Tagged: Mergers & Acquisitions
- This topic has 14 replies, 15 voices, and was last updated 1 year, 8 months ago by Yazeed Albaiz.
August 16, 2021 at 9:10 am #36332Yazeed AlbaizParticipant
According to research from a Harvard Business Review report, the failure rate for mergers and acquisitions is between 70% and 90%. The reasons for such a high rate of failure include:
– Inadequate Due Diligence
– False Sense of Security
– Lack of Low-Level Management Involvement
– Failure to Recognize Culture Synergies/Differences
– Don’t Stress the Press
– Understand the Value Added
Any other ideas?August 20, 2021 at 3:16 pm #38998Ahmed ZainalabedinParticipant
I would add poor post merger integration planning.August 23, 2021 at 9:41 pm #39008Millie ManningParticipant
I would add unclear strategy – a company that gets in the habit of acquisition for acquisition’s sake may wind up with a target company that doesn’t strategically make sense, simply because they are on a roll, or are swayed by the target’s reputation, personality, or ego.September 18, 2021 at 8:16 pm #39056Craig HaslerParticipant
Thanks for the prompt.
I’d be interested to know what their definition of a “merger failure” is. Is it inadequate capture of synergies identified in the board plan…or lack of fit within the new company? Both Ahmed and Millie present solid points above… I would also add that in some cases management will move forward with a deal to avoid time and investment to develop a particular technology or offering internally. The simple solution is always to “buy” instead of “build”. In certain cases, we’ve seen that companies will pay a steep price (overpay) to acquire a technology for the sake of speed and simplicity (or as a defense mechanism vs. competitors).
Do you have a link to the HBR article?
CraigSeptember 25, 2021 at 8:54 am #39067Sumit RambaniParticipant
There are many factors like
lack of strategy
lack of clear objective
lack of realization of synergies
Lack of propoer due diligenceOctober 9, 2021 at 12:14 pm #39122Wessam AlZamilParticipant
I would add “improper integration planning” and “lack of cultural synergy”October 15, 2021 at 1:41 pm #39143Meg VerParticipant
Lack of strategic planning. (including integration planning)
Overestimating the synergies.
Culture clash.October 15, 2021 at 6:28 pm #39146Pawankumar ShardaParticipant
Post Merger Integration
Failure to recognize the time of the deal – Is this the right time?
Conglomerate M&AOctober 17, 2021 at 9:34 pm #39147Ebrima B SawanehParticipant
Sometimes the M&A goals do not align with the core business objective. Maybe the management wants a bigger size company and not necessarily for a better return to shareholders.October 22, 2021 at 8:30 am #39169Thabet AlYousefParticipant
I would add the focus on short term gain over long term value creation leads to decisions that destroy value. Add to it how the reward and incentive plan was developed for the leadership and transaction team which is part of the first point.October 22, 2021 at 10:11 am #39171Saif AlnaimiParticipant
I would add (Misvaluation)October 29, 2021 at 11:34 am #39207Anandan RajagopalanParticipant
The ability of the buyer and target companies to integrate in structure, leadership and culture has a huge influence on the ability of the new company to realize merger synergies and strategic benefits. Also lack of effective communication lead to well plants the seeds of later failure, measured in terms of lost credibility, diminished employee morale, destroyed value and investor lawsuits.November 5, 2021 at 10:21 am #39223Mohammad AlageeliParticipant
I would add to your points, unclear objective and strategy. entering into an M&A just for the sake of catching the opportunity before others do.November 14, 2021 at 10:58 am #39254Stephane HetroyParticipant
Yes many M&A fail to deliver and as you highlighted above the list of issues behind it is quite long. I will add complementary ones with a different angle:
– cheap money, financial engineering (sometimes banks, BoD, other actors interest), playing poker with someone else money
– conflict of interests
– hubris CEO running crazy for recognition and package (apply to top team members wanting The deal at any cost)
– over aggressive synergies to sell the deal and eyes stuck on the stock market afterwards instead of operations mid / long term efficiency
– no review of past acquisitions or BD projects and lack of transparency/honesty to learn from the mistakes
– lack of power or unwillingness of regulatory bodies to dig on issues (only works in the US due to the whistleblower incentives and protection), lack of power of company internal ‘regulatory bodies’
– fines and sanctions apply to the legal entity…November 24, 2021 at 5:53 pm #39320Moazzam KhawajaParticipant
Lacking a good motive for the acquisition
Targeting the wrong company
Losing the trust of important stakeholders
Failing to pull out when all evidence says you should
Neglecting number one
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