Israel Berman, Asia managing director of Hay Group |
By Jane Han
Staff Reporter
When South Korea's construction equipment giant Doosan Infracore bought out American compact utility maker Bobcat in 2007, employees of the North Dakota-based firm expressed their worries over job security and cultural change on select online forums.
``Guess we should all learn to speak Korean?'' wrote one blogger named ``Bye-Bye Bobcat,'' and another assumed, ``The top management will be wiped out.''
Such anxieties are natural because it is relatively new for overseas companies to be acquired by Korean firms, says Israel Berman, the Asia managing director of Hay Group, a global management consulting firm.
``Western people will have a lot of questions, with the immediate worry being, `What's going to happen to me?''' said Berman in a Korea Times interview Friday.
He said Korean firms ― which have lately sealed many lucrative merger & acquisition (M&A) deals ― must pay extra attention to cultural integration since this key factor can ultimately lead to a merger's success or failure.
According to a Hay Group study, 70 percent of buyers consider their M&As to be a failure, while more than 60 percent of executives feel a notable post-merger difference in culture and level of commitment between two organizations.
``People focus on acquisition models and formulas, but the synergy doesn't end up coming because they're not taking proper follow-up measures,'' he explained, adding that it takes at least 18 to 24 months for employees of the acquired firms to acquaint themselves with a new system.
Doosan Infracore, which made the largest M&A deal ($4.9 billion) abroad by a Korean firm, so far, seems to be on track. That's because its Vice Chairman Park Yong-maan apparently acknowledges the importance of integration.
He once said, ``Concluding the deal is the easiest part of an M&A. From that point, the integration process decides the consolidation's success.''
Less than a year after the company acquired Bobcat, it kept most of its management in the U.S. and maintained the existing operating system to maximize flexibility and freedom.
Berman says this is a good transition for two-three years as it helps to build trust, but wouldn't advise it in the long run.
``The extreme way would be to completely leave them alone and keep up with the business unit's existing style,'' he said, adding, however, that such practice would minimize synergy.
``When you are a winner in an acquisition, you must reach out to the acquired,'' Berman said, stressing the importance of communication and hiring foreign executives to improve effective communication.
He said it is mandatory to invite foreigners into the top team and manage business in English because these are the prerequisites of becoming a global firm.
``If you want to run a global company, you need to behave globally,'' said the management expert, who oversees the Asian market from India to Japan.
Despite the long process of integration, Berman said M&As are still a great way to expand onto the global stage when equipped with the right strategies.
Aside from Doosan Infracore, food company Dongwon Group recently said it agreed to buy U.S. canned tuna firm StarKist, and Lotte Confectionary is to buy Belgian chocolate maker Guylian.
Berman advised Korean firms looking to buy more companies overseas to learn their culture ahead of time.
``Koreans are nice and polite in their own way,'' said the globetrotting executive. ``But they lack thinking from another person's point of view.''
He said understanding someone else's culture is a starter for any business.
``One meeting could kill the whole thing,'' said Berman, adding, however, that many times the bad feelings stem from miscommunication.
When asked about Samsung's possible acquisition of AMD, a major supplier of integrated circuits for computers, Berman said taking over a global firm with a worldwide presence calls for more work.
He exemplified the Unilever-Bestfoods merger in 2000, explaining that Unilever saw mixed integration results among Bestfoods' locations in some 150 countries.
The bottom line is to open and change the way things are done in Korea as well, instead of implementing new ways only in the overseas units, says Berman.
``You haven't expect to have Korean directors, maintain the same system and expect people to fall in love,'' he said. ``Results are seen at the end of two to three years, when employees of acquired firms can comfortably say, `I work for a Korean company.'''
jhan@koreatimes.co.kr
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