Five Ways To Clinch An M&A Deal Overseas

Indian companies acquiring firms abroad have crucial lessons to learn before they cement the deal. Mark Oshima, senior vicepresident, Aon Merger & Acquisition Solutions, shares some insights with Moresha Benjamin. 

Follow ground rules 

There are some key issues that the company acquiring needs to be aware of from the word go. In India, for instance, executive compensation focuses on the salary compensation whereas in the US and Europe, the emphasis is on severance pay, asset transactions, data privacy, cash bonuses, stock options and retirement funds. In Europe, specifically, workers’ councils play a crucial role. They are similar to Indian worker unions but are more stringent and organised when it comes to rules and regulations. For instance, an employee cannot be forced to work beyond specific hours. 

Outline main objectives 

The primary aims of many firms looking to acquire companies abroad are similar. A study by CFO Research Services’ and Aon Hewitt’s Human Capital Management highlights that 59% of firms thought that adding complementary products, brands, or service lines were important aspects of an acquisition, while 52% believed gaining access to new markets was a priority. Capturing market share from competitors was on the agenda for 32% of the firms surveyed, while 25% looked to acquire proprietary technology or operating processes. 

Adapt to cultural differences 

There are two categories of differences companies are faced with — national culture and organisational culture. They need to understand that national culture cannot be changed at any level; if they do, it will be at the cost of losing employees and their brand image. Don’t underestimate culture in integration success. What can be changed and modified is organisational culture. If a company lags behind in technology, the company acquiring it can introduce it for better productivity, while keeping in mind the national culture and making sure no one lags behind. This requires training sessions across different sections of the firm. 

Study employment laws 

In the US, employment laws take into account race, religion, lifestyle, age and so on. Companies that are in the process of acquiring firms abroad need to go through these levels thoroughly. What is accepted in their homeland will not be the case in another nation. The company can be taken to court for flouting any of these norms. It’s better to be aware and make sure nothing of the sort occurs. 

Let HR play an active role 

HR plays a highly important role when a company is mulling over their strategy of overtaking (overtaking is not the same as taking over. Overtaking happens in a race. But a takeover is an acquisition) a firm abroad. HR executives need to be proactively involved in the process. A study by CFO Research Services' and Aon Hewitt's Human Capital Management end of last year on the success and failure of M&A found that 59% of M&As were successful when the HR team was involved at the start of the process. HR helps understand both the business and the culture of the new organisation. Unless you understand the people, you cannot understand the business.

(The Economic Times, Mumbai, 02-06-2011)