Updated: Jan 23
The Due Diligence Checklist uses the M&A Synergies Framework to provide practical advice to guide a businessperson looking to work with people of other cultures. This checklist is written in the U.S. perspective, but provides important considerations for anyone looking to do business abroad. The checklist gives cultural guidance in the areas of communication, behavior, management, environment, and accounting and finance. For definitions and examples of the following topics, see the M&A Synergies Framework.
Openness. Providing information to employees during the early stages of integration will likely lead to greater synergy realization.
Start open discussion early to build trust. When left in the dark, employees worry their job security is threatened. It is better to be open with employees about the direction of merging companies in order to gain their trust.
Difficult news doesn’t get easier to give so give it early. The longer you wait to give bad news to employees of both acquiring and target companies, the more they lose their trust in you as a leader. Being open early will likely increase employee moral over the merger and give employees more confidence in the firm leaders and merger direction.
Communication is key with the public, investors, politicians, and regulators. Communicate important details with everyone involved. This will help you build the relationships you need to create the synergy you want.
Language Barriers. Merging abroad often means merging with a company that speaks a different language than yours.
Try learning the language before hiring a translator. Subtleties and nuances can be missed through translation which may cause misunderstandings between parties. Even though learning the language might prove difficult and nuances may still be hard to catch, learning the language will be more helpful in the long-run. Taking time in the early stages to learn even just a few key greetings and phases demonstrates a concern for others.
Adopting a language before the merger can lead to better outcomes. Learning the language of your target company can show your commitment to them. Just like “adopting English makes it easier to recruit global stars (including board members), reach global markets, assemble global production teams and integrate foreign acquisitions,” adopting the language of your target company can have similar results1.
Forcing employees to learn a language may result in negative emotions and attitudes. “Slow learners lose their self-confidence, worry about their job security, clam up in meetings or join a guerrilla resistance that conspires in its native language. Cliques of the fluent and the non-fluent can develop. So can lawsuits: in 2004 workers at a French subsidiary of GE took it to court for requiring them to read internal documents in English; the firm received a hefty fine. In all, a policy designed to bring employees together can all too easily have the opposite effect.”2
Provide opportunity and incentives for employees learning the language. “Senior managers should explain to employees why switching to English is so important, provide them with classes and conversation groups, and offer them incentives to improve their fluency, such as foreign postings. Those who are already proficient in English should speak more slowly and refrain from dominating conversations. And managers must act as referees and enforcers, resolving conflicts and discouraging staff from reverting to their native tongues.”3
Educate counterparts about company-specific slang. Company slang can cause a language barrier, even within a single culture. Combining two cultures with different primary languages will be even harder when undefined slang (e.g. company specific terms) is involved. This can also lead to employees of the target company feeling ostracized.
High Context vs. Low Context.4 The level of explicit detail given in conversation often differs between cultures. Low context cultures give a lot of explicit information when speaking while high context cultures use implicit messages. Below are some key tips for communicating with low context cultures:
Know that you may be missing unspoken messages. The United States is one of the most low-context countries in the world. This means that when speaking with people of other nationalities, a US employee should be on high alert to listen for implied messages in the conversation.
Explain that repeating information is part of American culture. People in high context cultures often think you do not trust them if you keep repeating information. Though they recognize this as distrust, it is common practice in the U.S. Before your first meetings, simply explain that repetition is part of American culture.
Principles Based vs. Applications Based .5 Cultures have varying ways of learning and persuading. Knowing a culture has preferred ways of learning and persuading can help you in meetings and presentations.
Consider the way your audience best receives messages. Your presentation will go better if you present your material in the order your audience likes; attune your presentations to them. When working with a principles-based culture, present facts before findings. When working with applications-first cultures, present your recommendation before giving specific details.
Don’t be discouraged if your presentation didn’t go well. If your audience didn’t receive your message the way you thought they would, this might be because your message was presented in the wrong order. Listen to and answer their questions, and don’t jump to conclusions about their opinions.
Direct vs. Indirect Negative Feedback.6 The way feedback is given in varying cultures also affects the way feedback is received.
Don’t try to give feedback in another’s style. Instead, explain that you will be giving both negative and positive feedback and both are important. Trying to mimic the feedback style of others may make your feedback too extreme in either direction which will cause more issues.
Be careful about where you’re giving feedback. In some cultures, it is appropriate to give individuals feedback in front of a group. In others, feedback should be given during one-on-one meetings. Figure out the proper setting for feedback to avoid embarrassment to yourself and others.
Although underestimated, nonverbal communication is critical to building strong relationships across cultures. This section supplies a list of common mannerism differences between cultures:
Be aware of the physical distance between you and your interlocutor. When speaking with people of different cultures, their definition of personal space may be different from your own. For example, in Latin America and the Mediterranean, physical distance is very close and hugging business partners is common. On the other extreme, Asian countries avoid physical contact to the extent that even handshakes are inappropriate. 7 Learning the suitable distance between business people in a certain culture can prevent uncomfortable situations due to misunderstandings or misinterpretations of proximity.
Make sure to sit in the appropriate seat at a meeting. American bosses tend to sit at the end of a table, also known as the “head” of the table. Similarly, in Japan, “the seating [in conference rooms] is strictly hierarchical, with the manager sitting at the head of the table and the subordinates sitting in decreasing order of hierarchy.”8 However, in other Asian countries the most senior member of the team will sit in the middle of one side of the table.
Give thought to when and how long you make eye contact. In some countries, eye contact shows your level of attention while in others firm eye contact is ill-mannered. The chart above shows the level of eye contact preferences across countries.9
Be careful about when you smile. Smiles have different meanings in different cultures: “While in the United States the smile is an expression of joy, in Japan, it may imply a myriad of emotions (including embarrassment, displeasure, or anger). Russians, for example, rarely smile at the beginning of a negotiation, but as it progresses in a favorable manner, they start to smile.”10 Smiling at stranger in Korea implies that one thinks the person is stupid.
Figure out how to greet someone before meeting them. In America, it is common to greet a business partner with a firm handshake regardless of gender. However, in India, only men use a firm handshake; women use a gentler grip. In the Middle East, everyone uses a gentle grip when shaking hands. In Japan, it is customary to bow instead of shake hands.11
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M&A Synergies Framework: Due Diligence Checklist—Management Breaking down the checklist for both decision-making and leadership of a successful merger.
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