Partial or total integration in a cross‐border merger? Building a Nordic bank culture

• DOI: http://doi.org/10.1002/tie.21943
• Author: Akmal S. Hyder,Aihie Osarenkhoe
• Date: 01 July 2018
• Published date: 01 July 2018

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Partial or total integration in a cross-border merger? Building

a Nordic bank culture

Akmal S. Hyder | Aihie Osarenkhoe

University of Gävle, Sweden

Correspondence

Akmal S. Hyder, Department of Business and

Economic Studies, Faculty of Education and

Business Studies, University of Gävle,

Kungsbäcksvägen 47, 80176 Gävle, Sweden.

Email: ahr@hig.se

The rate of failure for international mergers and acquisitions (M&As) is exceptionally high, since

the integration of merging firms does not function well. Using a process perspective, this study

aims to analyze the integration process in a cross-border merger and the development of a

common organizational culture. A framework based on premerger cultural and organizational

fit, synergy, and resulting organizational culture is developed to study the growth of Nordea, a

merger of four Nordic banks. Data include in-depth interviews and secondary sources. This

case study shows how cultural and managerial differences are dealt with and synergies realized.

Building a broad organizational culture involving human resource management, decision mak-

ing, technology, competitiveness, and customer relationships is necessary for merger integra-

tion, but it is costly and difficult. We suggest that success in mergers lies in managers creating

a new cultural identity with unique values and perspectives.

KEYWORDS

best practices, cultural differences, cultural fit, merger, organizational fit, synergy

1|INTRODUCTION

Cross-border mergers between entities from different countries are

becoming more common, a testimony to the efforts being made to

strengthen firms' positions on the international market (Ratajczak-

Mrozek, 2015). Bauer, Matzler, and Wolf (2016) observe that the

global transaction volume based on mergers and acquisitions (M&As)

equals the gross domestic product (GDP) of a national economy such

as Brazil (in 2013, $2.24 trillion). Regardless of the acceptance of

cross-border mergers, data suggest that at least 50% of them have

been unsuccessful (Weber, Tarba, & Oberg, 2013).

Hitt et al. (2009) claim that M&A represents a popular strategy

used by firms for many years, but the success of this strategy has

been limited due to cultural distance (Popli & Kumar, 2015; Uhlen-

bruck, 2004) and problems related to postacquisition (Clark & Mills,

2013). Although there has been much research on M&As, Bauer

et al. (2016) and Stahl and Voigt (2008) argue that there is a lack of

understanding about cultural impacts on mergers and how different

integration actions and approaches take place in the international

merger. We address these issues in this article.

To proceed with the merging process, we can initially identify

two major areas of interest: cultural fit and organizational fit

(Colombo, Conca, Buongiorno, & Gnan, 2007). The first area is often

discussed in relation to establishing a foundation for cohesion in the

organizational entity, with problems arising due to the cultural dis-

tances between merging organizations (Buono, Bowditch, & Lewis,

1985; Riad, 2007; Stahl et al., 2013). Organizational fit, on the other

hand, deals with organizational structures, policies, functions, and

how decisions are made in the merging parties. This fit can be com-

pared with “strategic fit,”which Jemison and Sitkin (1986) describe as

the degree to which the target firm augments or complements the

parent's strategy and thus makes identifiable contributions to the

financial and nonfinancial goals of the parent.

Many scholars, however, put emphasis on sociocultural perspec-

tive compared to conventional financial performance measures

(Caiazza, Shimizu, & Yoshikawa, 2016; Stahl et al., 2013) because the

latter, according to Zollo and Meier (2008), do not reflect the post-

merger integration process. We argue that merging firms need to

develop a broad, new culture comprising both financial and nonfinan-

cial factors. In international negotiation, Brannen and Salk (2000)

observe that culturally different organizations develop a new operat-

ing culture, based on a common set of beliefs and solutions. The

merger literature has consistently presented organizational culture as

a force with which managers must contend if they are to reap any

DOI: 10.1002/tie.21943

Thunderbird Int. Bus. Rev. 2018;60:477–488. wileyonlinelibrary.com/journal/tie © 2017 Wiley Periodicals, Inc. 477