The number of mergers and acquisitions involving US companies alone in 2004 reached 376 with an aggregate total paid of US$22.64 billion. In comparison, in 2003, the total amount paid was US$12.92 billion.

However, statistics show that the failure rate of most mergers and acquisitions lies somewhere between 40-80%. If one were to define ‘failure’ as failure to increase shareholder value then statistics show these to be at the higher end of the scale at 83% (Cnnfn.com 1999). The facts highlight a worryingly poor success rate for international mergers and acquisitions. Why?

Many business commentators are now acknowledging that failure does not have its roots simply in financial, monetary and legal issues but in lack of intercultural synergy. Research suggests that up to 65% of failed mergers and acquisitions are due to ‘people issues’, i.e. intercultural differences causing communication breakdowns that result in poor productivity.

A recent example of such intercultural failure has been that of DaimlerChrysler. Both sides in the partnership set out to show that intercultural hurdles would and could be overcome in their global merger. Recent articles in the Wall Street Journal and Business Week suggest however that DaimlerChrysler underestimated the influence of culture, and due to culture clash, almost two years later is still struggling to become a unified global organization.

Such discourse is highlighting the need for more intercultural training both within the framework of mergers and acquisitions and for key personnel such as managers and HR departments. In both instances culture is being ignored rather than being embraced and used positively.

Piero Morosini, author of Managing Cultural Differences: Effective Strategy and Execution Across Cultures in Global Corporate Alliances, emphasizes that "misunderstood national cultural differences have been cited as the most important factors behind the high failure rate of global JVs [joint ventures] and alliances."

Morosini argues that when intercultural differences are ignored during the evaluation and negotiation stages of a merger, integration inevitably fails. He adds that the manner in which an organization handles intercultural challenges is directly correlated with the performance of the merger in the post-integration stage and can mean the difference between long-term success or failure.

If intercultural understanding is to be recognised within the systems of processes of mergers and acquisitions, staff training is critical. It is the leaders, managers and HR personnel of companies that must have intercultural competency. However, it appears that companies are not investing enough in intercultural, or for that matter any, training.

In the Business Energy Survey, October 2004 (Adecco and Chartered Management Institute) where 1,500 managers were surveyed only a third had received training in the last 12 months. If management are receiving such low levels of support one can assume that other functions are receiving as much or even less.

Companies must start to become more aware of these deficiencies and their possible future impacts. If the mergers and acquisitions of the future are to prove fruitful , companies must design and implement comprehensive intercultural training programs for staff; assess and tackle possible areas of intercultural difficulties prior to, during and after mergers and put into place mutually agreeable intercultural frameworks of understanding to act as guidelines for post-merger synergy.

These tasks should not be seen as reactive, damage limitation exercises but as a positive, proactive means of creating cohesion, maximising efficiency and building a competitive advantage.