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Success and Fail Rate of Acquisitions

Some companies can check all the boxes of why a merger would make sense on paper, but when it comes down to executing, it results in a costly mistake. In fact, a KPMG study indicates that 83% of merger deals did not boost shareholder returns. Robert Sher suggests this is because of mismanagement of risk, price, strategy, cultures, or management capacity. Don’t do that. Instead, reduce your risk of failure and accelerate results by managing mergers and acquisitions at both enterprise and personal levels with a 100-Day action plan, working through behaviors, relationships, attitudes, values and the environment from the outside in.

According to collated research and a recent Harvard Business Review report, the failure rate for mergers and acquisitions (M&A) sits between 70 percent and 90 percent. The reasons for such a high rate of failure include:

Inadequate Due Diligence: Once a deal gets started, the expectations for a quick execution are high. This is dangerous because it results in oversight during the due diligence process. When you're supposed to be uncovering the good, bad, and ugly of a company it's imperative to assign the right person who knows what they're looking for and assuring they have adequate time to complete the investigation.

False Sense of Security: Mergers and acquisitions are laced with the promise of synergies that strengthen companies. Promises will be made to keep a consistent brand name and CEO's will collaborate to deliver results. However, after a merger the real power struggle emerges and promises are not kept and the once-promised synergies and unity collapse.

Lack of Involvement From Low-Level Management: Often times the people with the most say in a merger are the ones least involved with a company's operations. When evaluating due diligence, synergies and costs, the people with the most insight will be the lower-level management.

There are several other underlying reasons why there is such a high failure rate for mergers and acquisitions, but let's not ignore the reasons why they succeed. 

Recognize Culture Synergies/Differences: When looking at deals, it's easy to ignore little differences in company cultures because it's not something you can quantify. Often times it's something you will think about post-merger and are sure it can be handled properly, but that's what leads to power struggles and low morale that makes it difficult to succeed as one.

Don't Stress the Press: Companies often relish in the fact they will be receiving public attention during these next few months of the acquisition. If this perk is the reason behind your merger, you will fail. Don't put too much pressure on the news attention and focus on the next steps with your new company.

Understand the Value Added: When acquiring a company, you need to accurately understand where the new company is adding value. Deciding how to integrate the new company is crucial and misunderstanding the new value added has led to disastrous mergers.

M&A's are laborious, time-consuming and easily mismanaged. In order to beat the odds, you must consider numerous angles and steps in the cumbersome process.

Michael Koeppel