On September 3, 2013, Microsoft announced that it would acquire Nokia’s mobile phone division for $7.2 billion. Through a series of missteps, many of them cultural mismanagement, Microsoft informed the public in May 2016, of its intention to write off most of the $7.2 billion it paid for Nokia and agreed to sell the mobile devices unit to HMD Global and Foxconn Technology for just $350 million. This series uses the Mergers and Acquisitions Synergies Framework to explore the c

The Mergers and Acquisition Synergies Framework we developed includes measures from research on national culture by Geert Hofstede, Erin Meyer, and Sidney Gray. We used their data to show how cultural factors in cross-border mergers and acquisition can lead to success or failure. Our research is limited to national culture factors, yet as seen in a few instances above, corporate culture can be different from national culture. These differences can cause culture clashes of the

Just 14 months after the acquisition, HP wrote down 80 percent of Autonomy’s purchase price. Four years later, HP sold Autonomy for a fraction of what it paid to acquire the company. The differences in the accounting standards used by each company allowed Autonomy to recognize revenue in a more aggressive way. Ultimately, HP accused Autonomy of fraud. Accounting Methodology Accounting Standards. Generally, large merging companies hire auditors to provide a due diligence repo

The public had mixed opinions about the HP-Autonomy merger. Some shareholders felt that HP overpaid to acquire Autonomy, a sentiment picked up by the media. Many of the shareholders’ concerns were valid and stemmed from the lack of transparency concerning the deal. Public Acceptance Public Perception. The Cherokee have a proverb stating, “Listen to the whispers and you won’t have to hear the screams.” The quote is used to remind those in charge to be mindful of public feedbac

Leadership changes at HP soon after the merger resulted in friction affecting employees in both companies. HP’s decentralized management style conflicted with the hands on approach Autonomy’s CEO Michael Lynch used. Autonomy’s entrepreneurial management method clashed with the HP’s entrenched hierarchical structure. Leadership Leadership Turnover. Leadership turnover, or the act of changing CEOs during the acquisition or integration phases, is quite common for HP: it has a hi

Autonomy’s work culture was different from what HP anticipated. HP found Autonomy’s culture to be more task–based and confrontational than HP’s culture. These behavioral problems were never resolved and resulted in friction and distrust. Characteristics Task-based vs. Relationship-based. Erin Meyer, author of The Culture Map, suggests that in business settings, the U.S. is more highly task-based while the U.K. is more relationship-based. A task-based culture focuses prioritiz

HP had little experience managing software and found the software business unfamiliar. HP ultimately made the decision to let Autonomy function as an independent unit. Consequently, effective communication between the two companies was not developed. Information Availability One indicator that HP’s acquisition of Autonomy would not yield the anticipated results is communication, or lack thereof, between the two companies. A key takeaway from Why Deals Fail: And How to Rescue

Shortly after Hewlett-Packard appointed Leo Apotheker to lead the company, the board approved the acquisition of the UK-based software company, Autonomy. Hewlett-Packard, well known for its computer hardware, thought the synergies it could have with Autonomy coupled with its brand recognition would give it a strong presence in the software market. This series explores management’s cultural misstep using the Mergers and Acquisitions Synergies Framework to examine how this acqu

. The research conducted in this paper is based upon the Mergers & Acquisitions Synergies Framework, developed by combining outside findings by Geert Hofstede, Erin Meyer, and Sidney Gray. It is limited to national culture factors, which play a different role in business than organizational culture. Further studies may need to be conducted to help distinguish differences between national and organizational cultures. In reality, Microsoft’s acquisition of Nokia was doomed to f

Nokia provided financial reports using IFRS while Microsoft reported using US GAAP. Differences in national culture combined with different reporting requirements creates accounting and finance cultural differences. These differences can lead to financial reporting misunderstandings and possible valuation problems. Though there is little public information surrounding the rationale behind Microsoft’s valuation of Nokia, a consensus is that Microsoft paid too much for a com

The citizens of Finland were unhappy with the announced Microsoft-Nokia merger. The Finns had long felt national pride from Nokia’s success. Giving up control of this national company to a foreign entity was a blow to their identity. Microsoft did little to alleviate the Finns’ concerns. Public Acceptance Public Perception News and media critics (as well as citizens) in both the U.S. and Finland expressed dislike for Microsoft’s acquisition of Nokia’s mobile unit. From Micros

Management turnover during the period surrounding an acquisition is challenging, particularly when new leaders don’t share the same passion for the merger.  Leadership change created uncertainty for Nokia employees. Announced layoffs coupled with differences in leadership style created more suspicion and distrust of those leading the merged companies. Had Microsoft been sensitive and aware of differences in the way Nokia employees view and interact with management, many probl

Microsoft discovered that Finns’ views on work-life balance are different from those of Americans. Behavioral misunderstandings caused tension and friction between US and Finnish management teams and employees. Many problems could have been avoided had Microsoft embraced Nokia’s corporate and Finland’s national culture rather than expecting the Finns to adapt to their new owner’s native culture. Core Values Individualism vs. Collectivism. While both the United States and Finl

Language differences impede communication. But communication issues arise from much more than just having employees who speak different languages. Microsoft discovered that not spending enough time to understand and adapt to differences in communication styles, mannerisms, and culture made bringing Nokia under its corporate umbrella difficult. Information Availability Openness Before being acquired by Microsoft, Nokia struggled to maintain open communication. According to sev

Lenovo has yet to resolve all its cultural issues. As one global director said, “Until now, I think… [cultural integration] has not been completed…there still remain many cultural problems…I think this part is the most difficult one for the whole acquisition.”1This is an important reminder that the cultural integration process is measured in years, not months. Regardless, Lenovo truly is an example of a successful cross-border M&A and is regarded as such in academic literatur

It is a significant challenge bringing together two companies that have different cultural values concerning accounting and finance. Lenovo and IBM adhered to different accounting standards and come from cultures that have divergent perspectives on secrecy, uniformity, optimism, and corruption. These often-overlooked differences caused challenges for the merged company. Accounting Methodology There has been little to no release of information regarding the details of cultur

To say that the announced Lenovo-IBM merger was met with skepticism is an understatement. The US government pushed back as did the press, many leery of losing a company with a long, reputable reputation and technical know-how to a company with strong ties to the Chinese government and whose products were viewed with suspicion. Lenovo overcame some of environmental issues by locating its new company headquarters in the US. Public Acceptance Foreign Relations. Since the era of

Determining who should lead the newly merged company is a critical decision. Management and employee turnover is disruptive and adds stress to the organization as it integrates people and processes. The new Lenovo team recognized that leadership and the way they make decisions would mean the difference between success and failure. Leadership Leadership Turnover. Lenovo split top management positions almost exactly in half between Lenovo leaders and former IBM leaders. As part

The relatively unknown Chinese computer manufacturer, Lenovo, set its sights high: acquire the legendary IBM PC division. Though there were many who thought this merger would fail, it became one of the most successful Chinese acquisitions in history. This series uses the Mergers and Acquisitions Synergies Framework to explore the careful way Lenovo managed cultural integration with IBM to become a world leader in computer sales. Introduction Chinese merger and acquisition tra