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
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.
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).
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