It became clear discussions could go no further and so the Fiat Chrysler-Renault merger collapsed just barely a week and half after it was first announced. A peak behind the scenes reveal a number of lessons to learn from this failed merger.
Pay attention to cross-border issues
Many reports note that Fiat failed to win over the French government, a major shareholder in Renault. As I noted in my previous post when the deal was first announced, many deals fall apart due to regulatory issues. In the proposed Fiat – Renault merger, not only was the government acting as a regulator, but also as one of the largest shareholders in the company. In addition, politics and egos came into play in this transaction. France’s finance minister, Bruno Le Marie was reportedly irked to read the merger offer was “non-negotiable.”
Cross-border issues also popped up in Renault’s dealings with Nissan, it’s Japanese stakeholder. Renault read many of Nissan’s messages as positive, but it turns Nissan did not view the deal favorably. When dealing with owners from different cultures, it’s important to take into account their varying perspectives. This sounds simple, but a different culture could even be crossing the state line or even as close as the next town. Make sure you have a clear understanding of the other company’s culture and remember that not everyone’s culture – the way the communicate and what they value – is the same as yours. This passage from the Wall Street Journal is particularly illuminating
Privately, Nissan executives fumed over what they perceived as a betrayal. Their reticence about saying so led Fiat Chrysler to believe Nissan wouldn’t be a problem. In the days that followed, Nissan’s carefully expressed reservations were essentially lost in translation.
Don’t let things get lost in translation, which leads us to our second lesson.
Make sure you have the buy-in from the necessary parties
Nissan, Renault’s long-time partner was put off by the deal in large part because Fiat did not consult Nissan about the proposed merger until after the offer had been issued.
According to a source “close” to Nissan, “The idea you would negotiate a merger without speaking with your 20-year partner is absolutely extraordinary. It’s about trust, and that’s the problem here.”
This mistake cost them the support of Nissan, which was important for moving the deal forward.
Often when you have more than one owner, it’s important to have all their motivators and drivers figured out before you move the deal forward. It can be tricky, but without complete buy-in from all stakeholders, getting a deal done can be next to impossible. Even if the deal can get done, it might be painful, like pulling teeth, to get a minority shareholder to agree to something they are opposed to. In some scenarios, if the other owner has a 50% stake in the business you may find yourself at an impasse. Many of these issues can be worked out by simply figuring out what each of the owners want, building a mutually beneficial deal.
M&A is about more than just money exchanging hands. It involves many moving pieces and many human interactions. Be on the look out for the owner’s buy-in and cultural issues to avoid problems.