Failed deal of Merger & Acquisition - Compatibility Issue

The reason as to why the mergers fails, is a vast topic. Here some of the issue which relates to compatibility is stated. Incompatible Merger happens when the system integration or product matching fails like change in technology.

These include combining two disparate corporate cultures, linking financial and control systems, building effective working relationships (particularly when management styles differ) and resolving issues concerning the status of the newly acquired firm’s executives.

Even the failure to complete an effective due-diligence process (through evaluation of the target firm) often results in the acquiring firm paying an excessive premium (disproportionate to the performance gains).

Firms are often encouraged to utilize significant leverage to finance acquisitions. The large debt burden may put the firm in a messy situation, especially when the returns are poor.

The acquisitions often fail to achieve the intended synergy because of various reasons (managerial failures, non-cooperation from employees, skepticism, emotional doubts, etc).