Abstract
Previous research has shown that the vast majority of cross-border mergers fail to produce surplus value, and therefore must be labeled as unsuccessful. Paradoxically, this form of internationalization is more popular than ever. In order to find out why certain mergers fail and others become successful, six merger cases -
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Royal Dutch/Shell, Enka-Glanzstoff (AKU), VFW-Fokker, Hoogovens-Hoesch (Estel), Reed Elsevier and British Steel (Corus) – have been selected for an in-depth study. These cases are studied from a historic angle, and by analyzing these six European mergers in an interdisciplinary manner it is possible to raise our understanding of the cross-border merger phenomenon. To determine which cross-border alliance can be considered a success or failure, this study looked at how a merger worked out for all stakeholders involved (i.e. shareholders, government, employees and consumers). From the six selected case studies, only the Royal Dutch/Shell merger can be regarded as a clear and lasting success. The Reed Elsevier merger was only partially successful. All the rest of the mergers were failures. This study analyses what drove these companies into a merger with a foreign partner. Secondly, by comparing the outcome of the case studies, it is possible to see how changes in the Dutch business system contributed or negatively affected the formation of bi-national alliances. Thirdly, this dissertation will explain why the majority of cross-border mergers end up as failures. Is the cultural mix as suggested by the Dutch sociologist Geert Hofstede the decisive factor, or is it pure economics that determines the outcome of a merger? How must we explain the fact that Anglo-Dutch mergers appear to be more successful than German-Dutch ones? This dissertation argues that there is no simple explanation for the success or failure or cross-border mergers. The study also shows that it is very difficult to learn from previous merger experiences, because the outcome of mergers relies highly on how markets and relationships with stakeholders develop after the merger. It also depends on what the new strategy will be, and if one succeeds in finding the most suitable integration model. Furthermore, the study shows that the institutional conditions can differ per period, business-sector and per case. Another conclusion that can be drawn is that in certain sectors cross-border mergers are more difficult to establish than in others. After having compared the results from the six case studies five general merger lessons have been drawn: 1. Cross-border mergers fail mainly because of rapid deterioration of market conditions in the years following the merger. 2. The vast majority of the mergers experience great difficulty benefiting from synergies and economies of scale and scope. The main reason is that managers are too optimistic about the future prospects of a merger and that the motives behind a merger are often wrong. 3. Because of differences in the national business system cross-border mergers are more likely to fail than national mergers. Four barriers (i.e. legal and political, organizational, geographical and communication and cultural) are identified. 4. What makes a cross-border merger so much more difficult to realize compared to a foreign takeover, is the absence of an undisputed dominant partner. 5. The search for the right organizational and integration model is a long and difficult one, and often results in boardroom conflict.
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