Asian Mergers and Acquisitions: Riding the Wave

CHAPTER FOUR

Transforming Government-Linked Companies through Mergers and Acquisitions

The drivers for mergers and acquisitions (M&A) do not typically include a desire for culture change. However, we suggest that for some government-linked firms, with a heavy hold of the bureaucracy, this could be a real and transformative benefit. The post-acquisition period shakes established habits and could allow for a new regime. We have identified several mechanisms for engineering a mindset shift and suggest this might be a better way to kick-start a transformative program.

Government-Owned or Government-Linked companies dominate a large part of the domestic economy in most Asian countries. These incumbent government players tend to be somewhat lethargic, ponderous, and bureaucratic. They are typically slow to adapt, slow to change, and slow to make decisions. They can’t, however, afford to continue to operate that way.

Consider the onslaught of private sector competition that has emerged in the past decade in high-cost industries that have traditionally been dominated by government companies, including airlines, energy, and telecoms. In most cases, when faced with newfound competitive pressures, government incumbents have looked inward and opted to take on moderate improvement initiatives.

A viable, aggressive, and more proactive strategy to address their competitive shortcomings is the pursuit of M&A. M&A provides access to new products, technology, strategies, and ideas, and this kind ...