Merger and Aquisition Failure
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M&A Failures
University of Phoenix
September 25, 2009
Why M&A’s Fail
Mergers and acquisitions are prevalent in our society. It seems every day you can open the paper and read about another merger or acquisition. From 1982 to the year 2000 “the pace of merger activity rose to unprecedented levels.” (Weston &Weaver, 2001) The role of these mergers is to allow firms to effectively operate in the wake of new challenges and opportunities. M&A’s can increase revenue, market share and improve shareholder satisfaction. In contrast, with all of the movement of mergers, there can also be great failure. Not all mergers are successful and it is important to understand why this occurs. Failures of mergers can be a teaching tool for future organizations in light of potential merger activity.
Technology integration is critical in the success of a merger. Failure to successfully complete integration between two organizations can also result in the failure of the ensuing merger. Integrating information systems has proven to be the toughest post deal challenge. Misconception is that once the merger has been finalized it will be successful, but that is far from the truth. Just as in a company that is starting up and working off of their strategic plan, without the follow up and reassessment of what needs to be done it can still fail. Culture shock is often another reason for failure. A merger is like a marriage as companies need to have communication, flexibility and mutual respect. Within a merger organizations blend values, traditions, beliefs, and priorities. The leadership of the CEO is critical. In order to have the entire organization on board, the CEO must lead and show their employees the benefits of the merger and the CEOs interest in the human capital involved.
Not structuring a merger deal or lack of negotiating how it will be handles post agreement is another reason for failure. Lack of synergy is what is caused and can cripple an...
University of Phoenix
September 25, 2009
Why M&A’s Fail
Mergers and acquisitions are prevalent in our society. It seems every day you can open the paper and read about another merger or acquisition. From 1982 to the year 2000 “the pace of merger activity rose to unprecedented levels.” (Weston &Weaver, 2001) The role of these mergers is to allow firms to effectively operate in the wake of new challenges and opportunities. M&A’s can increase revenue, market share and improve shareholder satisfaction. In contrast, with all of the movement of mergers, there can also be great failure. Not all mergers are successful and it is important to understand why this occurs. Failures of mergers can be a teaching tool for future organizations in light of potential merger activity.
Technology integration is critical in the success of a merger. Failure to successfully complete integration between two organizations can also result in the failure of the ensuing merger. Integrating information systems has proven to be the toughest post deal challenge. Misconception is that once the merger has been finalized it will be successful, but that is far from the truth. Just as in a company that is starting up and working off of their strategic plan, without the follow up and reassessment of what needs to be done it can still fail. Culture shock is often another reason for failure. A merger is like a marriage as companies need to have communication, flexibility and mutual respect. Within a merger organizations blend values, traditions, beliefs, and priorities. The leadership of the CEO is critical. In order to have the entire organization on board, the CEO must lead and show their employees the benefits of the merger and the CEOs interest in the human capital involved.
Not structuring a merger deal or lack of negotiating how it will be handles post agreement is another reason for failure. Lack of synergy is what is caused and can cripple an...