Cultural Harmony - Foundation for Success

M&A is considered an effective solution for businesses in the time of crisis. A lot of businesses at the brink of bankruptcy have been rescued by M&A and many firms have jumped to new highs in the time of crisis because of M&A. Given current context, now is a golden time for M&A activities to develop. This is an inevitable trend of the strong to the weak. M&A may be friendly or hostile. The biggest challenge to M&A ambition is disagreements and conflicts between the two entities. This is the reason to the failure of many M&A deals. When two businesses in two environments and territories or countries with different cultures, behaviours, habits and communications live in the same roof, speak the same language and look to the same value, this is very complex and it takes time for this harmony.

 

According to statistics from the research group of M&A Vietnam Forum, hundreds of M&A deals have been concluded in Vietnam every year since 2008 but there is no official statistics about M&A efficiency. Nhu Dinh Hoa, CEO of Bao Viet Securities Company, said, “The efficiency of M&A deals is sometimes quantitative; therefore, it is very difficult to gauge the performance efficiency of businesses after they conclude M&A." However, according to researches on some specific cases, business performances are better after M&A. The typical example is the merger of Vincom and Vinpearl. After the merger, the company was renamed to Vingroup. The new entity managed to utilise the strengths of both companies, boost financial capacity, develop brand name and expand operation expansion and investment. But, in reality, not all M&A deals are mutually beneficial and successful as expected. According to Business Week, 61 percent of 302 cases it studied failed. Dominic Scriven, CEO of Dragon Capital, said that more than a half of M&As does not create added value. On average, M&A reduces the value of the acquiring company. Carrying out vertical M&As when the seafood industry was at difficulty, Hung Vuong Seafood Corporation shouldered more burdens from its acquired companies. And, the bottleneck lies in cultural harmony.

 

Marriage must be based on true love or expectations on good values from both parties. But, if the two sides are determined to marry because of over-optimism or temporary circumstances and disregard the nature of marriage to envisage difficulties and potential cultural conflicts to seek preventive and healing measures to build, protect and develop marriage, their marriage will collapse very quickly. An M&A is like a marriage. Leadership, cultural harmony and employee relationship are the biggest challenges for the success of an M&A.

 

Avoiding cultural conflicts is one of the top concerns of business leaders, especially human resources directors, in current global M&As. Therefore, before doing M&As, a thorough study on business cultures that they intend to take over is extremely important and necessary if they do not want to come into an early marriage breakup. To have a good M&A market, Vietnam must prepare some conditions: Perfecting the market economy for growing M&As and creating market demands in a competitive environment. These are motivations for businesses to grow up and develop in both dimension and depth and avoid bankruptcy and takeover. Obviously, that environment will shape M&A demand - a move to boost business development and promote mutual support.

 

In addition, it is necessary to establish an information control channel and ensure the transparency in business operations in general and M&A activity in particular because information about price, brand, market, market share, management and other factors is essential for both buyer and seller in an M&A deal. If the information is not controlled and lack of transparency, it may cause damage to both the buyer and the seller and affect other markets such as commodities, securities and banking. Like other markets, the M&A market has domino effect. If a big M&A is unsuccessful or deceitful, its impacts on the economy are enormous because shares, bonds, business performances and investments of that enterprise in particular and other enterprises in general will also be affected. It is also vital to complete the legal framework for M&A. This regulatory framework will facilitate the establishment of transaction, buyer and seller status and post-transaction legal consequences. In addition, the M&A market is a market that needs the participation and consultation of experts with extensive experience in various fields such as law, finance and branding. Therefore, we need training programmes to have good professionals, brokers and consultants for both the buyer side and the seller side.

 

Each company will have its own way. But, to harmonise disparities, we need to base on understanding and joint vision. Like a marriage, both sides need to mix together if they want to live with each other forever.