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Corporate culture clash took fizz out of merger

Merger talks between Kirin Holdings Co. and Suntory Holdings Ltd. have completely collapsed, meaning that a megamerger to create one of the world's largest beverage makers has gone flat.
However, the intent of the two firms in aiming to become a global company through merger was not wrong. It is a common task for Japanese companies.
In response to the collapse of the talks, the two companies said they are going to examine new merger and acquisition deals. An increasing number of crossborder reorganizations of food and beverage makers have been seen around the world. We hope the two companies will hurry in revamping their strategies.
Kirin and Suntory had been trying to negotiate a merger since last summer, and they filed an application with the Fair Trade Commission in September for a preliminary investigation into whether their proposed merger would run counter to the Antimonopoly Law.
However, the two companies could not sort out their differences despite last-minute efforts, failing to agree on a number of issues, including the merger ratio and how much the founding families of Suntory would be involved in the management of the combined entity.
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Different management styles
Kirin is known for its rock-solid management style as a member company of the Mitsubishi group that specializes in strong organizational skills. In contrast, Suntory is characterized by its unique management style, in which its founding families own about 90 percent of the company's shares. In the end, the two companies could not smooth over the differences in their respective corporate cultures.
As the two companies shared a sense of crisis, seeing no future in relying on the domestic market, Kirin and Suntory--which appear to have mixed about as well as oil and water--entered negotiations.
Beer consumption in Japan has been declining after hitting its peak in the mid-1990s, while soft drinks consumption seem to have reached its limit in the past several years.
On the other hand, food and beverage markets are rapidly expanding in emerging nations in Asia and other regions, thanks to an increase in the middle-income group accompanied by economic growth.
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Outgrowing the market
Kirin and Suntory are regarded as winners in the domestic market. However, sales of Kirin, which holds the top spot in Japan, amounted to 2.3 trillion yen--only one-fourth of world's leading food and beverage company, Swiss-based Nestle S.A., with its sales of 9.3 trillion yen.
To break out of the declining domestic market and instead seek new opportunities in the world market, a company must be highly profitable in the domestic market to develop sufficient strength to carry out international mergers and acquisitions
To break out of the declining domestic market and instead seek new opportunities in the world market, a company must be highly profitable in the domestic market to develop sufficient strength to carry out international mergers and acquisitions
The purpose of the two companies' effort toward the merger was to build strength to become a winning competitor in the world market, mainly in Asia.
The planned merger was described as an aggressive move, not a defensive one to shore up each other's weaknesses or fend off a bid by a rival.
If it was realized, the new entity could have become a model in which a domestic demand-based company sallies forth into the world.
Expanding a business to a global scale may come with risks, for example, Toyota Motor Corp., a leading global company in Japan, has its back against the wall on an international scale due to quality issues.
This should not be cause for worry for other firms. Japanese companies should not give up on taking an aggressive stance.