What Comes After a Merger or Acquisition?

Hello,

This week, I’d like to talk about mergers and acquisitions (M&A).

Lately, I’ve noticed a sudden increase in conversations about M&A among people around me.

Our company was even approached by a U.S. business that had been acquired by a Japanese financial services company. They were interested in providing Japanese business culture training to their leadership team. Although the discussions did not result in a contract, it was an interesting opportunity.

I’ve also noticed that more of our clients are becoming involved in M&A activities.

This got me thinking:

What happens after an acquisition? And what impact does it have on the Japanese economy?

So I decided to explore these questions through a conversation with AI.

Here is the response I received:

Japanese companies’ overseas acquisitions have complex effects on employment, potentially creating jobs while also eliminating others. International expansion can have a positive impact on domestic employment, but there is also a risk that downsizing operations in Japan could lead to job losses. Therefore, corporate strategies and government policies play important roles in determining the overall impact.

Corporate strategies and government policies?

Wait, wait a minute!

Aren’t we getting ahead of ourselves?

That discussion assumes that post-merger integration (PMI) has already been successful.

But getting to that point is the hard part!

Surely we should have learned that from the experiences of the 1980s.

Integrating two American companies is difficult enough.

Now imagine a Japanese company crossing the Pacific to acquire an American business.

Employees at the acquired company may suddenly find themselves overwhelmed with uncertainty.

What will happen to my job?

Will women face discrimination?

Will we be expected to work excessively long hours?

Will we be forced to learn Japanese?

These concerns can create considerable anxiety among employees.

And there are plenty of examples of acquisitions that failed to achieve successful integration.

Some integrations take far longer than expected, preventing companies from reaching their projected sales and profitability targets.

In other cases, the acquiring company discovers that the financial condition of the business it purchased is far worse than anticipated.

Some even argue that acquisitions carry a substantial risk of turning into costly mistakes, with much of the investment ultimately going to waste.

(That’s a painful thought!)

How Can Companies Avoid These Costly Mistakes?

To explore this question, I recommend reading this article by Rochel Cupp. The article is written in English, but you can use AI to translate it if needed.

As expected from Rochel Cupp, it is an excellent article, both in the quality of its insights and the clarity of its writing.

One of the points it makes is that, having learned from the acquisition failures of the 1980s, more companies are now taking the time to conduct thorough due diligence in hopes of achieving better outcomes.

But even with careful preparation, there are many potential pitfalls.

And none of them can be resolved overnight.

Some of the major challenges include:

Cross-cultural clashes: Differences in communication styles, management practices, and workplace expectations can create friction.
Stereotyping each other: Employees fall into the trap of thinking, “Those Americans always…” or “Those Japanese always…” rather than understanding one another as individuals.
A sense of corporate superiority: Both sides may secretly believe that their own company is better than the other.
Uncertainty about the future: Employees worry about job security, organizational changes, and what the acquisition will mean for their careers.
Failure to address compensation differences: Differences in salaries, benefits, and reward systems may become sources of dissatisfaction and conflict.
Lack of an integration plan: Companies may complete the acquisition without having a clear strategy for bringing the two organizations together.

The Real Challenge: Who Will Lead the Integration?

This raises an important question for Japanese companies.

Do they have people who can understand these complex challenges, develop practical solutions, and put those solutions into action while managing day-to-day business operations?

Personally, I believe there are few business challenges more difficult than successfully integrating two companies after an acquisition.

One possible approach is to avoid acquiring 100% ownership immediately.

Instead, a company might begin with a minority stake and gradually increase its ownership over time.

This can provide opportunities to develop mutual understanding, build trust, and learn how the organizations work together before pursuing full integration.

But beyond the question of ownership structure, I believe there is an even more fundamental issue to consider.

Successful M&A Begins with People

The United States is an enormous country, home to people with extraordinarily diverse backgrounds, values, and ways of thinking.

For Japanese business leaders, the challenge is not simply to acquire an American company and begin directing its operations.

It is to engage in meaningful dialogue with American employees and leaders.

It is to understand their perspectives, establish a shared direction, and align everyone’s efforts toward common goals.

And ultimately, it is to bring people together so that the combined organization can achieve greater success and profitability than either company could have achieved alone.

How can Japanese and American teams work together, align their goals, and create greater value through collaboration?

I believe that is the question we should begin with.

Because the real work of M&A does not end when the acquisition agreement is signed.

In many ways, that is where the most important work begins.