Chinese people say marriage is like a fortress besieged: Those who are outside want to get in, those who are inside try to run out.

The beauty of tying the knot is often so attractive that people tend to have high expectations of after-marriage life, but the reality is somewhat different.

In business, the scenario is similar. While it is tempting to seek mergers and acquisitions (M&A), corporate executives tend to ignore the fact that the "divorce rate" is also high.

This is particularly true with cross-border M&As, according to experts, largely because of the "culture shock," just as people from two different countries would encounter.

"Over the past 20 years, more than 50 per cent of cross-border M&As actually failed," says Oded Shenkar, management professor of Fisher College of Business at Ohio State University.

"That is because the difficult part is often overlooked when a marriage deal can be reached."

Corporate executives always tend to look at a potential M&A deal with a strategic vision, but they don't really understand that strategy is actually the easy part. "Once they successfully close the deal, they get into lots of trouble during the integration process, the more difficult part in reality," Shenkar says.

Like a marriage between two people from the East and the West who experience great cultural differences when living together, executives from two vastly different business systems may find it very difficult to integrate both cultures, which have grown out of very different business climates.

In China, some ambitious entrepreneurs are starting to ride on the crest of overseas M&A moves.

Moving businesses beyond national boundaries, however, does not always make for a successful corporation. Companies must always be cautious, experts suggest.

As the nation's economy continues to power ahead, many enterprises in China are marching towards the same goal windfalls from abroad.

Following Lenovo Group's purchase of IBM Corp's PC business, appliance marker Haier Group's intended purchase of US appliance icon Maytag and CNOOC's bid for Unocal are highlighting another new round of overseas M&A attempts by Chinese corporate leaders.

Haier Group, China's biggest home appliance maker, said recently it is interested in making an offer for larger US rival Maytag, helped by private equity firms Blackstone Capital and Bain Capital. China's largest offshore oil company CNOOC is now bidding against Chevron Corp for Unocal, the ninth-largest US oil and gas firm.

While the logic of promoting brand-names and extending international distribution networks appears to make good sense, corporate leaders are advised not to overlook the challenges they will encounter.

"When we talk about M&A deals at a strategic level, yes, these deals are great," says Shenkar, "But when we come down to implementation level, they may not be as good as previously expected.

"As industry experts point out, there are three most important things that have to be always borne in mind implementation, implementation and implementation!"

Chinese companies' M&A approaches may remind people of the heyday of the Japanese economy in the 1980s, when many Japanese companies were attempting to make huge inroads in the US, but failed later to secure a desirable outcome.

"Japanese companies were not short of capital and their technology was also first-class. The key issue is that they failed to integrate their corporate cultures with the ones they acquired," says Shenkar.

So, Chinese companies have to heed potential hazards when making M&A approaches.

Business systems are very different at first. Cultural barriers, social misunderstandings and policy puzzles can also lead to business failures.

Chinese companies may have grown under a very different business environment with the ones that they are about to merge or acquire, "It is often just a matter of time that they get into trouble."

There could be lots of subtle issues with the US government or labour unions. US labour laws are also very complicated, which would raise many difficulties in the human resources field.

Compensation for laid-off workers, for instance, is one of the tough issues once integration starts.

It would be hard to determine the severance payment as too low would be against local labour laws, but too high would make a great imbalance between people to be laid off in the US subsidiary and those who remain employed at headquarters in China, Shenkar says.

How to design career opportunities for key staff members from the acquired company is also an important issue that the new management team has to think about.

The fact that leaders of the acquiring company will become top management of the acquired company may dent confidence of staff members of the acquired company and how to retain them is a big issue.

The identity of both companies' workers would raise another headache for corporate leaders and it would often take years to have workers of the acquired company to acknowledge their new identity.

Dealing with the US media could also be another important topic.

"Lenovo's acquisition of IBM's PC business was not important news in the US. Haier's attempt to purchase a brand as iconic as Maytag, and in America's heartland, however, could become big news," says Joe Blumenfeld, a communication-strategy expert with US-based Tradewind Strategies. "Haier could still use this as an opportunity to increase its name and brand recognition in the US."

Jack Chen, chairman of Barrington Asia-Pacific, says that Haier is still not a very well-known brand in the US and acquiring Maytag can help Haier build its reputation in the US market, where foreign companies find it very hard to promote their brandnames.

What's more, Haier's comparative advantage is to grow its distribution network in the US and also combine Maytag's technology with its cost-saving facilities, says Chen.

Zhang Ruimin, the chief executive officer of Haier, has acknowledged that culture is the most difficult part of this M&A move as it is an integration process which never stands still.

Experts say TCL, another Chinese electronics giant, which has acquired two overseas companies in Europe, may provide a good lesson.

The Guangdong-headquartered company witnessed a considerable loss in the first quarter of this year after setting up a joint venture company with French firm Thomson and German company Schneider.

"It is really now facing a daunting task," says Chen.

"At first glance, some German companies really seem to be a good buy. They are affordable, and have good foundations," says Stefan Baron, editor-in-chief of Wirtschafts Woche, Germany's largest weekly business magazine.

But, failure to observe and address social and cultural issues in a foreign country can detrimentally affect a business.

"Purchasing a German company might not cost much since the economy is in the doldrums," Baron says. "But it could be very expensive to maintain the company's operations later."

TCL officials anticipated the overseas purchases would help the firm expand its business in Europe, and that the Schneider brand, a long-time trademark in Europe, would allow TCL access to its worldwide distribution network.

TCL, however, Baron says, failed to win over the German market with its Schneider image.

"To many German consumers, Schneider had the image of being old-fashioned and unwieldy," Baron said.

"TCL attempted to explore the market with fancy, high-tech products, but the Schneider brand could not help."

Thomson has factories in several European countries where labour laws are very strict, which present lots of difficulties for TCL, said Chen.

Haier may find a similar dilemma when entering the US market, but it is easier to deal with issues in one single market than several markets together. Haier may have hoped to promote its brandname through a purchase of Maytag, but for Maytag's business to turn the corner is not easy.

Continuing with the marriage analogy, Shenkar says people always tend to believe that their marriage will remain secure forever, though the divorce rate continues to climb.

(China Daily 07/11/2005 page1)