ISSN 1822-6515 ISSN 1822-6515

EKONOMIKA IR VADYBA: 2008. 13 ECONOMICS AND MANAGEMENT: 2008. 13

INVESTIGATING THE ROLE OF INTERNATIONAL BUSINESS

NEGOTIATIONS IN CROSS-BORDER M&AS IN THE BANKING SECTOR
Claudio De Mattos, Laura Salciuviene, Gianluca Pugliese
The University of Manchester, Manchester Business School, United Kingdom
cdemattos@dom01.mbs.ac.uk, Laura.Salciuviene@mbs.ac.uk

Abstract
Although M&As activity has been increasing in late years, the failure rate of M&As is still very high.
Due to the high stakes involved, international business negotiations in this context become vital for a firm’s
successful performance. The literature has paid little consideration to the negotiation process involved in
these transactions. In general, the literature on negotiations is focussed on a few categories of interest and has
been considered fragmented and a-theoretical. A well conducted negotiation process could influence the
underperformance of a number of M&As, reducing the associated failure rate. This study focuses on how
international business negotiations take place in cross-border M&As and how they contribute to the positive
outcome of the deal. In particular, the case-study of the Unicredito Italiano’s acquisition of Bayerische
Hypo-und Vereinsbank (HVB), one of the largest deals in Europe to date, is examined. Based on the case
under study, five main areas that should be considered during negotiations in order to ensure a successful
outcome have been identified, namely: (1) condition of the negotiation, (2) cultural influences, (3) negotiators
‘characteristics, (4) the negotiation situation itself, that is the pre-negotiation and the face-to-face negotiation
stages, and (5) the outcome of the negotiation or post-negotiation.
Keywords: Cross-border M&As, cultural compatibility, banking sector, negotiations.

Introduction
Cross-border Mergers and Acquisitions (CMAs) account for around 60% of all FDI inflows
worldwide (Schoenberg, 2004). Firms have been utilising Merger & Acquisitions (M&As) to expand their
market activities, develop manufacturing facilities, gain new sources of raw materials and get integrated into
capital markets (WIR, 2006; Morosini et al., 1998). The implicit assumption is that more value is created
through M&As than what could have been raised otherwise through organic growth or other
internationalisation strategies. The combined strengths of the merging organisations generate synergy that
surpasses the sum of their individual strengths. In the last few years, there has been a steady increase of
Mergers and Acquisitions (M&As) activity in Europe, particularly in the banking sector. The volume of
M&As worldwide increased 38.4 % from 2004 to 2005. Moreover, in Europe, the value of M&As increased
37% to US $1.2 trillion in 2005 relative to 2004 (Thomson Financial, 2005). The enormous increase of
M&As activity over the last few years is mainly driven by competitive pressure for globalization and it is
facilitated by the liberalization of markets worldwide. In the specific case of the European market, factors
such as the economic integration of the EU, the establishment of the European Monetary Union, the
introduction of the single currency and the various economic reforms have facilitated CMAs, especially
between European companies (Sudarsanam, 2003). As the number of CMAs increases, so does the number
of cross-cultural negotiations. Global companies increasingly rely on the effectiveness of business
negotiations for their growth. CMAs require the most rigorous negotiations because of differences in
political and economic environments, corporate organizations, culture, tradition, tax and accounting rules
between the countries of the acquirer and the target company (Sudarsanam, 2003). The stakes involved in
international business negotiations are generally high and despite the intention of the negotiating parties to
reach successful agreement, a large number of negotiations fail (Reynolds et al., 2003). International
business negotiations in this context become vital for a firm’s successful performance.
This study focuses on how international business negotiations take place in cross-border M&As and
how they contribute to the positive outcome of the deal. It is our contention that a well conducted negotiation
process could influence the underperformance of a number of CMAs, reducing the associated failure rate.
For instance, different values held by managers due to cultural differences may generate conflict and distrust.
The paper is structured as follows. The literature regarding the key issues of the negotiation process of
CMAs is examined. The case study methodology is discussed. A selected cross-border M&As that
Unicredito and HVB have undertaken is analysed. Conclusions and practical implications are then presented.

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It is expected that this study will provide a more thorough understanding of the negotiation process of
CMAs, considering the banking sector in the European context.

Background and research question

Effective international business negotiations are very important in cross-border M&As. The
consequences of failure in international business negotiations affect the outcome of CMA deals. International
business negotiations are one of the most challenging tasks in businesses (Gilsdorf, 1997; Sudarsanam, 2003)
and require additional skills and competencies on top of those required in domestic business negotiations.
The literature on international business negotiations is generally fragmented and a-theoretical (Reynolds
et al., 2003), and tend to concentrate only on one or two particular category or dimensions of interest. From the
extant literature on international business negotiations (Calantone et al., 1998; Simintiras and Thomas, 1998;
Tung, 1998; Weiss, 1993; Reynolds et al., 2003) it is possible to identify five main areas that attract the interest
of researchers. These are the following: (a) “condition of the negotiation”; (b) “cultural influences”; (c)
“characteristics of the individual negotiators”; (d) “the negotiation situation itself”; (e) “the outcome of the
negotiation”. Previous researchers have not considered an empirical study investigating holistically the above
categories, or the relationships and effects of these different categories on international business negotiations
and, consequently, in the outcome of CMAs. (a) The “condition of the negotiation” comprises influences from
the environment and organisation related factors. Influences from the environment include the legal and
political environment, currency fluctuations and foreign exchange, foreign governments’ control, and instability
(Ghauri, 2003; Tinsley et al., 1999; Phatak and Habib, 1996; Reynolds et al., 2003). In international business
negotiations companies have to carefully consider the above factors and consequently adjust their targets
accordingly (Reynolds et al. 2003; Kashalak 1998). ‘Organisation related factors’ include issues such as the
parties’ market position and image (Ghauri 2003; Snavely 1998); third parties involved in international
business negotiations such as governments, agents, consultants, (Ghauri 2003; Herbirg and Gulbro 1997;
Reynolds et al. 2003); stakeholders (Phatak and Habib 1996; Brouthers and Bamossy 1997); and the parties’
objectives and strategic goals (Ghauri 2003; Luo 1999; Sebenius 1998; Tung 1991; Reynolds et al. 2003). (b)
“Cultural influences” play an important role in international business negotiations as they affect how people
think, communicate and behave (Salacuse 2005; Ghauri 2003). Frequently, cultural differences have been
identified as the cause of conflicts (Hofstede, 2006; Phatak and Habib, 1996 p.34). The failure to integrate
different cultures from the merging organisations has commonly seen as responsible for failure or poor
performance of CMAs (Carroll and Harrison 2002; Huang and Kleiner 2004; Ghauri and Buckley, 2003;
Bradley 2003). Conversely, similar cultures may foster successful CMAs (Stahl and Voigt 2005, p.54).
Moreover, specifically in the banking sector, low compatibility between different cultures has been observed to
hinder the merger’s performance (Sherman and Rupert, 2006). For instance, it has been argued that managers
from different countries have differing perceptions of the external environment because of their different
cultural values (Angwin, 2000). The more distant the cultures of the merging organisations, the more problems
would be expected in integrating them (Stahl and Voigt 2005). Furthermore, both national and corporate
cultural differences may have a strong impact on the CMAs performance (Quah and Young 2005; Morosini et
al. 1998, Nahavandi and Malekzadeh 1993). Different perceptions of the value of time (Ghauri 2003; Phatak
and Habib 1996) as well as one’s behaviour regarding time (Hall, 1983; Ghauri, 2003; Usunier 1991; Salacuse
1998; Reynolds et al. 2003) can influence negotiations. (c) “Negotiators’ characteristics” may also affect
international business negotiations. Some researchers (George et al., 1998; Reynolds et al., 2003) looked at how
factors such as age, gender and experience influence the success of international business negotiations. Other
researchers concentrated on studying the personality of negotiators and their impact on the effectiveness and
outcome of negotiations (Luo, 1999; Reynolds et al., 2003; Ikle, 1964; Ghauri, 2003). Sebenius (2001) suggests
that one of the main mistakes that negotiators make during negotiations is neglecting the other side’s problems.
Failures and distortions in communication are the principal contributors to breakdowns and failures in
negotiation (Adachi, 1998; Ferraro, 1996; Salacuse, 2003a). (d) Another dimension is the “negotiation situation
itself” or process, that is, the pre-negotiation and the face-to-face negotiation stages. The literature points out a
number of different negotiation processes (e.g., Kennedy et al., 1984; Ghauri, 2003). Ghauri (2003) presented a
process divided into three stages: (1) pre-negotiation, (2) face to face negotiation and (3) post-negotiation. In
CMAs there are also other factors that will influence each stage of the negotiation process and ultimately the
final outcome. Ghauri (2003) identified two additional dimensions that are present in each of the three stages,
that is, strategic factors and cultural factors. The ‘pre-negotiation stage’ is essential for successfully completing
a deal: “the foundation for success in negotiating is the planning that takes place prior to the actual interaction

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process” (Lewick et al., 1994 p.127). During the pre-negotiation stage, each party gathers as much information
on the other party as possible. At this stage the objectives and goals of the negotiations should be discussed and
each party should have an initial strategy which is dependent on the information attained to this point (Ghauri,
2003). There is a vast literature on the importance of the pre-negotiation stage (Fisher and Ury 1990; Kennedy
et al. 1987; Ghauri and Usunier 2003; Lewicky et al. 2002; Salacuse 2003b) but much of it is prescriptive,
typically identifying a list of key points. The literature fails in offering clear direction about the pre-negotiation
stage (Fells, 1996). The ‘face-to-face negotiation stage’ is also crucial to make a deal. According to Ghauri
(2003), the individuals selected as negotiators should have a very good knowledge of their company and the
objectives of the deal, should not create problems during the negotiations, and should be open to deal with
people from different cultural and religious background. Moreover, parties expect to negotiate with members of
equal status, prefer to have the same number of negotiators as the opposing party and should appoint members
from different functional units or departments. Finally, patience is the key to successfully complete a deal.
International business negotiations are so complex that they can last a very long time. Thus, it is crucial not to
set a defined time horizon within which to conclude a deal. The (e) ‘outcome of the negotiation’ or post-
negotiation is mainly concerned with the implementation of the agreement/contract and the level of relationship
built between the two or more parties involved in the deal (Ghauri 2003; Phatak and Habib 1996). Phatak and
Habib (1996) affirm that the outcome of negotiations can be tangible, associated with short term approaches,
and intangible, associated with long term approaches. Salacuse (2003, p.197) identified six measures to convert
a contract into a relationship. Finally, this is also the stage where the integration process strategy starts.
Through an extensive review of the existing literature, a conceptual model for international business
negotiations was developed. The model includes the factors that lead to successful international business
negotiations outcomes in cross-border M&As and it is used to analyse the case study chosen for this project.
However, “negotiation is not just a matter of following fixed rules and formulas because every negotiation is
special” (Salacuse, 2002) and, as such, some amendments were introduced to the model following the results
of the research. In summary, while the literature focuses mainly on financial and economical aspects on
M&As, limited attention has been paid at an evaluation of the above five categories holistically. No definite
conclusion has been reached with regard to the relationships and effects of these five categories on
negotiations in an international business context. The research question investigated in this study is: What
are the main dimensions/areas/issues of the negotiation process that have an impact in a successful outcome
of the cross-border M&A of Unicredito and HVB banks? The study attempts to confirm empirically the
procedures used in the negotiation process during the CMA of the banks Unicredito and HVB.

Research methodology
A single case study methodology was chosen to address the research question. A qualitative
methodology was adopted to provide a holistic and rich description of the negotiation process, using the
acquisition of Bayerische Hypo-und Vereinsbank (HVB, Germany) by Unicredito Italiano (Italy) as a case-
study. In the light of qualitative research, the world is seen as not fixed, single or agreed upon, but actually
represents constructions and interpretations of reality that are in flux and that change over time (Merriam,
2002). The advantage of using qualitative research is that it is flexible and adaptable to change (Saunders et
al., 2003) and it helps in establishing causal relationships between variables. Qualitative research is
perceived as having superior potential for dealing with information (Healey and Rawlinson, 1994; Miles &
Huberman 1984). The internet was used as a research tool for accessing company information and M&As
latest news as it allows fast access to information at a low cost. However, Ghauri and Gronhaug (2005, p.91)
warn that this information may be “either exaggerated or biased”. The primary research carried out for this
project was in the form of semi-structured interviews, consistent with the research question, objectives, the
purpose and the research strategy adopted (Saunders et al. 2003, p.245). Interviews were conducted with key
people of both companies. In the next section a conceptual model, deriving from the literature (see Brouthers
et al., 1998; Trautwein, 1990; Buckley & Ghauri; 2002, Ghauri, 2003; Phatak and Habib, 1996), is used to
analyse the Unicredito Italiano’s acquisition of H.V.B.

Main results and discussion

The main focus of the analysis is the identification of areas that contributed to a successful outcome of
M&As. The main results of the study are as follows: The contribution of the study is to identify five main
areas that should be taken into consideration during negotiations in order to ensure a successful outcome,
namely: (a) condition of the negotiation; (b) cultural influences; (c) negotiators’ characteristics; (d) the

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negotiation situation itself; and (e) the outcome of the negotiation. (a) Condition of the negotiation- This
dimension comprises influences from the environment and organisation related factors. The condition of the
negotiations between Unicredito Italiano and HVB were described as “a friendly transaction with a shared
vision regulated by a Business Combination Agreement (BCA)” (www.unicredit.it). The interviewees
confirmed that the negotiations were co-operative and conducted in a very friendly and professional
environment. Therefore, it could be said that the two companies adopted an integrative approach. Although
no major problems seem to have occurred during the negotiations, Mr A did mention about times when, for
instance, Unicredito talked longer over certain issues. In this CMA the Business Combination Agreement
(BCA) represents a successful contributing factor for creating a friendly and cooperative environment
between the two parties because it regulated the “terms and conditions” of the transaction. Furthermore, the
parties’ objectives and strategic goals were common and complementary and therefore, they had a positive
impact on the negotiation process. “Unicredit was clearly our partner of choice for a cross-border merger, in
particular because of this identical strategic orientation” (Sprissler, 2006b, p.3). In terms of the legal and
political environment, the transaction was governed by and executed in accordance with German law. The
Bank of Italy, the German Federal Financial Supervisory Authority (Bundesanstalt fur
Finanzdienstleistungsaufsicht) and the EU regulators all approved the acquisition. Nevertheless, there was a
critical incident involving a third party that had a negative effect on the negotiations. Basically, the Polish
Government delayed giving Italy’s UniCredito S.p.A., which owned the number 2 lender in Poland (Bank
Pekao), a permit to take over a 71% stake in Bank BPH SA, the country’s third largest lender. The Polish
Government feared that the two banks together (Bank BPH SA and Bank Pekao) would create Poland’s
largest banking group, surpassing state-controlled PKO Bank Polski and it would also cause job losses
(European Banker, 2006). However, it is clear the concern identified in the literature review regarding the
impact of Governments on the negotiations. Companies should as a result adjust their targets according to the
host country’s economic, political and legal system. Stakeholders also had an impact on the negotiation
process. For instance, the unions from most of the countries involved (Italy, Germany, Austria, Czech
republic) together with UNI-Europa Finance demanded that the Unicredit’s management team held meetings
with them on the acquisition plan (UNI Global Union, 2005). According to Wolfgang Katzian, president of
GPA/Austria: “The employees of UniCredito and HypoVereinsbank in all affected countries can hear a clear
message: workers and unions have an effective network that ensures that their interests do not go to the
dogs." Also, Hanns-Peter Kreuseur, an employee representative on the supervisory board of HVB, at the
time of the merger discussions said: “In principle, we are not opposed to a marriage with Unicredito. But we
want to have a say in the size of the dowry. We employees and union members do not want to be handed a
finished takeover document but want to influence discussions”. (2) cultural influences- Culture plays an
important role in international business negotiations. Cultural differences are mentioned by practitioners as
one of the main factors influencing the process and outcomes of international business negotiations. Peter
Wuffli, chief executive of UBS, affirmed that he “has doubts about the economics of the Unicredit – HVB
merger, and the challenge of dealing with two different languages and cultures” (The Economist, 18th June
2005). Undoubtedly, Italian and Germans are culturally different and Mr Alessandro Profumo himself in an
interview with the New York Times in May 2006 stated: “Italians are warm and more emotional, the
Germans are more rational. A good combination of these two would be mid-way”. This statement evinces
that Mr Profumo was aware of cultural differences. Mr Sprissler (2006a, p.8-9) said: “Coming from different
cultural backgrounds, the employees of UniCredit and HypoVereinsbank must [mutually] recognize and
accept different behaviours. […] After all, we do not want to build a larger Italian or German bank, but a
European bank. I agree with Alessandro Profumo here.” The above statement also shows that the
management of HVB was aware of the different behaviours from the employees of both companies. The
management at HVB decided to overcome any possible problems arising from these differences by putting
forward the of the creation of a “a truly Pan-European bank”. According to Schoenberg (2004), a CMA
could be seen as an opportunity of combining the national cultures of the merging organisations. This seems
to be the idea behind the emphasis on the European spirit of the new merged organisation. Considering
Hofstede’s cultural dimensions, a certain level of national cultural similarity does not necessarily ensure that
the negotiation process runs smoothly (Usunier, 2003). However, both Mr A and Miss B in their interviews
believed that the different language, national and corporate culture did not have a significant impact on the
negotiations. For instance, although the negotiations were conducted in English without problems, Miss B
said that some language misunderstandings did happen at lower hierarchical levels, in which not all Italians
and Germans employees were fluent in English. It has been suggest that a common language could be a way
to leverage commonalities in merging firms (Buch & Delong, 2004; Anderson & Gatignon, 1986; Hisey &

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Caves, 1985). Some other cultural differences were also mentioned in the interviews. For instance, Miss B
said that the Germans would approach a meeting knowing which topics will be discussed and no other topics
would be part of the discussions. This could be classified as a monochronic behaviour. Instead, the Italians
would start the meetings with the decided topics and then, in the middle of the negotiations, would discuss
other topics not included in the agenda, representing a polichronic behaviour. Mr A in his interview
mentioned that for instance, in the case of the Germans, they had to consult a team before taking a decision
whereas in the case of Unicredito all major decisions were taken from Mr Profumo. This response confirms
that Italians have larger power distance compared to the Germans as identified by Hofstede in his work. This
means that in the case of Unicredito, key negotiations were concluded by the top authority. This would
appear to be the case; Mr Profumo has been the man having the final saying on almost every decision.
People close to him say that he is seen as “a fiercely independent manager”. Finally, it must be said that both
cultures had the same western attitude towards time and its value. This helped the negotiations to be
completed in less than six months, due in part to very well scheduled meetings as confirmed in the
interviews. (3) negotiators’ characteristics- The main negotiators were the two CEOs, (Mr Dieter Rampl
and Mr Alessandro Profumo). They used all their skills and experience to make sure the deal went through
successfully. Mr Albersmeier from JP Morgan claims: “To be successful, you need substantial integration
experience and Unicredito’s (Mr) Profumo has proven in Italy that he has this, where he has integrated seven
savings banks, achieving substantial synergies on both the costs and revenues sides” (Euromoney, Sept 2005,
p.1). Mr Profumo understood the importance of creating a European bank few years back. In 1999, he
attempted without success to merge Unicredito with the Spanish bank BBVA, and in 2001 with the German
Commerzbank AG. In 2005, his perseverance paid off and Unicredito eventually acquired HVB. This
statement addresses what Ghauri (2003) and Ikle (1964) said regarding the importance of the personality and
characteristics of a good negotiator. Ikle (1964) said that a good negotiator has “a quick mind but unlimited
patience”. It seems as if Mr Profumo meet these terms. Stefano Caselli, a professor of banking and finance
at Milan’s Bocconi University, familiar with Mr Profumo thinking, said: “He has a strategic vision in mind
and he has been following it for 10 years”. Furthermore, an article from the Economist (18th June 2005)
asserts: “Mr Profumo may have caught a change of mood in Europe among investors, national regulators and
the public. He has managed to buy HVB without providing howls of German protests”. All the above
statements show that Mr Profumo has considerable experience in negotiations and managed to avoid possible
resistance and/or protests from the German regulators and citizens. Nevertheless, it must be said that to
complete a deal you need two parties to be in accordance and therefore the merit for this CMA must be
shared with Mr Dieter Rampl. Dr Sprissler (2006a, p.16) said: “He devoted all his energy to this
transformation project and played a key role in shaping the basic features of the combination with
UniCredito - fully convinced of taking the right step for HVB.” Mr Dieter Rampl became managing director
and CEO of HVB in January 2003, following the resignation of the previous CEO due to a very difficult
financial situation. He gained a good reputation within the banking sector for his ability to restructure
divisions as well as to stay cool, calm and confident even in troubled times (Business Biographies, 2006).
He was awarded the “Most Optimistic Banker of 2003”. The above information shows that he too, like Mr
Profumo, had was a person with a lot of experience in negotiations and possessed those features that make
someone a good negotiator. (4) the negotiation situation itself - that is, the pre-negotiation and the face-to-
face negotiation stages. The face-to-face negotiation stage is crucial to make a deal. As mentioned earlier, the
negotiators involved in the transaction are very important. In this acquisition four investment banks, two for
each company, were appointed to advice on negotiations, together with two teams of executives and lawyers
(European Banker, 2005). Both Mr A and Miss B in their interviews said that all negotiators that took part in
the negotiations had negotiations experience at both a national and international level. They also confirmed
the high involvement of the two CEOs in these negotiations. Due to his past experience, Mr Profumo was
aware of how costly, both financially and in terms of the company and his personal image, could have been
to make yet another mistake. As for HVB, they had not been performing very well in the last few years and
they knew that mergers talks are costly and if not successful would leave them in yet worse financial troubles
and vulnerable to a takeover. Both companies accurately planned this operation. At the planning stage the
two CEOs were not involved but only specific individuals from each company.At the pre-negotiation stage it
is vital to gather as much information as possible about the other party in order to establish if it is the right
partner for the deal. Mr A said that Unicredito conducted a study on HVB in order to establish the potential
synergies that the acquisition would provide. A similar procedure was followed by HVB. Miss B, in her
interview, said that there were several alternatives available to HVB and careful evaluation was made on
each of them but Unicredito seemed to be the more attractive one. Both banks “had clearly stated their

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commitment to Europe with their business models, even before their combination” (Sprissler 2006b, p15).
This statement shows that the two companies shared common goals and objectives. It was also very
important at this stage to ensure that the transaction would not be against regulators and would increase
shareholders value. In this case, Unicredito had taken into account the German, Italian and European
regulators, but presumably not thought of facing problems with the Polish authorities. Mr A, in his interview,
said that prior to the announcement of the deal more attention was paid towards the German authorities
compared to the Austrian and Polish authorities due to time restrictions. Shareholders value were expected
to increase, as the two banks had different clients and product areas. Miss B in her interview said that the
deal was sold to the HVB shareholders as an attractive option. At the Face-to-Face Negotiation Stage, the
two CEOs met and discussed the outcome of the previous analyses and studies. Mr A in his interview said
that at this stage the focus was based on the economic aspect of the deal and on the development of a
Business Combination Agreement. In this phase, “open issues” such as Corporate Governance, Company’s
valuation, shares exchanges were negotiated. Once these issues were dealt with, the CEOs of both companies
gave green lights to the operation and the financial and legal advisors dealt with all others aspects involved
in the deal. The facts above confirm that at this stage parties expect to negotiate with people of equal status.
In addition, the same number of legal and financial advisers where sitting at the negotiating table. (5) the
outcome of the negotiation or post-negotiation - At this stage some problems emerged. Firstly, the new
group had difficulties in obtaining authorisation from the Polish government to go ahead with the deal. The
Polish government was against the acquisition of BHP by Unicredito Italiano as part of the HVB acquisition.
The Polish government alleged that back in 1999, when Unicredito Italiano acquired Bank Pekao, they
signed an agreement “the Pekao Privatization Agreement” in which Unicredito committed itself not to
engage in further acquisitions in the Polish financial market. (www.ilsole24ore.com). However, Unicredito
Italiano opposed to this agreement as it was no longer enforceable under EU regulations. The European
Commission intervened and opened a case accusing Poland of breaking EU rules by holding up such big
merger (www.unicredit.it). The above issue delayed the process of the merger, generated extra costs and
started new negotiations. Mr Profumo had to start new negotiations with the Polish Ministry of State
Treasury in order to have the all clear for the merger. Negotiations lasted few months and eventually an
agreement was reached between UniCredito and the Polish government (www.ilsole24ore.com). Another
critical issue at this stage of the negotiations was to plan and implement the integration process. The fact that
both companies CEOs emphasized since the beginning that this merger would create the first truly pan
European bank rather than a German or Italian bank showed to the shareholders and stakeholders that there
was a clear balance between the companies and that both would gain from the merger. In addition, both
CEOs established a friendly and co-operative environment right from the start of the negotiations and
showed their desire to attain a win-win outcome through a long term relationship. For instance, Mr Sprissler
(2006b, p.5) said: “We are in the process of integrating two well-functioning corporations active throughout
Europe. This naturally involves overcoming cultural differences with respect to mentality, leadership culture
and attitudes. As expected, we have been affected by this phenomenon too”.

Conclusion and implications

In this study the negotiation process of the cross-border M&As of Unicredito Italiano and Bayerische
Hypo-und Vereinsbank (HVB) has been analysed. The main contribution of the study is to identify a number
of key factors that have an impact on international business negotiations and, therefore, influence the
outcome of the deal. A number of key factors must be present during negotiations in international M&As if
the deal is to be successful. These factors are not mutually exclusive and they are interdependent. For
instance, the condition of the negotiation was appropriate and conducive to the successful completion of the
deal. The CMA between Unicredito Italiano and HVB was carried out because it offered potential benefits
for all stakeholders (such as increasing market share and shareholders value). Moreover, most of the
governments involved approved the deal. The condition of the negotiations for this acquisition was ideal.
The environment in which the negotiations took place was very friendly and co-operative since the early
stages of the talks. Also, both companies shared the same vision on the merger and they both saw each other
as a complementary company and wanted to establish a long term relationship. Moreover, from a political
and legal point of view, both the German and Italian authority, together with the EU Commission, posed no
obstacles to the merger. In terms of cultural influences and cultural fit, it was very skilful from both
companies’ CEOs to emphasize to the employees that the new company would be neither Italian nor German
but European and as a result they should adapt to a new corporate culture within the company. Furthermore,

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the management of the two companies realised that although the national cultures were different, they could
be fine-tuned. This underlining philosophy avoided any major problems regarding cultural conflicts. The
negotiators’ characteristics also represented a key factor for the positive outcome of the negotiations. Both
CEOs showed commitment and support to the merger coupled with many years’ experience of negotiations
as well as strong leadership and management skills. Both Mr A and Miss B in their interviews said that one
of the main factors that led to successful negotiations was the strong commitment showed by the two CEOs
in completing the deal. Third parties such as investment banks and legal companies were also involved in the
negotiations and dealt with the financial and legal aspects of the deal. The number of those involved during
the negotiations was the same for both companies. In terms of the negotiation situation itself, research was
conducted on selecting the best partner for the merger and common goals and objectives were identified by
both companies. A key factor that led to a successful outcome and allowed the negotiations to run smoothly
was the Business Combination Agreement signed by the two companies. As explained earlier, the BCA dealt
with issues such as the transaction structure, the organizational model and the strategic mission of the new
group. It established the “terms and conditions” of the deal and therefore it made easier for the parties
involved in the negotiations to reach an agreement as well as to implement a good integration strategy. Mr A
in his interview said that having only small team involved in the negotiations made easier to keep the
negotiations secret and, more importantly, agreeing on specific issues. Other important factors that
contributed to successful completion of the deal were: the locations of the offices of the new group which
were wisely split and the fact that HVB brand name remained unchanged even after the acquisition. Finally,
the outcome of the negotiations or the post-negotiation stage was probably the most difficult part of this
acquisition. UniCredit had to negotiate an agreement with the Polish government for the deal to be
completed. Furthermore, it faced some difficulties during the integration process. In particular, on one hand,
it had to deal with the loss of people from high level management positions and, on the other hand, it had to
deal with some employees concerned about their future within the new group. These findings highlighted
that some key factors were missing in the initial model developed based on the literature and therefore a final
model has been produced in order to incorporate other important factors that should be considered during
international negotiations. The model shows that only if all factors are present during negotiations in cross-
border mergers and acquisitions the outcome is going to be positive. It was evident from the analysis of this
case study that Unicredito had not sufficiently considered the impact that this acquisition could have in
Poland where the company was already present with another bank. Therefore, one of the key factors when
negotiating across border, especially when the merger affects more than one country, is to consider in detail
both the external influences (such as the legal and political environment of all countries that will be affected
by the transaction) and the organization related factors (such as third parties and stakeholders). The Business
Combination Agreement was also crucial in the post-negotiation stage as well as in the integration process. It
built a co-operative relationship between the two companies and it helped to avoid any problems on subjects
such as organizational structure and corporate governance. Communication was another key factor in this
case study. Both Mr A and Miss B in their interviews said that communication was very important during the
negotiations and the integration process. It appears that the new company carefully planned the integration
process and communication was handled properly. Finally, it is important to highlight the fact than no matter
how attractive is the business opportunity with an acquisition; value is not created until capabilities are
transferred, and people from both organisations collaborate in order to create the expected benefits and the
unpredicted opportunities. In this case study, people were fundamental to the completion of the merger. As
seen in the previous sections and from what emerged in the interviews, the managers and the CEOs from
both companies were eager to work together towards completion of the deal and to create a stronger
company. This study has developed an understanding of the negotiating factors necessary to form a
successful Cross-Border Acquisition. A number of key factors during the negotiation process between the
two companies have been identified and assessed together with some of the problems that arose during the
negotiations. Furthermore, the research has explained how these factors can affect the outcome of the
negotiation process itself and consequently the outcome of the deal. A model including the successful factors
involved in international business negotiations was developed. The aim of the model is to assist negotiators
in better preparing themselves for international business negotiations.

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