October 8, 2019 at 11:05 pm #96548
Assuming that a merger or acquisition is completed, please list the top three reasons you believe that M&As are not successful in achieving the intended goal(s)? If possible, rank them and provided a brief explanation.October 10, 2019 at 12:07 pm #96669
From personal experience and from what I have heard from fellow colleagues, I believe there are two main reasons for unsuccessful M&A.
The first one is related to the very first stage of the M&A process, prior to merging and acquiring and that is the development of M&A strategy and choosing candidates for M&A. At this stage, leaders and strategists determine the high-level goals for the firm and what they seek to gain from this transaction, such as increasing share in their current market or expanding to new ones. It can happen that the very strategy they aimed for from the begining wasn’t well defined or wasn’t profitable, and therefore the whole process can end up being unsuccessful. If valuation analysis isn’t done properly it could simply lead to choosing the wrong candidate for the M&A.
The second reason, is due diligence, as highlighted here https://dealroom.net/faq/what-is-m-a-process-everything-you-need-to-know Not conducting due diligence properly can result in unsuccessful M&A because the Once an offer with the final candidate is on the table, the acquirer must conduct due diligence. If they don’t carefully examine, evaluate, and analyze all aspects of the target company’s operations and financial position prior to establishing a definitive agreement and there happen to be important threats for the future of the M&A deal with that candidate, the whole deal can result in failure after a process is already completed.December 27, 2019 at 7:18 pm #103116
1) Overvaluation. Overly optimistic assumptions used in the valuation process. Either in the form of overly optimistic cash flows or a willingness to pay to high a multiple for perceived synergies that never materialize.
2) Cultural / Operational differences that were not adequately researched/identified in the due diligence process. Moral is easily eroded in the acquired company if management does not get on board early to communicate with managers of the acquired company.
3) Lack of planning and strategy for the after closing operations of the combined entities. To much focus is put on getting the deal done with not enough emphasis on how things are going to play out after the close date.December 30, 2019 at 7:19 pm #103300
1 – Poor due diligence
2 – Failure to account for Culture and compatibility of cultures
3 – Integration is not informed by good due diligenceJanuary 3, 2020 at 10:18 pm #103662
1. Combining incompatible cultures
2. Poor leadership governance
3. Placement of resources on the integration team with no significant experience with Project Management and Risk MitigationJanuary 6, 2020 at 7:32 pm #103840
I believe most folks have covered the top three. One thing I would like to add in is that I often see scope creep when moving into Integration. The financial model created in due diligence is a great starting point but once we bring in additional leaders, they often want to do much more (for instance enhancing the new companies product) that was not originally scoped in the model and requires added resources and cost.December 19, 2020 at 5:24 am #115815
1. Lack of Planning and Strategy
2. Inaccurate Data and Valuation Mistakes
3. Integration ObstaclesDecember 21, 2020 at 6:55 pm #115853
I see a trend that I would agree with; that being poorly planned due diligence being the main factor for a failed transaction. Poorly executed DD tends to create a more tense environment where emotions start to impact decision making.
Second, I would point to integration planning – failing to have a dedicated team and project lead to manage the workstreams.
Lastly, an identification of incompatible cultures will invariably stymie talks and could lead to a failed transaction.December 23, 2020 at 11:51 am #115892
Agree with all previous replies on this… from my experience the 3 that stand out for me on the PMI side:
1. Limited understanding of the deal success factors, value creation and a coherent PMI strategy
2. Congestion in decision making at exec level and losing sight of the value drivers
3. Underestimating culture and how things get done
An interesting area that I have seen play out recently is effort and focus being placed at the same levels regardless of the overall value potential.
Many thanksDecember 27, 2020 at 1:35 pm #115941
Cesar Otero LucasParticipant
For me the three main reasons:
1.- Over estimating the final result focusing only in the best case
2.- Poor due dilligence
3.- In DD process, not analyzing the technical issues of the plants and equipments you are acquiring. In my experience this factor is a key factor.
César OteroDecember 28, 2020 at 7:51 pm #115964
All the answers provided before mine are spot on and I won’t restate a previous post. In addition, I still wonder if the number 1 reason why a merger or acquisition is not successful is it was done at the wrong time during the business cycle.December 29, 2020 at 1:26 am #115974
– Lack of cultural fit
– Lack of clear communication and consolidation plan
– Lack of in advanced setting of synergies which are reasonable, deliverable, and measurableDecember 30, 2020 at 4:31 am #116000
All the answers above provided insight into why the M&A, not a success. Many companies just focus on getting the deals but not on the integration part which turns out harming the overall values.January 4, 2021 at 10:40 am #116092
I think this is a really important one, Scope Creep, particularly when you’re charged with oversighting a particular deliverable(s) is a major reason for failure as you will inevitable miss the target that was supposed to be achieved which often outs you in a far worse position than when you started as you now need double the resource and funds to fix an even bigger problem.January 6, 2021 at 2:16 pm #116137
High costs, different cultures, distrust between companies
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