ experiences related to M&A activity
further the knowledge of such transactions, and provide data to answer the main research
questions.
Data collection techniques using questionnaires may provide a different view on
the complexity of integration during an M&A process (Prescott, Shi, & Sun, 2012). A
pilot study to improve the reliability of the collection instrument by gathering comments
from respondents on the coherence and ease of use of the questionnaire did not improve
reliability (see Appendix B). I used this qualitative questionnaire study to explore the
Denison culture and leadership instrument that I modified into qualitative, open-ended
questions (see Appendix B & D). Respondents’ answers addressed the validity and
reliability of culture involvement in M&A transactions, the area of research interest
(Fujimura, Ito, & Tamiya, 2012).
Data Organization Technique
I stored the records related to this research in a hierarchical folder and in the
NVivo 10 system to reduce errors, track emerging data, and facilitate printing for a
reference. Strong electronic data security reduces participants’ concerns about
confidentiality. Alternatives included creating a backup system to protect, against loss
and theft. Policies and procedures mandate saving the data to a password-protected
system for 5 years. Moreover, safety controls include antivirus protection with firewall
controls (Childs et al., 2014).
Data Analysis
A content analysis provides thematic categories and themes for participants’ key
behaviors (observable actions), thoughts, opinions, or experiences as reflected in their
responses. I used the NVivo 10 system to qualitatively code and evaluate the data for
content analysis. I used open coding techniques to generate the general themes and
thematic categories, with each question creating a thematic category related to the
research questions. The NVivo 10.0 software package is a qualitative research tool to
manage data enabling flexibility during the data collection phase and simplifies the
formation of themes transferred through a participant’s story (Petty et al., 2012). The
software package provides tools, themes, and patterns for a line-by-line analysis of the
open-ended questionnaire responses by producing codes based on words, phrases,
sentences, and paragraphs; or by underlining the functional relationship between parts
and the entirety of the document. Moreover, this research approach yielded themes within
the study and the data analysis (Herstatt, Lee, Raasch, & Spaeth, 2013). The process
simplifies the methods and analysis of the qualitative questionnaire responses, while
providing data availability, decreasing bias, and reflecting the truth and reliability of the
source of origin (Lassalle, 2014).
Reliability and Validity
Lassalle (2014) demonstrated that encoding the data serves as the principal
measure of reliability and validity by verifying participants’ accounts of events in
qualitative research. Researchers must eliminate bias and assume responsibility for the
interpretation of the data collected (Rowley, 2012). The researcher is best able to develop
validity and reliability by demonstrating consistency in understanding the data as it was
collected (Boesch, Scholz, Schwaninger, & Weber, 2013).
Reliability
Reliability was appropriate for this study to secure the truth of the data (Ittner,
2014). Supporting words such as credibility, dependability, confirmability, transferability,
and authenticity describe the trustworthiness of qualitative research (Elo et al., 2014).
O’Reilly and Parker (2013) found that qualitative research method provides the
researcher with data to analyze. NVivo 10.0 provided consistency in processing data
collected for qualitative research (Mendes, Seidel, Sulayman, & Urquhart, 2012). Data
reliability relates to transparency because the reader needs all of the research information
(O’Reilly & Parker, 2012). Fussell, Gray, and Hunter (2014) found the importance of
data quality and reliability depends on synthesizing and extracting analysis returning the
most ambitious representation of the research.
Researchers are aware of the challenges involved in collecting valid and reliable
data requiring proper safeguards during research (Enosh, Stolovy, & Tzafrir, 2014). A
researcher develops theories based on assumptions extended to participants’ data and on
bias-free findings related to the research. The organizational culture model has reliability
as demonstrated by studies involving over 88,000 participants (Denison et al., 2012).
Flexible, open-ended questions fundamentally relate to the validity, credibility, and
trustworthiness of the research into the main research question (Corley et al., 2013).
Furthermore, data collection must remain free of bias to support the research (Corley et
al., 2013). Supporting the processes of research balance, action, and conceptual approach
may add meaning to the quality in a methodological research into M&A (Eriksson,
2013).
Validity
Enosh et al. (2014) explored the qualitative approach to validity to safeguard the
internal and external treatment of research data. Bragge, Gonzalez, and Piirainen (2012)
and Ioannidis et al. (2014) argued that validity should form the basis on which to judge
the trustworthiness of a study because the data encompasses collection from the
beginning to the end of the project.
Qualitative research offers flexibility in the questionnaire and insures against
biases resulting from communication with participants. Lee (2013) discussed how
researchers are the principal instrument safeguarding the validity of qualitative research
because of their ability to influence the study’s conduct, means to achieve goals, and
value. A qualitative research method requires validity so the end user may read and
recognize the instructions contained in the research. Guercini (2014) stated that validity
provides a greater insight into the data collected, the experience, and the research
perspective, with content validity in qualitative research measuring, supporting, and
providing information relevant to the research.
In terms of internal validity, Bragge et al. (2012) suggested that data collection
and interpretation might reflect the researcher’s ambiguity and subjectivity. The
researcher selects or excludes data subjectively, and is responsible for maintaining the
true value of the findings and their interpretation. Similarly, researchers cannot test for
the external validity of the findings or formulate the findings as theory. Collecting data
while interpreting, delivering, and forming the theme externally validates the research
(Merchant, 2012; Rowley, 2012). The validity of this qualitative questionnaire facilitated
flexibility while gathering data. FluidSurveys/Survey Monkey, Cint.com, and the
research participants may balance and offer a greater degree of information internally and
externally validating the research data (Bragge et al., 2012). The questionnaire as an
instrument in qualitative research ensured flexibility, captured the true value of the data,
and enabled a deeper investigation. Using a small sample limits the generalizability of the
study results, potentially limiting the validity of the interpretations, patterns, and themes
(Rehman & Roomi, 2012) I develop based on participants’ descriptions of their
experiences. Miller-Day, Pettigrew, and Pezalla (2012) suggested that researchers should
continue to summarize findings and recognize the importance of validating and
revalidating the value of a questionnaire during the data gathering process.
The validity of the Denison Organizational Culture Model tested positively in
more than 120 companies and more than 30 industries registered in the United States
(Denison et al., 2012). The Denison model of organizational culture and leadership
proves reliable and valid for knowledge management and organizational culture (Tarba &
Weber, 2012). Measures related to culture and culture's effects on organizations
worldwide prove the reliability and validity of the Denison model (Ataei & Sharifirad,
2012) with evidence of the model's central value and demonstrating efficacy in
organizations (Crona & Parker, 2012). The results from the pilot study further proved the
reliability and validity of the Denison instrument.
Transition and Summary
Section 2 described the qualitative method I used to determine factors influencing
the success and failure of M&A activity using responses from 94 participants. This study
adhered to Walden University’s ethical standards for participants and data collection,
organization, and analysis, and includes methods to ensure reliability and validity in the
results. Furthermore, the strength of the analysis and the findings of in this study
facilitated insights and overcome skepticism related to maintaining objectivity and
drawing conclusions about the role of culture in M&A transactions. Section 3 discusses
the findings related to the effects on stakeholders during an M&A process.
Section 3: Application to Professional Practice and Implications for Change
Introduction
The purpose of this qualitative questionnaire study was to explore managers'
strategies for cultural integration during an M&A and to extend the transformational
leadership conceptual framework. In Section 3, I explore five categories and briefly
summarize the study. I then present results and mark their applicability to professional
practice and implications for social change. Next, I offer recommendations for action,
recommendations for future research on cultural integration related to M&As, reflections,
and a conclusion. The study’s findings enable an understanding of how leaders’ and
managers’ skills influence a company. The results include the integral elements and
themes of a successful M&A: (a) communication, (b) due diligence, (c) management, (d)
exploration of mergers, and (e) integration of work environments. These results should
assist organizational leaders in designing and managing an optimal organizational culture.
Presentation of the Findings
Research Question
This study aimed to determine the skills and strategies managers must have to
facilitate management and cultural integration during M&As. I utilized six open-ended
questions in this qualitative questionnaire study (see Appendix A) to address the research
question. The questionnaire explored the patterns and themes related to M&As. My
analysis consisted of putting the raw data into NVivo 10 to facilitate coding. This coding
of participants' responses resulted in the following 5 patterns and themes: communication,
management, work, merger, and company organization. These patterns and themes reflect
participants’ thoughts on M&As as a part of a company's work environment.
The company themes illustrated in Figure 1 relate to the past and current
literature. Ahammad et al. (2014) stated that leaders and managers deliver company
fundamentals and a vision for future growth. Building on the previous literature, I
demonstrated in this study how participants confirm and perceive leaders’ and managers’
actions. Figure 1 represents participants’ perceptions of contributions and value for the
company.
The objective of this qualitative questionnaire was to explore participants’
experiences that facilitate further exploration of company values. These values relating to
companies’ continuity and growth were reflected participants opinions. Participants’
views of their companies’ challenges during and after M&As demonstrated a
commitment to togetherness.
Participants’ opinions regarding an acquisition depended on leadership. Many
noted that company growth and their understanding of the operations increased the firm’s
competitiveness. According to the questionnaire participants, managers’ are largely
responsible for controlling of the companies during M&As. Therefore; future growth was
a sign of great management that ultimately contributed to employees’ positive mindset
and motivation.
The findings of this qualitative questionnaire add to the literature. According to
survey participants, an acquisition requires managerial leadership. This study’s results
helped to clarify the use of transformational leadership, and transformational leadership
served as the central guide as I designed this study’s conceptual framework.
This study enabled my analysis of individuals' experiences and opinions (Rowley,
2012) during an M&A. The questionnaire, administered to 94 participants located in the
state of Texas, United States, addressed the issues of how to communicate during an
M&A, manage M&A integration, develop a company integration process, and enhances
the work environment during and after an M&A. Managers’ strategies for the integration
of merging cultures influences an M&A’s failure.
Figure 1. Participants’ theme query results: Company.
Figure 1 represents how participants essentially viewed the company or
organization. Participants’ expectations all related to the future of the company during
and after an M&A. These perceptions and expectations included, but were not limited to,
managing the company, departmental goals, and managers’ and leaders’ responsibilities
and values. Participants viewed managers and leaders as responsible for ensuring smooth
operation, with a transparent framework and a vision with manageable goals.
Participants' experiences and perceptions indicated how they expected to keep
leaders and managers accountable for the direction of the company. They expected
leaders and managers to reinforce the fundamentals of the company for future prosperity.
Respondents expected leaders and managers to manage the company by considering the
global competitive nature of doing business, as well as by setting goals and objectives to
benefit leaders, managers, and shareholders.
Figure 2. Participants’ theme query results: Merger.
Figure 2 illustrates the merger theme that I identified in this study. Angwin and
Meadows (2015) stated that managers and stakeholders’ value mergers’ fundamentals
and participants' perceptions indicate a clear link to this strand of the literature. This
connection is shared with the skills and the synergy of transformational leadership in
study’s conceptual framework. The findings tie in to the conceptual framework base on
transformational leadership (Antonakis & House, 2014).
In this study, I focused on M&As and firms’ cultural integration. Participants’
opinions clarified the role of managers’ knowledge of the merger. Participants’
perception included how mergers benefited all affected and how those benefits were
conveyed. Thus, managing and controlling a merger might increase the companies’
growth.
Participants’ views resonated with the literature I reviewed for this study. Their
responses indicated that many used transformational leadership as the basis for cultural
integration, and noted that culture integration and managerial leadership were necessary
for a successful merger. According to the participants, successful mergers contain goals
and future vision for the acquired company.
Participants believed a structured merger conveyed management requirements for
the companies’ growth and success. A merger’s structure should also include cultural
integration to improve performance. Structured mergers conform to the conceptual
framework since mergers are most successful when managers encourage transparency.
Transparency during merger facilitates and supports transformational leadership qualities.
Relationship to Conceptual Framework
The findings and participants’ descriptions of themes, patterns, and the
organization’s strategic culture were in line with and conformed to the conceptual
framework that I based on transformational leadership in M&A success. Managers
applying transformational leadership can determine how the themes apply to the
organizational culture, which may then influence the outcomes of future M&As
(Antonakis & House, 2014). Moreover, my findings indicated that using transactional
leadership building blocks for business models can contribute to an effective M&A
(Angwin et al., 2013). The themes revealed by my qualitative analysis confirmed existing
findings in the literature related to assisting, managing, visualizing, and developing an
M&A.
The communications theme illustrated in Figure 3 likewise resonated with
findings from previous studies. Indeed, the conceptual framework was a fundamental part
of understanding this theme. For businesses, growth requires communication between
leaders and managers. Rubino (2014), for instance, has stated that leaders and managers
must strive for communication. The past and current literature have confirmed that
effective and transparent communications, coupled with due diligence, were valuable
during and after M&As.
The participants of this qualitative questionnaire study indicate support for open
communication. Open communication from organizational managers indicates specific
needs and expectations from employees. A lack of communication from managers
inhibits the positive direction of a merged company. Participants’ opinions indicated that
communication should be frequent and honest. This frequency and honesty represents the
managers’ core values related to forming a winning team.
Participants’ perspectives on managers’ abilities to demonstrate leadership during
and after M&As reflected aspects of effective management. As participants indicated,
managers should focus on effective communication while integrating the companies’
cultures. This aspect of organizational cultural integration contributed to the literature.
Figure 3. Participants’ theme query results: Communication.
Applications to Professional Practice
The study participants indicated how (a) communication, (b) positive work
environment, and (c) managers’ strategies lead to successful M&As. The participants
shared thoughts about their personal experiences, processes, values, and contributions to
successful M&As. The findings from this study offer business leaders and managers
across the United States insights to increase their M&A success rates. The conceptual
framework and themes from this study illustrate the factors needed for successful cultural
integration.
The themes I explored through this study present leaders and managers with
opportunities to energize future growth. Goaied and Sassi (2013) stated that relationships
among an organization’s fundamentals may improve future growth. Leaders and
managers, by embracing the relationships and themes that I have identified in this study,
might create a faster growing organization with global prospective, opportunities for
personal and professional growth, and growth opportunities for the new organization.
Organizational Culture
This study contributed to the literature on organizational culture, with
participants’ responses focusing on values and experiences and indicating the need to
combine the companies’ organizational cultures. Moreover, combining two
organizational cultures requires cohesiveness and collaboration, and the participants
described how leadership and managerial practices to combine organizational cultures
facilitated a successful M&A.
Participants' responses lead to generalizations about organizational culture. A
successful M&A requires a cultural comparison and evaluation (Steenkamp, 2014). An
organizations’ values, due diligence, structure, brand, and corporate responsibility enable
a successful M&A (Steenkamp, 2014), because leaders and managers are responsible for
post-merger integration.
Figure 4. Participants’ theme query results: Work.
Interestingly, the work theme illustrated in Figure 4 can cause resentment during
and after an M&A. Participants experiences and perceptions of the work environment
was in line with the extant literature. Prakash (2014) noted how the work environment
was a predictor for whether a company will be acquired, and leaders and managers look
for predictors to exploit opportunities inside and outside of a company. Leaders and
managers as transformational leaders contribute to an energized work environment, thus
confirming the data illustrated in Figure 4 and the conceptual framework of this study.
The results of this study revealed that employees respect organizational managers
with the highest levels of ethics. Participants’ opinions of organizational managers with
high level of ethical leadership performed effective mergers. Further, the participants
highlighted employees’ collaboration and excellence in a company’s financial
management. The findings indicated most of negative reactions from employees stem
from unequal work distribution.
By allowing autonomy in the work place participants perceive managers’ positive
contributing towards the structure of the new for organization. Participants from the
newly formed organizations demonstrated and shared similar interest in the structure so
as to retain qualified employees. The findings of this study related to the work
environment, considered part of the structure that demonstrated organizational managers’
knowledge and proficiency. Organizational structure flexibility and the transformational
leadership framework are indicators of a positive merger.
Implications for Social Change
Firms engage in M&As to enable organizational growth, challenge employees at
all levels in the company, provide opportunities for knowledge transfer, and support
corporate and social responsibility (Fairweather, 2012). The study highlights the potential
for a community of employees to contribute to a successful and productive M&A through
their narratives of the critical patterns and themes, such as job satisfaction and community
relations. Because managers seek success in communities and via corporate
responsibility, leaders and managers must encourage employee involvement in the
community, which is a clear indication of the firm’s alignment with the local government.
The findings from this study provided leaders and managers with information to
develop a vision for growth. Communities hold organizations accountable for failing to
address corporate responsibility, while organizations with exemplary community
involvement records develop loyalty and trust (Baker & Niederman, 2014). Communities
develop expectations related to organizational changes over time, which result in better
collaborations (Baker & Niederman, 2014).
Figure 5. Participants’ theme query results: Management.
The management theme shown in Figure 5 related to participants’ experiences and
expectations given that global business requires collaboration. Bond (2014) stated that
management facilitates growth creation. The management literature emphasizes culture
and transparency. Participants' experiences and expectations tie into the conceptual
framework of this study, specifically the relationships among transformational leadership,
management, and mergers. Participants’ expectations and experiences relate to the global
market. Goaied and Sassi (2013) stated that existing market imperfection may incentivize
leaders and managers to take action to improve growth, which relates to organizational
growth represented in the conceptual framework and literature review.
The findings of this study facilitated the understanding of how managers create
organizational performance. Participants’ perspectives’ depended on the benefits of a
structured merger. Structured mergers, gain performance, and act as an indicator of
diversity. Diverse participant expectations in the work environment demonstrated their
confidence the organization was focus on a mission.
Mergers represent financial investments and vision for continuity. Organizational
managers with vision for continuity depend on the support from and completion of
financial deals. Participants’ expectation of organizational managers included increase
financial opportunities and leadership to avoid breakdowns. While organizational
managers’ leadership should attract investors a revised objective contributes to a
successful M&As.
This study’s exploration related to organizational management facilitated
scholars’ understanding of transformational leadership. The conceptual framework based
on transformation leadership conveyed valuable information about the organization. The
conceptual framework adds to this study’s concept and related body of the literature. This
study findings highlighted organizational management objectives and goals with a focus
on growth and increased performance during a merger.
Recommendations for Action
Possibilities abound for leaders and managers to strengthen organizational
cultures by fostering better communication and improving work environments. Moreover,
educating employees about the organization’s values contributes to loyalty and retention.
Employees need or expect to belong within the organizational culture, as demonstrated by
this qualitative questionnaire study. The participants’ responses offer general
recommendations for leaders and managers, who should focus on actions,
communication, employee integration, corporate responsibility, and leadership
commitment from the top during and after an M&A (Angwin et al., 2013). Leaders and
managers must prioritize actions with speed and due diligence, disseminate ideas with
knowledge transfers, and communicate the future vision for growth for a successful
M&A.
Recommendations for Further Research
This study explored leaders’ and managers’ actions related to organizational
culture during and after an M&A. The study was limited in geographic scope, and future
researchers could conduct a study in Delaware because most companies or organizations
incorporate in the state of Delaware. Further studies could reduce the sample size to
determine the processes by which participants contribute. Additional studies could also
apply mixed methods by expanding and exploring mergers and culture integration using a
quantitative exploration. Future studies could explore factors related to M&As and
corporate responsibility, how communication between leaders and managers facilitates
organizational culture integration during and after M&As, challenges in cross-border
M&As, or best practices related to organizational culture integration. The findings from
this study offered a support base for future studies into organizational culture integration
and successful M&As.
Reflections
I am very interested in the M&A process, and the results from this qualitative
questionnaire changes and expands the knowledge related to managing a complex system
with M&As. However, this did not influence the study as it uses primary data. I have not
influenced the participants, data, or outcomes since I used SurveyMonkey, an
independent research company with diverse audiences. This data collection method
minimized bias in conducting this study. The exploration and significance of the results
illustrates how the M&A process can help prevent future failures.
Conclusion
This study expanded the M&A-related literature on the topic of M&As. The
analysis of participants’ responses yielded themes through a qualitative questionnaire
survey, and the data collected offers leaders and managers' implications for managing
future M&As. Section 1 provided a literature review and this study’s conceptual
framework. In Section 2, I established my role as a researcher, the participants’
involvement, population sampling, the research design and method, and this study’s
reliability and validity. Section 3 concluded by presenting the themes within the
participants’ combined responses showing the importance of integrating organizational
cultures. The generalized results have managerial implications both before and after
M&As, though this applies for larger firms, as small organizations do not use M&A
strategies because the deals tend to be small and non-competitive.
