The problem often lies with postdeal integration. A new management team must be assembled. Two very different accounting systems may have to be meshed. Employees who speak different languages have to work together. “I tell companies not to underestimate the postdeal problems they may run into in China,” comments Michael Thorneman, who runs Bain & Co.’s China M&A practice. “But a lot of companies don’t invest in laying out a clear plan for after closure.”
That’s one mistake GE Money has learned to avoid. Postdeal planning starts well before any agreement is signed. The company identifies which managers will be responsible for the deal and gets them involved in due diligence and negotiation. There’s an integration leader and a cross-functional team of 25 to 30 people. Senior management keeps close tabs on progress, lending support where needed.
For its SDB alliance, GE has assembled a team of cross-functional specialists, representing areas such as finance, HR, and IT, that draws heavily on its operations in other Chinese-speaking markets. Barrett, as CEO for China, has been closely involved, as has GE Money Asia chief operating officer Ed Pinto, who oversees deal integration for the region.
2. Speed and focus. Advance planning means that GE can move fast once an agreement is in hand. That helps morale, but it’s also a competitive necessity. “In China, if you fail to move quickly right at the start, it takes a lot of time to recover,” says Pinto. “Our competitors move quicker because they know that we’re now in the market.”
Before closing, GE works with its partner to pick the projects that deserve immediate attention and maps out 100-day plans to get them done. Some of the projects are what GE terms “nonnegotiables.” Those typically include efforts to fix up IT, risk management, financial systems, and HR. Others are contributions the partner requests from GE — such as help in improving customer-relationship-management (CRM) processes.
GE Money also moves quickly to get new products into the local market. “The company we’ve acquired will typically have some products already,” says Pinto. “After we come in, we very quickly expand that number. We can usually launch a new credit card within three to nine months.” With SDB, the company began work immediately on the Wal-Mart card and on a new mortgage product.
Just as important as a quick start is knowing when to stop. “If you continue integration too long, it starts to interfere with people’s jobs,” says Pinto. When it starts planning the postacquisition projects, GE Money defines three sets of measures that will indicate when integration is done. Those include growth, productivity, and culture.
3. Cultural integration. For GE’s postdeal projects to yield results, employees need to work well together despite their different backgrounds. In China, such differences can be subtle but disruptive. For instance, the two management teams may have strikingly different ways of thinking about growth. “Many Chinese companies are enthusiastic about expanding outside of their core businesses given China’s rapid economic growth,” says Bain’s Thorneman. “But most Western companies want to stay focused. That can set up a clash of management styles.”