Another view on the Tata acquisition

How Tata can beat the 80% failure rate for M&As
Declan Mulkeen - 03-Apr-2008

Following Tata's purchase of Jaguar and Land Rover last week there needs to be an awareness of the challenges which a cross-border acquisitions may produce.

AutomotiveThe current trend towards international mergers, acquisitions and joint ventures is resulting in organisations not only having to deal with the merger of different corporate cultures, but also of two or more national cultures. While Tata will be more familiar with British business culture following its recent acquisition of steel producer Corus and its ownership of Tetley Tea, it will need to work hard to understand the unique culture of the British car maker.

Jaguar and Land Rover, previously owned by US car manufacturer Ford, are familiar with North American management and business practices so the change to Indian ownership should be an interesting challenge for management and production staff alike. With estimates suggesting that as many as 80% of international mergers and acquisitions fail, Tata will need to take extreme care and consideration to ensure that it fully understands the national and corporate cultures of the companies it has bought into.

There has already been employee suspicion over the secretive nature of the three month purchase negotiations when Tata was named ahead of private equity company One Equity and Indian automotive group Mahindra and Mahindra. Delays were put down supply contract negotiations with Ford and pension and job security issues.

Key to Tata’s success will be the ability to maintain clear and open channels of communication with all Jaguar and Land Rover employees. Information is the lifeblood of any organisation and the way in which it is communicated can make the difference between a productive and committed workforce and one that is sceptical and unreceptive.

All the senior management teams must communicate accurate information transparently, explicitly and as quickly as possible. Information must then be cascaded throughout the entire business in order to effectively convey the key messages. While rapid and efficient communication should help to ease feelings of doubt and insecurity, managers should understand that employees need time to digest and understand the impact of the acquisition and gain a clearer understanding of the business objectives.

How the cultures differ

All parties involved also need to recognise the importance of understanding the underlying values and attitudes of each culture. To put it simply, they need to understand the other culture's perception of 'how we do things': this will include differences in levels of formality, tolerance of risk and methods of decision-making.

Different perceptions of time may also be a particular challenge for Jaguar/Land Rover and Tata. Before business is even discussed, Indians will typically take much more time than the British to meet the employees at all levels and develop relationships. This could conflict with the local approach, which often expect things to be done more quickly right from the start.

The human element

Jaguar/Land Rover and Tata should also take careful steps to ensure that the human element of the acquisition is not ignored. It is the employee who will have the greatest impact on the successful outcome of this acquisition and carefully selecting respected people in the organisation to help communicate change and policy will help ensure they feel cared for. Without taking the time to fully understand the effect that a changing organisational culture can have on employees as well as the challenges of bringing together national cultures, companies are risking everything.

Mr Tata

Many people probably have a misperception of the Tata Group, perhaps identifying it as an emerging market’s upstart. However it has been operating since 1868 and has often won accolades in valuing its employees as much as it values profit. It prides itself on equality and fair management which can only be seen as positive attributes for Jaguar and Land Rover. Mr Tata has a passion for innovation with the most recent example being the launch of India's own Volkswagen - People's Car. Called the Nano and costing just $2,500 it has opened car ownership to millions of Indians, proving that Mr. Tata and his empire is out to make a difference.

Declan Mulkeen, Marketing Director at Communicaid, Europe's leading Culture and Communication Skills consultancy. It acted as cultural consultant to Corus during Tata’s purchase.