Categories : Change Management China China Recruitment - Getting Good People Chinese Culture Culture Development Motivating Workers Private Equity Acquisition Recruitment

 
doing M&A in China

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Doing M&A in China takes all the thinking you can muster. Everyone does legal and financial due diligence. Too few do HR due diligence. Further, their thinking from and on HR after the purchase will not make most companies nearly as successful as they should be.

Doing M&A in China is a huge HR challenge.

Integration is the term the industry uses for what happens after you buy. The Association for Corporate growth has a post that can help us think about the key mistakes.  I post three of their 8 reasons doing M&A in China fails. You can get the whole PDF here.  This quote is taken from page 5.

3) the failure to fully understand the cultural differences and directly copy western business practices in China; 4) the over-reliance on personal relationships; 5) following “common” local business practices without understanding their legal basis;

Deloitte lists Poor Leadership and Culture Gap as 2 of its 6 reasons M&A fails in China. See all the reasons on page 10 here.

So, at minimum, 33% of the reasons doing M&A fails in China is because the buyer did not get the people part of the equation right. All their lawyers and accountants got paid big money and could not touch these critical cultural issues. And they failed. Many others do not outright fail but fall far short of the buyers expectations due to people issues.

We recently helped a struggling acquisition. They only lost about 6 months before calling us. They had no idea before they started that they would have to fire the top 8 managers. They were very glad that we could find and convince them to hire some very unlikely candidates who have proven to be gold for them. The ability to run a Western enterprise and change a Chinese cultural enterprise into an international standards operation is quite another.

Doing China smart HR due diligence is the first thing. Then hiring a GM who can create culture change to your liking on a large scale is next. These people are gold and not who you might consider hiring without expert eyes. You likely will  need to give that GM some extra support in placing some other talented and trustworthy leaders with him. Then usually the worm will turn and things start getting more understandable.

Hope your experience in doing M&A goes well once you have noticed the key steps here.

Thoughts?  See Also:

Succeeding in Your China Acquisition I – Before you Buy

Succeeding in your China Acquisition II – After China Acquisition

Private Equity Failing Operationally

 Posted on : May 12, 2015
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