Two companies may merge to reduce operation costs, for diversification and rapid growth. “Mergers are… part of… strategy for growth or diversification.” For instance, the merging of two Canadian telephone companies, BC Tel (British Columbia Telephone Company) and TELUS, was expected to save their union a total of $178 million in costs of operation. Companies may also merge in order profit from the services of the merger partner, as was the case in of Bank of America (BOA) and MBNA; BOA sought to benefit from MBNA’s reliance on big fees and effective in debt collection.
The merging companies always hope that they can integrate with as little organizational friction as possible. But that does not always happen? Although, for instance, BC Tel and TELUS used the same models of reference and Enterprise Resource Planning (ERP) system, which was expected to remove obstacles to and spawn their organizational integration, the difference in their implementation of the models became the main problem in their union.
But cultural differences between two merging companies do not always have to mean culture clashes, as seen in the merger between BOA and MBNA.
Before the BOA acquisition of MBNA, the two were culturally very different. MBNA was a spendthrift. It paid high salaries and generous packages to its employees, owned a number of corporate jets, yachts and a private golf course in its corporate headquarters in Wilmington, Delaware. BOA, on the other hand, was a low-cost, frugal, no-nonsense company that believed in smarts and size, rather than speed. Also, the dress code in MBNA was more formal than BOA, which took a more casual approach to business.
Inspite of this, the merger has largely been seen as a success. First, it has been obvious who the ‘boss’ in the marriage is, BOA. Knowing this helped decide who would be the major decision maker, in terms of the policies and rules of integration, unlike the case where the partners are relatively equal.
But it is also commendable the way BOA took to dealing with these differences. BOA accepted that there were differences in business cultures between them, which, unless regarded and properly dealt with, there would be integration problems.
And so it set out to work in conjunction with the MBNA executives, which was a practical approach. By this, it got to assessing which of the MBNA’s culture(s) could be changed and which ones could not, including those that would be beneficial to it- like MBNA’s expertise in partnership marketing, efficient techniques of debt collection, call centres and technology system. Although it imposed, a few times, upon the MBNA, it also gave away some of its cultures- like the overall casualness of business as reflected in its dress code. Or atleast, it became accommodative to include the MBNA’s formal dressing in, for instance, departments that had more direct interaction with clients and those that dealt with credit-cards. In the end, both gave away something and “the payoff was enormous”,.
How much of its culture a company gives away for the sake of the merger mostly depends on how much power it has. As in the case of BOA and MBNA, the latter seems to have given away more than the former, which had more power in the merger.
In conclusion, it is important and necessary that the cultures of the companies planning to merge be seriously regarded. But, as evidenced in the two examples above, the emphasis is not- necessarily- to be on the degree of cultural differences between them per se, but on how possible it is for the cultures to integrate- relatively- smoothly.