Determining if the Deal is Right for Your Company

Determining if the Deal is Right for Your Company

Mergers may seem like a step forward.  But like any deal, mergers come with a degree of risk.  The odds are good that you’ve heard of the massive merger between the German auto manufacturer Daimler and the American car company, Chrysler.  In this deal, we see a prime example of cultural friction and how that friction can lead to serious merger problems.  In the beginning, the merger was promoted as a merging of equals.  However, when Daimler officers took complete control, Chrysler executives quickly left in droves.

What Was the Problem with the Deal?

Part of the problem with the merger was the management styles were completely different.  It was a situation of centralized versus decentralized and rapid decision making versus decision making by committee.  And there were other problems such as fostering supplier rivalries versus supplier partnerships.  Adding further to an already complicated situation was the fact that the Chrysler management team received massive compensation packages whereas the Daimler management team worked with smaller salaries, yet received considerable perks.

A key aspect of mergers and acquisitions is that they are, in theory, supposed to create a synergy that produces results.  When mergers and acquisitions fail to live up to their potential, it is often the overlooked factor of culture that is at the heart of those failures.  If two companies don’t have the right culture to work together, then the deal can be in trouble literally before the ink is dry.

How to Tell if the Fit is Right?

The trick is thus to determine when a merger is a good fit for all involved.  While there are many variables determining if a merger or acquisition is right, it can begin with something as seemingly simple as a casual dinner with the owner or CEO of the acquiring or merging company.  Such a meeting can reveal much about an owner’s philosophy and how he or she runs a business.

An organic flow of information can accomplish much and do so in a short period of time.  Key areas such as determining how employees of the other company will be compensated can work to reveal whether or not the corporate culture of two companies is, in fact, a good fit.  There are situations when the culture of two companies is so similar that integration is relatively easy and straightforward.  However, there are other situations, such as the Daimler-Chrysler example, in which a merger is doomed to be highly problematic.  At the end of the day, proper communication is key to determining the long-term viability and potential for success of any merger or acquisition.


Copyright:  Business Brokerage Press, Inc.