Cultural integration in M&A activities

By David Truong Lang, Viettonkin Consulting

Cultural differences have long been cited among the leading causes for M&A failures or underperformance, especially in cases of cross-border M&A or market entry M&A.

Corporate culture is built during the development history of a business, and implicitly influences employees’ behaviour and beliefs, and dictates their daily actions, thereby differentiating businesses in the same country or territory. Corporate culture is an intangible and immeasurable asset that creates corporate value. Adding to the complexity of organisational culture is its regional culture component. For example, Vietnamese firms usually retain some features of Asian culture, however they have their own characteristics which might confuse outsiders.

In an M&A transaction, cultural issues can arise in several ways:

• First, an unfavourable shift in leadership style can impact employees’ motivation and cause uncertainty, which leads to a potential loss of top talent.
• Second, employees might respond negatively to working with a “new team” and show unwillingness to implement new strategies or embrace changes.
• Third, differences in decisionmaking and internal communication can lead to resources being wasted, and a failure to execute quickly.

To address these issues, organisational redesign should be considered seriously in such a way that changes made after the acquisition/ merger will be designed in harmony with the prior organisation structure. The leadership should be proactive in defining, articulating, documenting, and repeating the “new culture” to all stakeholders through internal communication systems and scheduled all-hands meetings. Culture is most effective when it becomes explicit, transparent, and actionable.

Furthermore, leadership should work with all line managers to formulate a decision-making philosophy that emphasises KPIs and timelines, and will not be hampered by cultural differences. Finally, strong employer branding for the new organisation should be built, offering career opportunities, rewards, and a sense of belonging for top talents, especially those from the acquired firm.

David Truong Lang

GGI member firm
Viettonkin Consulting
Auditing & Accounting, Tax, Corporate Finance, Advisory
Ha Noi and Ho Chi Minh City, Vietnam
T: + 84 918 866 858
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W: viettonkinconsulting.com

Founded in 2009, Viettonkin is a multidisciplinary group of consulting firms specialising in accounting, legal, and a one-stop solution to FDI enterprises worldwide. The FDI consulting company aims to facilitate and connect investors in Southeast Asia with the rest of the world.

David Truong Lang is the Founder and CEO of Viettonkin. He has over 10 years of experience, focused on FDI investment and supporting worldwide enterprises.

Published: M & A Newsletter, No. 02 Spring 2022 l Photo: Prostock-studio - stock.adobe.com