Essay by PaperNerd ContributorUniversity, Master's October 2001

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Merger a way to become global Working globally takes more than enthusiasm. A company will not just flip a coin one day and decide that it is time to do business in Europe, Asia or South America. It is a lot of work to turn global and it is no guaranties that it will be a success. The cross-border reach of corporations has been growing rapidly for the past two decades and it is not likely to slow down. In Europe domestic firms have actually found that, more than before, other European, US, and Asian companies want to enter their market. Euro, the new currency shared by many countries in Europe, is making it easier for companies to do business across the continent. Mergers of companies from the same country have a greater chance to succeed. When two companies from nations with big culture differences merge they will more likely run into trouble.

Many mergers undertaken with the highest of hopes have failed to deliver. It is often culture conflicts and personality clashes that hamper the new company's success. The significant risks included in international alliances and join ventures are reflected by the high failure rate that have been documented in recent years.

Research by accountancies and consulting firm KPMG suggests shareholders are losing out in more than 80% of all cross-border mergers. Only 17% of all mergers added value to the combined company, while as many as 53% actually destroyed shareholder value. The remaining 30 % of deals made hardly any difference to the performance of the companies involved. Language and culture appear to be the major barriers to a successful completion of the merger.

Culture can be defined as the set of values, customs, and beliefs that people have in common with other members of a social unit...