For many businesses, internationalization is an important pillar of their growth strategy. This growth can be achieved either independently or through an international merger or acquisition (M&A transaction).
Compared to organic growth, an M&A transaction can achieve synergy benefits such as economies of scale, access to new markets and risk diversification relatively quickly. However, practice shows that international transactions by no means always deliver the values expected in advance. Not because the strategic rationale is lacking, but because the ability to fulfill crucial preconditions is underestimated.
Based on our experience with international transactions, we explain five factors that in practice determine success.
1. Joint vision of growth plan, strategy and pace
International M&A transactions succeed when parties share the same expectations and vision for the future. Differences in the joint growth plan, strategic direction or desired pace constitute underestimated risk factors in practice. Often these differences become visible only after the transaction, when adjustment becomes more complex.
By jointly determining in advance (i) where the organization should be in three to five years, (ii) what plan is needed to achieve this and (iii) who will carry out what actions when and what resources are available for this, direction and commitment are created within the new organization.
2. Clear governance from day one
An international merger requires clear agreements on decision-making, because the organizations involved will continue as one company after the transaction. Parties must explicitly define who is responsible for steering, which decisions are made centrally and where local powers remain.
When these questions are answered too late or insufficiently concretely, frictions can arise. Especially in international mergers, lack of clarity can quickly lead to internal tensions and delays in decision-making.
3. Making cultural differences explicit
In an international merger, organizations have to deal with cultural differences between countries. Differences in communication style, hierarchy and pace of decision-making directly affect day-to-day operations.
In many cases, the extent and impact of these differences only become visible after closing. This can lead to resistance in the integration phase and friction that delays decision-making and prevents synergy benefits. By discussing cultural expectations in advance and making concrete agreements about them, these risks can be significantly reduced.
4. Prepare integration before closing
Legal completion is not the end point, but only the beginning of a successful integration. Internal processes and systems must be aligned in order to actually realize potential synergies. Consider IT systems, reporting standards, HR policies and financial processes.
Mergers in which an integration plan has already been drawn up before closing are less delayed after closing and succeed more quickly in achieving the intended synergies.
5. Clarity on role of entrepreneur
For many entrepreneurs, their role changes dramatically after an international transaction. Where they were previously ultimately responsible, they become part of a larger organization. Clear agreements about responsibilities, authority and expectations towards the entrepreneur are essential to make the transaction a success.
In conclusion
An international merger is more than the strategic rationale and financial transaction alone. It is a profound organizational change, where success is realized only with effective integration. Entrepreneurs who pay timely attention to the shared vision for the future, governance and culture increase the likelihood of sustainable value creation.
