Reasons Why Mergers & Acquisitions Fail And Succeed

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  • #36332
    Yazeed Albaiz
    Participant

    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?

    #38998
    Ahmed Zainalabedin
    Participant

    I would add poor post merger integration planning.

    #39008
    Millie Manning
    Participant

    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.

    #39056
    Craig Hasler
    Participant

    Hi Yazeed,

    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?

    Craig

    #39067
    Sumit Rambani
    Participant

    There are many factors like
    lack of strategy
    lack of clear objective
    Cultural differences
    lack of realization of synergies
    Financial
    Lack of propoer due diligence

    #39122
    Wessam AlZamil
    Participant

    I would add “improper integration planning” and “lack of cultural synergy”

    #39143
    Meg Ver
    Participant

    Lack of strategic planning. (including integration planning)
    Overestimating the synergies.
    Inaccurate valuation.
    Culture clash.

    #39146
    Pawankumar Sharda
    Participant

    Post Merger Integration
    Overambitious M&A
    Incorrect strategy
    Failure to recognize the time of the deal – Is this the right time?
    Conglomerate M&A

    #39147
    Ebrima B Sawaneh
    Participant

    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.

    #39169
    Thabet AlYousef
    Participant

    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.

    #39171
    Saif Alnaimi
    Participant

    I would add (Misvaluation)

    #39207
    Anandan Rajagopalan
    Participant

    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.

    #39223
    Mohammad Alageeli
    Participant

    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.

    #39254
    Stephane Hetroy
    Participant

    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…

    #39320
    Moazzam Khawaja
    Participant

    Lacking a good motive for the acquisition
    Targeting the wrong company
    Overestimating synergies
    Overpaying
    Exogenous risks
    Losing the trust of important stakeholders
    Failing to pull out when all evidence says you should
    Failed Integration
    Neglecting number one

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