European Cross-border Acquisitions — The Impact of Management Style Differences on Performance

Abstract

Acquisitions have long been recognised as a means of increasing a firm’s European competitiveness (Kitching, 1974). They allow rapid entry into new or expanding geographic markets as well as a means to diversify into new product markets (Norburn and Schoenberg, 1994). Indeed the promise of a single European market has seen a rapid increase in European cross-border acquisition activity. Since 1987, the number of cross-border acquisitions completed within the EU has risen four-fold. By 1992 over 800 cross-border deals a year were completed within the EU, with UK companies accounting for nearly a quarter of the total. Despite this level of activity, empirical studies continue to highlight the low success rates associated with such acquisitions. Research by McKinsey (Bleeke and Ernst, 1993) reveals the overall success rate for cross-border acquisitions to be as low as 57 per cent, a marginal improvement only over Kitching’s 1973 finding. Increasing emphasis has focused upon the post-acquisition integration stage as being a key determinant of acquisition success (Haspeslagh and Jemison, 1991): even the best strategic logic can only bear fruit if properly implemented. Indeed, pathbreaking work on European acquisitions (Kitching, 1973) estimated that one third of all acquisition failures were due to ineffective integration. Continuing this direction, research on domestic intra-country acquisitions has converged upon the importance of cultural compatibility and associated management style compatibility.