As the wealth management sector braces itself for an expected further round of merger and acquisition activity this year, Mercer, the consultants, has ranked France and Japan as the toughest markets for global M&A, with the US and UK as two of the easiest.

Examining a variety of firms and their workforce culture, employment laws and national accounting rules in 29 states, Mercer ranked countries for how tough or easy it is to pull off M&A deals.

Pension liabilities, employment rules and complex corporate cultures can stymie some deals, the survey, called M&A HR Issues Around the World, said.

The report does not single out wealth management as a sector.  In this part of the economy, as WealthBriefing reported last year, a raft of M&A deals were signed in Asia, North America and parts of Europe. The US, for example, witnessed major deals, such as the purchase of Merrill Lynch by Bank of America, the coming together of Wells Fargo and Wachovia, and Morgan Stanley’s brokerage joint venture with Citigroup. In Europe, Deutsche Bank, for example, bought Sal Oppenheim, while Commerzbank, under instructions from EU regulators, sold off non-German assets. In Asia, firms such as ING, the Dutch business, disposed of Asian private banking assets.

“We’re now coming out of an economic trough, with companies looking to fuel future growth through global transactions. The number one reason why many will founder is the failure to pay enough attention to the important people and cultural issues,” said Eric Warner, Mercer’s head of M&A consulting for Europe, Africa and the Middle East. “As we’ve seen time after time, the people issues can make or break a deal,” he said.

Companies face numerous obstacles when attempting to create value from a deal. The report shows that these may range from strong union power and complex corporate cultures to employment terms that bring unexpected burdens around severance and future benefit provision, Mercer said.

France is a particularly tough territory for deal-making as its corporate culture follows complex, formal procedures that often hamper flexibility, and strict collective bargaining regulations require consultation with works councils at every stage.

“France’s works councils can present a significant  bottleneck, with delays to concluding the process a very real risk. And disruption from industrial action is the ultimate threat if deal communication procedures are not handled correctly,” said Dr Warner.

In Japan, there is a similar culture based on building consensus, with a high value placed on employees and managers saving face. As in France, Japanese law gives special legal status to collective agreements that may reject changes to future employment conditions, including pay, benefits and severance.