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Why do up to 90% of Mergers and Acquisitions Fail?

Annifer Jackson
|Jan 28|magazine10 min read

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.

That is a remarkably high figure, but when you consider the range of business, IT and cultural factors that occur during the average merger or acquisition it is not that surprising.

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Mergers and acquisitions should never be taken lightly. Not only are you asking two companies to integrate under one corporate mission, but you are bringing together large groups of people with their own personalities, ambitions, behavioural traits and ways of working. The complexity ramps up when multiple branch offices, cross-border IT infrastructure and financial regulation are included.

Without a clear strategy, effective project management and open communication between stakeholder groups, the merger or acquisition will struggle to deliver the desired results. The process must be transparent, realistic and involve all areas of management if success is to be achieved.

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Planning for the Future

Delivering the above generally involves three components:

  • Strategic planning
  • Stakeholder engagement and third-party mediation
  • Company-wide engagement

The first – a comprehensive project strategy – is perhaps the most critical to realising the other components. This means effective management irrespective of the deal’s scale. Merging or acquiring a company can be draining from a personnel and financial perspective, and it can quickly spiral out of control if the businesses have not outlined what they wish to achieve.

This means a unified business plan, enough time to let employees adjust to the change, training programmes for those who need to be brought up to speed, financial and legal adjustments, a consolidated IT department and the creation of a brand identity that everyone can relate to.

Clearly defining the purpose of the merger or acquisition – growth, market share, mutual benefits – will establish realistic goals and a natural process that can be managed. Challenges will occur, that is a fact, so make sure your strategy assesses the potential risks and complications that could arise during the process so you are prepared.

Utilising a Board and Communicating its Vision

Remember, nobody can champion a great business alone and this is particularly evident during a merger or acquisition. It is therefore wise to establish an advisory board that includes major stakeholders, heads of department, internal staff and an outside specialist to guide the process.

Mergers and acquisitions require highly sophisticated expertise so consider bringing in an expert who can assess the situation and planned objectives without bias. An independent source will help challenge claims, validate great business decisions and ensure leadership stays on track in its goals.

The outside specialist will also look to ensure employees receive the support they need through the merger or acquisition. It is crucial that people understand why the changes are taking place, otherwise they will lose focus, become unhappy and potentially be disruptive.

Keeping employees engaged is fundamental. If staff are fully immersed in the changes they will have the knowledge to lead the united company in the new direction, contribute to its mission more and could possibly even act as an advocate for the new organisation internally.

A successful merger or acquisition comes from carefully combining employee engagement programmes with a multi-layered strategy built around communication. With this at the centre of the overarching strategy, organisations will have a better chance of bucking the merger and acquisition trend.

By Esther McMorris, Founder of Nine Feet Tall, a fast growing business consultancy, shares her strategy for long-term M&A success. 

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