Why M & A Failure

Acquisitions fail because they look only to one side – cost efficiency (a tactical approach), rather than business expansion (a strategic approach) – and fail because they ignore the effects of culture. 

#KPMG interviewed 100 executives who had been involved in 700 deals over a two-year period. Of these, 83% #mergers failed to produce any benefit and over half actually destroyed value. 

Mercer-Kroll reported a 50-70% failure rate in #acquisitions they’d worked on over a period of two years. While that was some progress, it looks like there’s still plenty of room for improvement.  

Why?

There are several intricate steps where they can go wrong. Here are the actual goals of M&A and why is it so hard to get it right:

1. Find a compatible candidate company.
2. Complete the due diligence.
3. Close the financial transaction.
4. Get past the turbulent transition period as quickly as possible.
5. Reduce turnover resulting from uncertainty after the financial close.
6. Quickly transition to get as close as possible to that operating state represented in the financial model – that is, to get across the gap in performance that typically accompanies acquisitions without losing too much time, revenue, personnel or momentum.  

 Jeez – what could possibly go wrong with all of that?  

Starting Line

When you sign the documents at the financial close, you’ve essentially stepped up to the starting line, not the finish line. Most acquisition failures result from not following through. 

Much of post-acquisition integration is not complex but can be very hard. It's like breaking rocks – simple concept, but not easy; just very hard work!   

It’s the milling and grinding to deliver the goods; it’s the blocking and tackling that allows the fancy pass-play to work. Acquisitions don’t meet their financial projections typically because they look only to a tactical approach, rather than a strategic approach, and fail because they ignore the effects of culture. 

Read the latest article on The Need for A Culture Assessment.

#integrationadvisor #merger #acquisiton #Value #blackstonecullen

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