The Role of Company Cultures in Mergers with Reference to Fiat Chrysler Automobiles (PDF)

Seminar paper from the year 2016 in the subject Business economics - Business Management, Corporate Governance, grade: 1,2, University Witten/Herdecke, language: English, abstract: In times of globalisation, mergers and acquisitions (M&A) are an important and common tool for companies in order to expand their operations as well as to face changing market conditions and increased competition.
Over the past three decades, M&A have therefore become a truly global phenomenon: While in 1985 there were only 2,675 M&A transactions worth 347 billion USD, there were more than 46,000 global transactions, worth more than 4.5 trillion USD in 2015. In comparison to 2014, the number of deals increased marginally by 2.7 percent in 2015, while the value of the transactions grew by 16 percent.

Nevertheless, and despite the increasing popularity of M&A transaction worldwide, several studies yield that mergers actually have a high rate of failure. Depending on whose research results one relies on, the failure of M&A-deals varies between 60 and 75 percent. In this context, it should however be distinguished between the failure of creating any business benefit (especially shareholder value) and the total failure of the merger (and a segregation afterwards, as e.g. Daimler-Chrysler did) which most likely will be a much lower percentage.

As one recent study found out, culture has been identified to be the cause of 30 percent of failed integrations. These cultural differences between the merging companies become even more important in cross-border mergers where people from different cultural groups with different opinions, attitudes and values interact with each other. Although it is known that culture plays a key role in the integration process and therefore also for the success of the whole merger, it is often given relatively little attention to by the managers.

After building a theoretical background on M&A and organizational culture, the paper will focus on the role of culture in a merger: It will be analysed which role the organizational culture plays in a merger, why so many mergers fail due to cultural differences and how the factor culture can be successfully managed within a merger. In the second part of the paper, I will briefly present the merger of Fiat and Chrysler, shedding light on their different cultures and the integration process. In the end, there will be a short summary.