Cultural integration is a key to post-M&A success

08:00 | 24/07/2018

The merger and acquisition trend seems to be showing rapid growth along with investment flows from international enterprises to Vietnam. It is believed that they are the fastest way for outside corporations to join domestic markets compared to having to build facilities and establish employee systems.

cultural integration is a key to post ma success

Our research shows that some international companies, especially from Japan and South Korea, now want to go the mergers and acquisitions (M&A) route in various fields of the Vietnamese market such as manufacturing, retail, fast-moving consumer products, professional services, and more. In the pre-M&A process, they already plan to recruit talent or relocate high-level overseas staff instead of modifying the whole human resources system.

However, M&As harbour two great risks: personnel management and cultural integration. So, before officially starting M&A transactions, at least three years of conversion are needed.

Although the M&A deal between Navigos Group and en-Japan Corporation in 2013 was assessed to be a complete success, we also learned valuable lessons about culture and staff. Fortunately, our founder had created a culturally diverse environment right from the start, so when our parent corporation en-Japan visited Vietnam, they showed great interest in cultural characteristics here at Navigos Group. We still uphold our cultural heritage and construct a working environment focused on cultural diversity and the motto “People are at the centre of development”.

I think the key that led to this successful M&A deal is that the philosophy of Navigos Group was similar to en-Japan’s. As is the case for a successful marriage, we need to choose a partner that matches our characteristics, mindset, culture, and philosophy.

Another issue we had to face at the time was a feeling of resignation as the M&A deal was being processed. Some staff members were unable to get on with the new way of management and chose to quit. I want to emphasise that capabilities and specialised skills are not the focus in an M&A deal; being open-minded and thinking positive should be the most important things. For this, it is necessary to deliver consistent internal communications to each employee.

In all companies, the staff plays a key role in generating values. Every M&A transaction has to seriously consider the quality and quantity of the available human resources. I do not share the opinion that you should completely change the staff with an M&A deal; it is extremely time-consuming and a waste of money.

Vietnam boasts an advantageous population structure with a young, strong workforce, so the supply of employees will not bother international enterprises. In terms of quality, Vietnamese employees have less experience and less of a global mindset compared to workers in other countries. On the other hand, they have the cultural understanding and knowledge of the domestic market we really need when growing a business.

It has just been five years since M&As became a trend here. To many people, including employees and employers in Vietnam, M&As are a strange new thing. As a consequence, there are some internal shortcomings concerning a lack of understanding about M&As, which are barriers for both sides in such a deal.

In my opinion, enterprises should organise internal communications throughout M&A deals – before, during, and after. Along with this, the company’ leaders need to co-operate in managing the transfer period. They then need to regularly share their targets, long-term vision, and short-term goals in order to make employees understand their career paths as well as the company’s orientation and feel more secure in their jobs. In addition, internal education is advisable if enterprises want their staff to meet the skill and knowledge requirements after M&A transactions.

The M&A wave took developed countries 20-30 years ago and it is said that M&A deals are essential for one enterprise to gain a market monopoly, expand its market share or scale up all over the world, or buy some joint companies and use investor money to buy and enlarge business segments.

As I have said, M&As must be communicated clearly inside the company to ensure that each person understands the meaning of this transaction. Moreover, in HR management, in lieu of a top-down style which makes employees uncomfortable, it is much more effective to use a bottom-up approach to build attachment. After the M&A, a bottom-up management model helps to understand the corporate culture and employee behaviours more easily. Once we understand our people, we can change to a top-down management approach.

Furthermore, department structures will be affected more or less depending on their functions and the nature of the work after the M&A deal. This directly impacts personnel objectives, so the management needs to take the following steps to retain human resources: Firstly, precisely know the restructuring process and offer suitable positions; secondly, ensure personnel career paths; and lastly, support training courses if needed.

I think Vietnam is opening up to and gradually familiarising itself with M&As, since developed countries don’t have much space to invest anymore, but Vietnam is still a developing country with great potential. In my opinion, M&A deals in Vietnam involving international companies are win-win deals. The combination of products that suit consumers’ culture and trends with well-known global brands creates a resonance which helps sellers in the market achieve their long-term goals.

Nowadays, more and more companies are following the HRBP Model (Human Resource Business Partner), not only building a personnel strategy for growing the business, but also offering appropriate orientation for human resources in M&A deals. This includes hiring and training in anticipation of the post-M&A phase plan for HR management. If your company tends to M&As, then building an HRBP department is necessary. This model is also a part of bottom-up management, which helps to better understand and get more information from each department and business.

By Gaku Echizenya CEO, Navigos Group

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