Depending on the definition of success, performance can be judged in different ways. In economic terms the benchmark used is the amount that would otherwise be attainable at a market rate of return, or in another investment.
Using this measure, of economic value rather than another forecasted amount, more mergers succeed than fail. However, managers aren’t betting they will be economically successful, they are betting they will meet and maybe even outperform their synergy goals and projections.
Why do they think they will be able to achieve this performance?
• Excitement / want to be a bigger company
• Rosey estimates
• Lack of detailed planning
• Inadequate use of experts
• Incentives
Why wont they get there?
• Strategic confusion
• Overvaluation / paid too much
• Unfocused or inadequate Due Diligence
• Lack of integration planning
• Not enough dedicated resources
• Inadequate change management
• Retention problems for key people
• Culture problems → buyers curse, cultural fit
• Gaps in team expertise
• Communication planning problems
Depending on the specifics of the situation, there are a great deal of other aspects that contribute to destroying or creating value in a merger. Due to conflicts inherent to organizations, a great deal are not able to achieve the synergy goals they set for themselves, or projections which are used to justify the M&A business case.
