Mergers and acquisitions are aimed at creating a leaner, meaner company with greater shareholder value. Yet research concludes that up to 80% of large cap and 50% of small cap transactions fail to meet their objectives within 18 months. That's pretty dismal. What's to blame?
Not a lack of financial or systems' due diligence. Recent research for HR Consultancy, Hay Group, found that it was a failure to grapple with intangible human issues that are often at the root of these failures. Management Issues reports the results of the study, and has some pretty grim metaphors for what goes on in many companies after a merger or acquisition: 'culture shock' at best, and 'trench warfare' at worst. If spending a typical day at headquarters post-merger leaves you feeling like you've spent a day on the Somme, then your company probably made some pre-merger mistakes. The study found:
Firms too often prioritized financial and systems' due diligence at the expense of the intangible assets critical to a merger process, such as business culture, human capital, organizational structure and corporate governance.David Derain, a director with Hay, warns:
"Integrating intangible assets six months after a deal has gone live is too late. Companies should be examining the compatibility and differences between the two firms well before the deal is made public, in order to have a clear plan of action in place right from the start."Want your company to end among the 20% that successfully transition after a merger? BNET offers a feature package on evaluating potential mergers, so you can avoid mismatches from the start. And Harvard Business School's Working Knowledge series outlines nine merger sins to avoid.