of the performance measures utilized, the time period covered, and whether
the study has been conducted by academics or a consulting firm, more than
half of M&A are not successful (Hall and Norburn, 1987; Hunt, 1990; KPMG,
1999; Porter, 1987). For example, a study of 107 of the largest cross-border
M&A completed between 1996 and 1998 found that 83% were not successful
in producing any business benefit in terms of shareholder value (KPMG, 1999).
At the same time, many companies (such as BP, or GE) have been very good in
managing acquisitions, and for every troubled mega-deal there may be many
small acquisitions which are substantially more successful.
M&A failures are often due to problems in integrating the different cultures
and workforces of the combining firms (Marks and Mirvis, 2001; Schweiger and
Walsh, 1990; Shrivastava, 1986). Sociocultural integration of different organiza-
tional cultures, HR systems, managerial viewpoints, and other aspects of organi-
zational life can lead to sharp inter-organizational conflict (Buono and Bowditch,
1989; Cartwright and Cooper, 1996; Stahl and Sitkin, 2001). In a survey of more
than 200 chief executives of European companies conducted by Booz, Allen and
Hamilton (cited in Cartwright and Cooper, 1996: 28), respondents ranked the
ability to integrate culturally as more important to merger success than financial
or strategic factors. Problems are often exacerbated when M&A occur between
companies based in different countries. It has been argued that different political
and legal systems, culture and language barriers, and other differences between
countries can be major obstacles to achieving integration benefits (Malekzadeh
and Nahavandi, 1998; Olie, 1990; Very and Schweiger, 2001).
Despite anecdotal evidence suggesting that cross-border M&A are riskier than
domestic ones, the empirical evidence is mixed. As we will see, the findings sug-
gest that the probability of success of cross-border M&A is not necessarily lower
than that of domestic transactions, though they may be more difficult to manage.
This chapter begins with a review of prior research dealing with integration
processes in cross-border M&A, examining the potentially critical role that cul-
tural differences play in the M&A process. The second part of the chapter
focuses on how the meaning of cultural integration depends on the strategic
logic behind the merger or acquisition. The third part discusses the key HRM
challenges at different stages in the M&A process. The chapter concludes with
a discussion of the implications for M&A research and practice.
2 CULTURAL DIFFERENCES AND CROSS-BORDER
MERGER AND ACQUISITION PERFORMANCE
It has often been argued that cross-border M&A are less successful than domes-
tic transactions. For example, a survey of top managers in large European
acquirers showed that 61% of them believed that cross-border acquisitions are
90 International Human Resource Management