Vale of Tears

Today’s Financial Times’ story about Vale’s acquisition of Inco, the Canadian nickel mining company, perfectly captures the cultural quagmire created when emerging economy companies take over developed economy companies.  The arrogance and the condescension from employees of the acquiree, miners of the finicky metal nickel (the PhDs) towards the prickly Brazilian miners of “mere” iron ore (High School Diplomas) were, it appears, a perfect match for each other.  It was utterly predictable that the Brazilians would resent (and abolish) some very large Canadian bonuses and that the Canadian unions would treat these (newish) bonuses as non-negotiable entitlements.

Precisely because similar transactions (and struggles) will be playing themselves out repeatedly in the coming decades (“if you’re so smart, why did we take you over?!”), we should agree on some basic principles to make these marriages more successful:

1) Leaders of the acquisition target should start talking up the benefits and the potential sacrifices with employees early on, before the hatchet man from the acquirer arrives.

2) The acquirer’s representative should be a diplomat first and a technician second, with the skills to make a meaningful effort to get the target’s unions and workers on board as much as possible by inviting their input and advice.

3) The acquirer should avoid acting as if the acquisition is a conquest (even when it is) and resist the temptation to lash out when condescended to.  Flattery and firmness are not antitheses.

4) The acquirer should clearly communicate goals but be flexible about implementation wherever possible.

Are these guarantees of success? No, but now the shoe is on the other foot, it wouldn’t hurt the Brazilians and the Chinese to learn the “local” culture.  It’s so much easier that way.

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