Ques #1: Are there specific things that affect the chances of a merger failing or succeeding?
There are various factors that can affect the success or failure of a merger.
First, the extent of pre-merger planning often dictates the success of the merger. Inadequate planning that does not consider the interest of stakeholders or identify potential risks and problems often leads to the breaking down of mergers. In the Bancolumbia merger with Conavi and Confinsara, the partners saw the necessity to engage in extensive pre-merger preparations in order to ensure that chances of success are maximize. For example, they recognize the need to understand the cultural differences and prepare strategies to tackle potential cultural barriers or problems.
Another factor that can affect the changes of a merger failing and succeeding will be cultural differences and integration efforts. Cultural differences affect the way employees interact as well as the style of management. The success of integration depends greatly on the ability for smooth integration to take place post-merger. This is demonstrated by the failure of the Daimler-Chrysler merger which was caused by the inability of the German and American employees to adapt to each other’s working styles. In the Bancolumbia merger, cultural transformational workshops were carried out to prepare employees to adapt to changes in culture so as to enhance the success of the merger.
In addition, the timetable for merger also affects the success of the merger. An overly aggressive timetable may deter potential partners as well as result in transition and integration problems because the stakeholders such as employees are not allowed sufficient time to adjust to change. In the Bancolumbia merger with Conavi and Confinsara, the partners saw the necessity of creating and adopting the “Golden Rules of Integration” which help provided a clear overview of the goals which they want to achieve and thus offered a general understanding of the pace of change.
Ques #2: In your assessment, what are the appropriate issues to be considered in facilitating a successful merger?
To facilitate a successful merger, it is necessary to consider the agreement on the proposed business model. Many mergers have failed because the partners fail to arrive at a consensus on the business model to adopt. When two or more companies come together, it is important for the different components to have a common goal or direction in order for the merger to work out. The Bancolumbia merger is an example of a merger that has successfully recognized the need to arrive at a common consensus on the goals and milestones to achieve with the adoption of the “Golden Rules of Integration”.
In addition, the issue of internal communication will need to be considered. A merger is a major change that will influence all members of the employees. The information needs to be communicated appropriately to the employees so as to adequately prepare them for the change as well as to persuade them to accept the change. Resistance to change can be detrimental to success of a merger. In the Bancolumbia merger, communication strategies were designed to achieve three main goals: precision, timeliness and veracity. In addition, the company also ensured that communication was a two-way process so that the views of the employees can also be heard and considered. This helped to enhance acceptance of the changes.
Finally, another issue which needs to be considered will be the relevant business laws and regulations that can affect the merger. This is so that the merger can be recognized and would not be considered as illegal. For example, it is necessary to ensure that the merger is not seen as violating anti-competitive laws. In addition, this will also prepare the partners for adjusting to the different laws and expectations in the new countries which they are required to operate in.
Ques #3: Looking at each company’s business model, can we expect them to be reflected in management strategies and practices?
The business model should be reflected in the management strategies and practices of the organization. First, a business model refers to the conception of how the set of strategies pursued should work together to allow the organization to gain a competitive advantage to achieve the organizational goals. A business model encompasses the management strategies and practices in different areas such as the selection of customers, differentiation of products, setting of prices and organization of internal activities. Given that the implemented strategies and practices arises from the kind of business model adopted by the organization, it is thus possible to infer or learn about the business model by analyzing them. For example, if the prices of products at a business have been constantly set at a very low level, it can be inferred that the business is adopting the business model based on offering customers low-priced product to reach out to customers whose demands for the products are very price elastic. In the Bancolumbia merger, the three businesses had three different models and these were reflected in the different management styles as well as their business focus. For example, the old Bancolumbia focused on investment banking and high income individuals. On the other hand, Conavi focused more on mortgage banking. Corfinsura focused more on corporate clients and offered a wider range of services such as treasury management and credit lines. Therefore, it was imperative for the three companies to come together to set a new business model so that they can reach a consensus on the management strategies and practices to adopt in order for the merger to be successful.
Ques #4: Is it possible that mergers can facilitate the attainment of management talent and new capabilities?
It is possible that mergers can facilitate the attainment of management talents and new capabilities. When companies merge, they can gain access to the talents of the other partner. With suitable talent management strategies, these talents can be retained. In addition, the new firm that arises from the merger may be more competitive. As such, this can also help to attract more talents to join the company. In addition, the partners in the mergers can share knowledge and resources. For example, technology transfer can be done or the sharing of market knowledge can be carried out. As such, this allows for new capabilities to be developed. Next, the process of merger can offer valuable opportunities to train employees so that they can demonstrate better skills and opportunities. This is because people are more willing to embrace change during the merger period and thus will be more open to learning and applying new lessons and skills. As demonstrated by the Bancolumbia case, the company was able to provide intensive training and development programs which not only reduced the employees’ resistance to change but also allowed them to better contribute to the success of the post-merger company.