Prashant Kale

Harbir Singh

Anand Raman

<article-ideainbrief class="article-ideainbrief">
 <h4 class="ideainbrief-title">The Idea in Brief</h4>
 <div class="ideainbrief-contents">
  <ul>
   <li>Instead of assimilating the businesses they’ve taken over, some companies from emerging markets have allowed acquisitions to retain their independence—and their top management teams.</li>
  </ul>
  <ul>
   <li>Although it’s early, signs suggest that this approach is working. Partnering, as the authors call it, even helps emerging giants bag premier companies—as the Ülker Group did with Godiva.</li>
  </ul>
  <ul>
   <li>Some drivers of the approach are peculiar to emerging multinationals, but companies like Cisco and Renault have also experimented successfully with this hands-off technique.</li>
  </ul>
  <p>The Idea in Practice</p>
  <p>Body</p>
 </div>
</article-ideainbrief><p>What counts in making a happy marriage is not so much how compatible two people are, wrote Leo Tolstoy, but how they deal with incompatibility. That philosophy underlies a novel approach to M&amp;A that some emerging multinationals have adopted. Instead of rushing to integrate businesses they’ve bought overseas, they’ve allowed their acquisitions to continue operating independently, almost as if there had been no change of ownership. Each organization focuses on what it does best even as it learns to use the resources and capabilities of the other to achieve its goals.</p>

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<p><span class="reprint">Reprint: R0912M</span></p>
<p>A takeover usually signals the demise of one of the two corporations involved in the tussle&#8212;no prizes for guessing which one. Breaking with this practice, some companies from emerging markets are preserving the identity of companies they&#8217;ve taken over and giving them near-total autonomy. The acquirers (the AV Birla Group, the Mahindra group, and the Tata group in India; the &#220;lker Group in Turkey; and AmBev in Brazil, among others) have also retained the incumbent management teams, including the CEOs, of the corporations they bought. The new parents lay down new values and create a fresh sense of purpose, but they leave it to the acquisitions to carry them out.</p>
<p>Some companies are better suited to adopt the partnering approach than others. Organizations with collaborative, inclusive cultures will have an easier time than companies with a hierarchical, command-and-control style. Senior executives in acquiring companies must be comfortable achieving goals through influence rather than control. They must also have a higher-than-average tolerance for ambiguity. Respect for new ideas is critical because executives must recognize the strengths of the acquired company and resist the urge to impose their way of doing things. These traits are encoded in some organizations&#8217; DNA, but others will have to develop them.</p>
<p>These are early days yet, but the authors&#8217; research shows that the partnering approach to takeovers seems to work better than traditional postmerger integration practices, and it has created value for shareholders.</p>

Don&rsquo;t Integrate Your Acquisitions, Partner with Them

Reprint: R0912M A takeover usually signals the demise of one of the two corporations involved in the tussle—no prizes for guessing which one. Breaking with this practice, some companies from emerging markets are preserving the identity of companies they’ve taken over and giving them near-total autonomy. The acquirers (the AV Birla Group, the Mahindra group, and the Tata group in India; the Ülker Group in Turkey; and AmBev in Brazil, among others) have also retained the incumbent management teams, including the CEOs, of the corporations they bought. The new parents lay down new values and create a fresh sense of purpose, but they leave it to the acquisitions to carry them out. Some companies are better suited to adopt the partnering approach than others. Organizations with collaborative, inclusive cultures will have an easier time than companies with a hierarchical, command-and-control style. Senior executives in acquiring companies must be comfortable achieving goals through influence rather than control. They must also have a higher-than-average tolerance for ambiguity. Respect for new ideas is critical because executives must recognize the strengths of the acquired company and resist the urge to impose their way of doing things. These traits are encoded in some organizations’ DNA, but others will have to develop them. These are early days yet, but the authors’ research shows that the partnering approach to takeovers seems to work better than traditional postmerger integration practices, and it has created value for shareholders.

Don’t Integrate Your Acquisitions, Partner with Them

Summary.

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