Mind the Gap - Building ADP Europe (A) & (B)

This case series examines the issue of managing a large acquisition where there is a substantial gap in organizational culture between two companies where the path taken places an emphasis on leveraging complementarities rather than homogenizing differences. It is split into comprehensive segments that measure the choices made, decisions taken, and the evolution over time of an acquisition managed as a partnership in order to assess the opportunities and challenges of aligning values and procedures in a highly tense post-merger management setting.

by Yves Doz,Maurizio Zollo, Jeanne Larson
Last Updated: 23 Jul 2013

What happens in an acquisition process when one company must ‘fit’ another in a situation where value might come from leveraging differences as well as streamlining them? What to keep? What to discard? Who should teach whom? How to manage this process successfully? This series of cases on the fusion of ADP & GSI Building ADP Europe: 1995-2002; GSI (A); GSI (B); ADP – GSI: The Integration Challenge and ADP – is written by Jeanne Larson, Research Associate, under the supervision of Yves L. Doz, the Timken Chaired Professor of Global Technology and Innovation, and Maurizio Zollo, Associate Professor of Strategy and Management. It charts the genesis and intricacies of complex acquisitions in the global economy as they develop over time.

In 1995, Automatic Data Processing (ADP) was one of the largest computing services firms in the US with revenues of $2.9 billion and a record of 136 consecutive quarters of growth. Its success was widely attributed to a ‘straightforward business model’ – entry into business markets offering significant growth opportunities. Generale de Service Informatique (GSI) was one of the largest computer services companies in France and the leader in payroll outsourcing at European level. It had an almost unique culture in France based on decentralizing responsibility, trusting people, and thus winning commitment and loyalty through engagement. Within GSI, for example, there was no human resources department: “Every manager had to manage the human resources part.”

In 1995, to ADP, a large-scale strategic move into Europe seemed wise. On paper, GSI looked like a very attractive candidate to ADP. Some in the company argued that it would be “a real business mishap to have it acquired by a competitor”. Others argued that “Our international acquisitions haven’t been particularly successful, GSI is based in France and the French aren’t exactly renowned for their love of American business practices.” Was this strategic move too risky for ADP and its ‘straightforward’ business strategy? Could such an acquisition be handled successfully?

Despite misgivings, on 27 August 1995, the management of ADP and GSI signed an agreement for ADP to acquire all of GSI’s outstanding shares for FF2.3 billion. After only two months, the challenge of integrating the European and American operations throughout both functional and operational areas was coming sharply into focus. The Corporate VP of HR had worked in a French company in the past, yet he was shocked by what he found at GSI: “This company is different from anything we’ve seen before. These guys are very independent souls.” Time was of the essence to make both GSI’s decision to sell and ADP’s decision to buy the right ones. Could the newly acquired company make it work across the organization?

The case is split into a series of studies that measure the choices and decisions close-up and assess the gains and losses in aligning and integrating values and processes across both companies and for the individuals involved. The case extracts lessons for acquisitions of culturally diverse companies and provides extensive learning material for managers and senior executives, particularly those in large organizations.

INSEAD 2003

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