M&a Examples in

¶ … conditions is M&a activity more likely to create rather than destroy value? Use case examples and appropriate academic frameworks to support your answer. Globalization & Merger and Acquisitions M&A and Cultural Problems The Multi-Cultural Organization The Nokia-Microsoft Case Microsoft changed Nokia Culture to Gain Value Other Value Propositions that Microsoft Considered Mergers and acquisitions have become an integral part of international business, companies, in an effort to expand their market, look to enter new markets through the strategy of mergers and acquisitions.

Mergers and acquisitions are an important, fast and effective way to enter markets. This is also an effective business strategy to gain market share quickly and reduce competition by buying out rival companies if possible. Merger and acquisitions also comes with their share of problems, especially problems that relate to functioning in an environment that is often alien to a company that leads the merger and acquisition.

There are several problems that such business strategies entail and often it has been seen that the cultural differences within the company, formed due to mergers and acquisitions, reduces value for the company. Difference in the culture of the new market and the difference in the culture of the customers in comparison to the culture of customers in the domicile country of a company, which they are used to tackling, can be another problems of mergers and acquisitions that can significantly reduce value of the business strategy (DePamphilis, 2008).

However if a company is able to tackle the problems of cultural differences both within the company and the new market, due to the merger or acquisition, then the business strategy can be very useful for the company and add value to the company in terms of image and business.

In this paper we would discuss how the acquisition of Nokia by Microsoft helped the company to enhance its value and how the company managed to tackle the cultural differences that existed between the two companies to create a niche market for themselves. The paper would also discuss the fundamental achievements that Microsoft managed to get through the process of acquisition of Nokia.

Globalization & Merger and Acquisitions Mergers and acquisitions have become common words on the business parlance as the fragmented and once isolated economies separated by geographical and political boundaries come together to form a single global market. Companies and firms extend their markets beyond their immediate surroundings within the domicile country as well as into other countries. The words internationalization and globalization have thus become familiar with modern business (Roberts, 2009). Majorly linked to economic activities, globalization has given rise to international trade and business.

International trade or business or globalization, as is popularly known, is said to have happened when economic and business activities like private sales, investments, logistics, and transportation happens between two or more regions or countries that transcends the political boundaries (Spero and Hart, 2010). Companies tend to go international or become global with the sole aim of expanding the market and increasing business. This expansion of business markets can be done in several ways.

One of the ways is to take over the business activities of other companies or to buy other similar companies producing similar products. This amalgamation of two separate entities into one is referred to as merger and acquisitions or M&A in business parlance Mergers and acquisitions create a new entity out of two separate entities. The two or more companies can collaborate or decide to become one with ownership as decided among themselves.

One of the companies can also buy out the other company where the company that is sold out would cease to exist. The buying company can however keep the brand name or other intangible assets of the company as decided in the agreements of the mergers and acquisitions. It has not always possible for companies to transcend the political boundaries and overcome the cultural differences even as globalization has opened up new markets for companies.

This made the strategic alliances, mergers and acquisitions for companies very important to expand business (Spero and Hart, 2010). A more integrated form of two organisations coming together is known as mergers and acquisitions. After approval by all the shareholders of both the companies, two companies combine together to form a larger company in mergers where the new entity can operate in the same segment or diversify.

Controlling shares of another company is bought out by a company in an acquisition so that the former effectively becomes the owner of the latter company. Given the extension of international trade and the growth of globalization of goods and services, companies tend to look for new markets. Mergers and acquisitions give companies the opportunities to quickly enter a new market and gain market share very fast without investing much of time and resources.

Financial resources however are required to be invested in the mergers and acquisition process (Rahman and Lambkin, 2015). M&A and Cultural Problems Mergers and acquisitions also entails that companies enter alien markets. Companies not only inherit the company and its physical, and sometimes intangible assets, the workforce and the employees also come along with mergers and acquisitions. Furthermore, alien markets means that companies have to understand and adjust to a completely different culture.

Companies have to encounter not only the working habits and cultures of the existing employees of the company or companies merged or acquisitioned, they would also have to deal with the existing and prospective customers of the company acquisitioned or merged. The complex accumulation of knowledge, folklore, language, rules, rituals, habits, lifestyles, attitudes, beliefs, and customs is known as culture. Culture helps to link and provide a general identity to a group of people as well as defines the way people behave and how they react to situations.

This definition fist well individuals and groups active in the markets, the customers and the employees of a particular region or a particular country (Paulson, 2010). Any culture is developed through years of existence and practice and is hence embedded in an individual or a group. People of a particular regions or a country tend to believe that the way they functions, influenced by the culture and years of getting influenced by the general functioning of the society, is the right way for them to react and behave.

For any organization functioning in a particular market or a country and employing people from a particular region or country develops a particular habit and a particular culture. This culture is also influenced by the norms and rules as established and implemented by a company for the employees and the combined behavioral attitude of employees become s the organizational culture of that particular company (Liu, Gallois and Volc-ic?, 2011).

Hence after a merger or acquisition, when a company inherits the employees, it essentially also inherits the organizational culture of the company merged or acquisitioned. The company also inherits the risks and advantages of functioning and doing business with the existing customers and the prospective customers who have a particular type of culture and habit of purchase and reaction to business proposals influenced by the local culture.

This local culture can be very different form the culture that the company, trying to set foot in a new market through acquisition and mergers, form the culture where the company had been operating previously or in the domicile market of the company. The Multi-Cultural Organization From the above discussion it is clear that mergers and acquisitions give rise to multicultural organizations where people from two or more different culture have to work together to achieve a certain goal set by an organization or a company.

The cultures and traditional beliefs of the society they grew up in are brought along when a company, which is an existing global or trying to be a global company, employs people from different countries. There can be occasions when there are conflicts and misunderstandings in organizations when organizations find it hard to cope-up with the varying cultural differences. This conflict often reduces the value of the merger or the acquisition.

According to Geert Hofstede, various cultures have various dimensions that is defined by an individual's behavior to various situations and the values of the individual, which in turn is influenced by the culture of a society.

Hofstede says that the dissemination of power in an organization, uncertainty avoidance and the degree to which a society accepts ambiguity, masculine and femininity that defines roles of the two genders and long-term orientation which defines the time orientation of the society about a task is all defined and influenced by culture (Canals, n.d.). In a similar manner, the customers, both existing and prospect full, are influenced by local culture.

The purchasing behavior, the reaction of advertisements and to the corporate communications, the use of technology, the need and demands and the fulfillment rate and the satisfaction level of customers are all defined by culture of the region or a country. Therefore companies trying to enter new markets through mergers and acquisitions have to tackle the problems of a multicultural organization as well as the problems to appeal and approach the customers in the new market.

The Nokia-Microsoft Case Background The environment of competition brought into the market by their revolutionary smart phones by competitors like Apple and Samsung since 2007 has placed Nokia, the once best seller mobile handset company under severe competition (Ben-Aaron, 2010). While the Finnish company, Nokia, still used symbian operating systems, the new smart phones used Google-based operating systems.

As forecasts projected that android phone sales would increase from 23% of the smart phone market in 2010 to around more than 50% of the mobile phone market by 2012-2013, Nokia was losing out quite heavily to its competitors. At this stage the Finnish mobile company opted to form a strategic alliance with Microsoft to supply its phones with MS operating systems.

The fact that Apple had overtaken Nokia and become the world's largest mobile phone maker in terms of sales for the first time in the history of both the companies had forced Nokia to accept the change from the Symbian technology to android technology. Compared to the 11.9 billion dollars in revenue generated by Apple the first quarter of 2011, Nokia could only generate 9.4 billion dollars in revenue. Experts forecasted a dip in the share of Nokia in the mobile phone market below 20% (http://company.nokia.com, 2015).

Another factor for the above is the rapid influx of cheap smart phones from China and India who used the Google android mobile operating system. Since it is expected that smart phones would be the means by which most of the people would be accessing internet, the smart phone business is seen to be a hard fought battle in the near future (Grundberg, 2015).

After the company stock had fallen by 60% since the launch of Apple's iPhone in 2007 and the loss in market share consequent to Nokia made huge loses to the tune of 61 million dollars, the company, in 2010, the company made some drastic changes in its leadership and structure. From the one time high of 203 billion euro in 1999, the company's net value had dropped to 30 billion euro in 2011. Despite the initial induction and tie up with Microsoft for iOS on its smart phones, Nokia could not gain back much of the market.

The company tried to gain back market share through launch of smart phones like Lumia. On the other hand, Microsoft, one of the premier and oldest IT company in the business, was trying to counter rising IT companies like Google to market its operating system. The company was also on the lookout for its own range of phones to infuse the windows operating system.

Having worked with Nokia earlier and taking into account the extended global reach and brand value of Nokia, acquisition of the Finnish company was the only logical business strategy for Microsoft. At the time Microsoft bought over Nokia, the finances of the Finnish company were dismal. The sudden drop in the revenues is evident from the fact that total corporate taxes collected by the Finland government from Nokia dropped from 18% of the total revenue in 2007 to 9% in 2008 and even lower in 2009 and 2010 (Gralla, 2014).

The value proposition for Microsoft from the acquisition presented very high values for the IT company as it entered new business vertical of smart phones and could create product differentiation through the software available with the company. Moreover the established global brand name and supply and distribution network of Nokia would help the company enter new markets and Microsoft hoped that it would also help to gain market share.

Microsoft changed Nokia Culture to Gain Value Analysts have said that one of the major problems for Nokia in losing out market share was the corporate culture of the company. The company did not react fast enough to the changing mobile market. The organizational culture at Nokia was very different from that of Microsoft. There were ample chances that there Nokia's company corporate culture would have a conflict with the culture of Microsoft.

Employees had difficulty in functioning and adapting to internationally accepted corporate culture norms as the local Finish culture was somewhat insulated from outside cultures, especially corporate cultures. While some of the managers had worked for years in the company, they were reluctant to innovate and be a part of change in the way the company functioned (Singh, 2014). This hindered adoption of a culture of innovation that was required for Nokia to keep pace with the changing mobile market and tastes and choices of customers.

Microsoft had to make changes and strive to correct the failure in the corporate culture of Nokia to foster innovation and usher in new ideas. This lack of innovation was the primary reason that the company had not developed upon the Symbian operating system even after being in operation since 1997 and despite the other rival companies fast developing and marketing on the smart phone opportunity (Johnson, 2009).

Microsoft created a particular focus in the company by reducing the extended product line of the company and focusing on the product and the market aspects thereby narrowing down the number of products to be innovated upon. Microsoft added value to the products with its software and relaunched the Lumia series of phones under its own brand along with new brands. Microsoft, used to developing new products and encouraging product development in the software segment, adopted the culture of disruptive innovation.

When an innovation makes a small but decisive entry into the market as a small innovation and then later on disrupts the equilibrium of the market to tilt the market in favor of the innovation is known as disruptive innovation (Friek, 2012). Microsoft has adopted this strategy with Nokia in the case of smartphones and it is imperative that Nokia, now Microsoft, creates innovation that has the potential to change the market. This is a change in the corporate culture of the Nokia that was earlier absent.

This is an cultural and behavioral change in Nokia and its former employees that Microsoft tried to bring in to gain competitive advantage in the smart phone market. The corporate culture of Nokia is something that Microsoft had inherited and it need to change it to be able to gain value from the acquisition. Other Value Propositions that Microsoft Considered 1) Timely: Microsoft had to decide whether the acquisition would be timely. It has been established the mobile phone market.