What are the key risks in the different phases in an M&A transaction?

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This topic contains 3 replies, has 4 voices, and was last updated by  Brandon Kissinger 3 weeks ago.

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  • #114310

    Karl Heinz Foertsch
    Participant

    Would like to understand what the key risks in the different phases in M&A transaction are. Quite a few studies indicate that many transactions do not meet their original targets and / or destroy economic value.

    #114408

    Riccardo Scaioli
    Participant

    As you correctly mentioned, there are key risks that can be associated to all the phases of M&A transactions. To name a few, starting from due diligence, not having considered all the financial aspects of the target, or not having conducted a proper research and investigation, can have the risk for the buyer to buy at a higher price and have impact on the value of seller; not having considered how to properly manage the integration, then, can be disruptive and can either delay the proposed timeline (sometimes never reaching its original and planned goal) or having massive consequences, such as poor retention from the acquired business. These two are the areas in which I have a bit more knowledge about, and other experts can give you more detailed analysis or provide further examples.

    #114443

    Yaw Adom-Boateng
    Participant

    Yes, various research confirms that most M&A transactions failed to achieve the desired expectation. For each of the phases, there exists varying risks but in general, the key risks include Determination of strategic objectives
    1. Over-estimated Synergies
    2. Finding the right target
    3. Conducting due diligence
    4. Paying the right price
    5. Incompatible Cultures
    6. Post-merger integration

    #114478

    Brandon Kissinger
    Participant

    Double clicking into this question, I do wonder if “current business cycle” doesn’t play a larger role in the success of an acquisition. On slide 6 of that presentation, I was surprised to see that +60% of M&A are deemed a failure. Would be interesting to superimpose a timeline on those percentages to get a better idea of the each vintage.

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