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Globalization of Indian Economy and Foreign Direct Investment. Guest Editors: Badar Alam Iqbal, Kottala Sri Yogi and Imlak Shaikh

Cross-cultural issues in M&As: experiences and future agenda from Asia-Pacific deals

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Pages 140-149 | Published online: 23 Aug 2017
 

Abstract

In the era of global competition, enterprises have adopted a strategic route on Mergers and acquisitions (M&As) for growth. This has been more profound since the liberalisation and openness programme adopted by many countries. Research literature on M&As has attributed failure of deals primarily to cross-cultural factors. Hence, researchers remained interested in understanding the nuances of cross cultural issues for the success of integration. Further, literature on cultural issues suggests that due to the complexity, uniqueness and largely tacit nature of organisational culture, it is difficult to imitate and adopt any specific organisational culture. This becomes even more difficult in the international settings where organisations forced to merge with different nationalities, background, and languages. This study examines the cross-cultural issues associated with Indian cross border deals in the Asia-Pacific region in order to find out the key research dimensions. It attempts to seek answers to these issues based on the Indian evidence which may aid successful cultural integration.

Notes

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 The most popular cultural dimensions is the framework proposed by Hofstede (Citation1984), which included individualism versus collectivism, masculinity versus femininity, high power of distance versus low power of distance, and high uncertainty avoidance versus low uncertainty avoidance.

2 In the words of Edgar Krökel, Vice-President of the M&As department at Daimler Chrysler, ‘As the leading driving factors of acquisitions in Asia, he identified debt-equity restructuring, the break-up of conglomerates and structural overcapacity. Shareholders are not the only decision-makers in major asset realignments, employees and banks also play an important role. This phenomenon indicates a relative lack of transparency and virtual absence of venture capital’ (East Asia Economic Summit, Citation1999).

3 In 11 June 2008, Japan’s second biggest pharmaceutical, Daiichi Sankyo (DIS) announced acquisition of over 51% stake in Ranbaxy at a price of R737 per share (US$4.2 billion), including the mandatory open offer to public shareholders.1 However, stock markets reacted negatively to the announcement as Ranbaxy’s scrip fall sharply. At the close of 2008, Ranbaxy’s shares were traded 66% lower than the acquisition price.

4 Ranbaxy’s two key units in India, Paonta Sahib (Himachal Pradesh) and Dewas (Madhya Pradesh), were barred from supplying to the US in 2008 just before the acquisition of the company by Daiichi Sankyo. However, the company took four years to reach a settlement with the US authorities and sign a consent decree for taking corrective measures in the facilities. And more, the management pleaded guilty to the US authorities for fraudulent activities and paid a hefty fine of $500 million. Even after this, the two factories are yet to get a clean chit from the FDA for resuming supplies to the market. On the contrary, the other factories, a newly-commissioned formulation plant in Mohali (Punjab) and an active pharmaceutical ingredient (API) plant in Toansa, came under the US import alert, putting a full stop on supply to the US from India.

5 Nemawashi (根回し) in Japanese means an informal process of quietly laying the foundation for some proposed change or project, by talking to the people concerned, gathering support and feedback, and so forth.

6 He started attending every board meeting after the Indian company was forced to shut down its plant in Manesar in the northern Indian state of Haryana in summer 2012 because of a riot by its workers. This riot led to the death of a factory manager and injured more than 100 people.

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