Organisational Acquisition and Cultural Synthesis

This article discusses the importance of culture in the success of mergers and acquisitions, with a case study of Bank of America and MBNA. It explores the concept of cultural mesh and clash, and the need for smooth collaboration between mother company and subsidiary.

Running head: ORGANIZATIONAL ACQUISITION AND CULTURAL SYNTHESIS
Organisational Acquisition and Cultural Synthesis
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ORGANIZATIONAL ACQUISITION AND CULTURAL SYNTHESIS
Table of Contents
Introduction:....................................................................................................................................2
Bank of America and MBNA acquisition was a mesh:...................................................................2
Importance of culture in success of mergers/acquisitions:..............................................................4
Smooth transition and collaboration between mother company and subsidiary:............................5
Conclusion:......................................................................................................................................6
References:......................................................................................................................................7

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ORGANIZATIONAL ACQUISITION AND CULTURAL SYNTHESIS
Introduction:
The acquisition and merger model is used by business organisations to expand their
markets and generate more revenue. Apparently, the success of the merger or takeover is
dependent more on the mother companies financial and strategic might. However, in reality, the
subsidiaries play equally important role in ensures success and profitability of the takeover. The
paper would visit this mutual dependence between mother companies and subsidiaries through
the lens of Bank of America and its erstwhile subsidiary, MBNA (bankofamerica.com 2018).
The paper would take into account theories like economies of scale and strategic human resource
management besides the main theory acquisition and mergers.
Bank of America and MBNA acquisition was a mesh:
The acquisition of MBNA by Bank of America was a cultural mesh and not a cultural
clash. Cultural mesh as per Abdulai and Ibrahim (2016) refers to the situation when one
organisation acquires another organisation. The holding organisation accepts some of the cultural
aspects of the acquired subsidiary company while enforcing some cultural aspects on its
employees. The management of the mother company motivates the employees of the subsidiary
company to inculcate the organisational culture of the former instead of outright forcing them
(Robbins and Millett 2016).
Miller (2016) refers the cultural clash in terms of organisational culture as confrontation
and conflict between the management of the mother company and subsidiary company when the
former enforces its own culture upon the employees of the latter, thus creating a conflicting
situation. Ovseiko et al.(2015) point out that cultural clashes are prevalent in situations when
multinational companies cross borders to acquire subsidiary companies to expand their market.

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ORGANIZATIONAL ACQUISITION AND CULTURAL SYNTHESIS
Again, cultural conflicts are also common when business organisations acquire firms from other
industries. The organisational culture prevailing in business organisations are often derived from
the cultures of their home countries. When such organisations enter foreign countries, especially
the ones which are culturally diverse, they often try to enforce their culture upon the employees
of the subsidiaries. Moreover, the employees of the mother company are often hostile towards
employees of the subsidiary company and that creates a sense of deprivation among the latter
group of employees. This gives rise to situations of organisational clash between the subsidiary
and the holding company which ultimately lead to failure of the acquisition (Jia, Rutherford and
Lamming 2016).
As far as the acquisition of MBNA by Bank of America is concerned, it was a cultural
mesh and not a cultural clash. One can point that Bank of America is a leading American
multinational bank based in the United States of America. MBNA is a financial company based
in the United States of America. Hence, both the companies are based in the United States and
shared common national culture. This cultural similarity between the two organisations enabled
the employees of the two companies to accept each other as co-workers (Ahern, Daminelli and
Fracassi 2015).
Ahammad et al. (2016) mentions that multinational companies acquire companies across
industries to expand their product line and market presence. Bank of America is an American
bank whereas MBNA is a credit card offering company. One can infer that the products and
business of the two companies are not totally same. Their employee policies and organisational
culture were also not totally same. However, the employees of the two business giants accepted
each other’s cultures to form a hybrid culture. For example, the dress code of Bank of America
was normally business casuals which enabled the bank staff to relate to diverse customer base.

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ORGANIZATIONAL ACQUISITION AND CULTURAL SYNTHESIS
The normal dress code of MBNA is formals which in turn allow the staff of credit card offering
company to relate to its high net worth income clients (Zheng et al. 2016). The management of
Bank of America allowed the employees of MBNA retain their dress code of formal wear but
they could also follow the business casual dress code. The American international bank however
curtailed salaries of MBNA employees and forced them to accept the salary parameters of Bank
of America.
Importance of culture in success of mergers/acquisitions:
Culture plays a very important role in case of mergers and acquisitions. As per theory of
globalisation, business companies enter different countries to expand their business and boost
their revenue generation. The multinational business organisations in their host countries
establish subsidiaries or take over exiting firms. This allows them to get access to the human
resources of their subsidiaries as well. Jackson, Schuler and Jiang (2014) point out that as per
strategic human resource management, the employees of organisations play strategic role in
executing the plans formed by the management. As per Baumers et al. (2016), the multinational
companies in order to achieve economies of scale, employ human resources in their host
countries as well. As per the economies of scale theory, the multinational business organisations
adopt this human resource strategy to reduce their human resource expenditure. This strategy
brings the employees of the mother companies in contact with the employees of the subsidiary
company. The employees of the mother company and the subsidiary company often fail to
collaborate owing to the cultural differences between the two countries (Schraeder and Self
2003). The cultural differences play significant roles when two countries have bitter relationships
in the past. The employees of the mother company and the subsidiary company owing to the
bitter cultural history often end up displaying abusive and indifferent attitudes. This results in

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conflict between the two groups of employees which ultimately starts impacting the smooth
operation in the company. This lack of collaboration starts impacting the productivity of the
company as a whole. Khazanchi and Arora (2016) point out that mergers and acquisitions attract
immense legal and other expenditure from the side of the mother company. One can clearly infer
from this fact that the loss of productivity due to cultural conflict between the two groups of
employees causes immense loss to the mother company. The mother company is often compelled
to close the subsidiaries in this cases to reduce further losses (mbna.co.uk 2018).
Smooth transition and collaboration between mother company and subsidiary:
The mother company and the subsidiary companies have to collaborate to ensure smooth
transition and amalgamation of their organisational cultures. Angwin et al. (2016) mention that
conflict between employees of mother companies and subsidiaries stemming from differences in
cultures lead to failure of takeover. The mother companies which are financial and strategically
stronger than their subsidiaries often enforce their own organisational cultures on the employees
of the latter. The mother companies often compel the employees of their subsidiaries undergo
abrupt organisational changes (Jenter and Lewellen 2015). This creates stress on the employees
of the subsidiary companies which hampers their motivation. The terms imposed by the
management of the mother companies like new reporting managers and new compensation
policies put immense mental stress on the employees of the subsidiary companies. They do not
get time to acclimatise with the organisational culture and environment of the mother company
(Larkin and Larkin 1996). The outcome of this imposition of organisational culture on
employees of subsidiary companies ultimately leads to high employee turnover. This adds to the
operating costs of the mother company in the new market. Loss of experienced employees results
in the faulty decision making which has long term effect on the business (Brueller, Carmeli and

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ORGANIZATIONAL ACQUISITION AND CULTURAL SYNTHESIS
Markman 2018). Thus, the lack of cooperation and conflict between the employees of the mother
company and subsidiaries are capable of causing immense loss to the former. Hajro (2015)
mentions that collaboration between the employees of mother company and subsidiary
companies play a very significant role in success of the acquisition. The case study mentions that
Bank of America instead of imposing its organisational culture on the employees of MBNA,
accepted their organisational culture, at least partially. For example, the management of Bank of
America reduced their salary but accepted their dress code. The outcome of this change was that
though some of the employees of MBNA resigned, most of the employees remained (Chmielecki
and Ukasz 2018). This proved that mutual acceptance of organisational culture between mother
company and subsidiary can lead to smooth transition of operations from the subsidiary to the
mother company’s control. Moreover, Bank of America was able to use the product of MBNA,
credit cards to expand its own product line. This enabled the bank to serve more customers and
generate more revenue. This analysis shows that mutual acceptance of organisational cultures
between mother company and subsidiary is important for success of mergers (mbna.co.uk 2018).
Conclusion:
One can conclude from the discussion that multinational companies should adopt
acquisition and mergers strategies more effectively to expand their business. They should not
enforce their organisational culture on the employees of their subsidiaries. They instead of opting
of cultural clash, opt for cultural mesh to infuse their culture into their newly acquired
employees. This would boost smooth productivity and higher revenue generation in the global
market.

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References:
Abdulai, M. and Ibrahim, H., 2016 Abdulai, M. and Ibrahim, H., 2016. Merging Cultures in
International Mergers and Acquisition: A Case Study of Lenovo's Acquisition of IBM PC
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Ahammad, M.F., Tarba, S.Y., Liu, Y. and Glaister, K.W., 2016. Knowledge transfer and cross-
border acquisition performance: The impact of cultural distance and employee
retention. International Business Review, 25(1), pp.66-75.
Ahern, K.R., Daminelli, D. and Fracassi, C., 2015. Lost in translation? The effect of cultural
values on mergers around the world. Journal of Financial Economics, 117(1), pp.165-189.
Angwin, D.N., Mellahi, K., Gomes, E. and Peter, E., 2016. How communication approaches
impact mergers and acquisitions outcomes. The International Journal of Human Resource
Management, 27(20), pp.2370-2397.
Bank of America. 2018. Bank of America - Banking, Credit Cards, Home Loans and Auto Loans.
[online] Available at: https://www.bankofamerica.com/ [Accessed 8 Jun. 2018].
Baumers, M., Dickens, P., Tuck, C. and Hague, R., 2016. The cost of additive manufacturing:
machine productivity, economies of scale and technology-push. Technological forecasting and
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Brueller, N.N., Carmeli, A. and Markman, G.D., 2018. Linking merger and acquisition strategies
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Chmielecki, M. and Ukasz, Ł. 2018. Organizational Culture in Mergers and Acquisitions’,
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