Country specific factors in merger integration
Multinational target companies span several different countries with subsidiaries in each of the countries. There are many factors in a specific country that influence merger integration activities that are on a supra national, on a national, and on a local level. In addition, there are social and cultural factors that differ by country or region like work days within a week, national holiday calendars, the political environment and the presence and influence of trade unions.
Those factors are:
- Legal framework
- Sociological framework
- Cultural framework
- Political environment
- Technological environment
- Ecological environment
- Local environment of the company
Each country has a specific set of laws and regulations which apply to merger integration activities. These affect e.g. the transfer of physical and intellectual property, corporate compliance and reporting requirements, the behaviour in competitive situations, regulations and procedures regarding employment and business transfers as well as calculation and payment of taxes.
For merger integration, the legal framework sets boundaries and regulates integration activities such as integration of companies into a single legal entity and restructuring. Merger integration managers have to have knowledge of such legal frameworks to determine the impact.
National cultures might differ when talking about religion, ethnicity and class structures. But according to Hofstede, national cultures also define the equality/inequality within society, the individual and collective aspects, the gender roles as well as uncertainty avoidance and anxiety in a society. For merger integration, you have to be aware of such cultural aspects.
How does the political environment affect merger integration? In an active view, politicians drive legislation and budget decisions. They will engage with the acquirer if the expected positive effects of the merger integration are high and serve the politician well.
In a passive view, politicians have to react on possible negative perceptions and outcomes or side effects of merger integration activities like strikes by the workforce in the case of restructuring. For merger integration you have to be aware of the political environment in each country that is affected by the integration.
Different industries have different needs for the existence or the availability of technology in a certain country. This might relate to national technological infrastructure like availability of power, cooling, heating, transportation as well as local suppliers having the right technology, skills and supplies.
A company is always embedded in its local ecological environment. Natural resources, ecology as well as environmental protection requirements are examples of the ecological environment. Results from due diligence might create work items for the merger integration like environmental recovery activities.
Local company environment
Besides macro-economic factors discussed above, each local company is embedded in a microeconomic context with local competitors and suppliers and employees and has to deal with local conditions for financing and local laws and regulations.For merger integration, you should consider and respect the local company environment and determine the impact of changes, mostly with the help of local employees.
(c) Dr. Karl Popp 2017