Why Merger failed during the first 6 months


This topic contains 1 reply, has 2 voices, and was last updated by  Niral Shah 1 year, 8 months ago.

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    The majority of mergers are like marriages – they don’t work.The failure rate for mergers or M&As, is anywhere between 40 percent to 80 percent.That means that most deals fail to achieve the strategic aims for which they were initiated.Some of the reasons are :
    1. Deal Fever
    Momentum, personal ambition, and public headlines make it difficult to stop a deal once it gets going. Politics and ego make it hard to assess the objective merits of a negotiation once it has started.
    2. Implementation
    Rarely implement them. Lawyers send in their invoices, and the strategies move on.
    3. Lack of insight
    Nobody tell the truths, and few companies examine where or how the deal makes sense.


    Niral Shah


    Few other considerations on this topic as as follows:

    1. Acquirer materially overestimates the synergies a merger will yield. These synergies can come from economies of scale and scope, best practice, the sharing of capabilities and opportunities. It takes only a very small degree of error in estimating these values to cause an acquisition effort to stumble
    2. In the absence of a common vision and a clear statement of what the merged company will stand for, how the organisation will operate, what it will feel like, and what will be different compared to how things are today, there is no point of the convergence on the horizon and the organisations will never blend.
    3. There is not much importance given to cultural assessment and integration due to which the acquired company does not fit into the target eco-system and retention becomes a key issue.

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