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Reasons Why Company Mergers and Acquisitions Fail

Updated on December 2, 2010

Business Mergers and Acquisitions

As the jostle for market share continues to drive business into merger and Acquisitions there has been a lot of failure and success of the same measure. Many companies get to merger but end up performing poorly than they were doing before. There are so many reasons that have contributed the many merger and acquisition to fail

Poor Valuation Strategy

Many companies merge before doing sound valuation of the Company they are acquiring and this often leads to short coming after getting into merger, hence valuation strategy need to be in place before any acquisition process is started

Lack of Integration Plan

Once the companies have come together without proper integration plan they will run into trouble due to lack of visionary expertise to run the business, board members who normally Okay the merger and acquisition of various companies are not the same people going to run these companies after acquisition finalization hence they need expertise with the same visions and skills to manage the merger

Poor business judgment

Lack of sound judgment is also to blame for merger and acquisition failure, many business merger only to realized that the business principles are not the same and will not lead to any growth in the future, this can only be avoided by having good business judgment at the beginning before getting yourself into the process, ask yourself whether this is the right company that will help get the market share and whether they share some of your values and operation strategies

Mergers and Acquisitions

Overpayment of targeted companies

poor valuation, poor business judgment will lead to overpayment of targeted companies, this will lead to loss in return for quite some time before realizing any profit but in most cases overpayment leads to your companies death as you cannot meet operation expenses

Changing market condition

You may get into merger and acquisition at the right time but suddenly in negative change in the market and in your niche particularly will get you back to the drawing whether you need to go it alone or remain in the merger, this is a one factor that should be taken into consideration during the initial stages of merger and acquisition.

The other reasons why merger and acquisition fails is that many of them should have not been done in the first place if sound integration plan would have been develop to guide the process

So for a successful merger and acquisition to take place there is need to develop sound integration plan that will guide your business from the initial stages up to the point are you are breaking even


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      Yinka Oyenuga 7 years ago

      This is very enlightening.

      In addition to valuation and integration, the processes which distinguish a brand must be understood. It may consist of mundane habits, such as special incentives to a market leader or participation or sponsorship in some special interest activity or festival.

      This may show up as "goodwill" in the accounting books, and may rightly attract additional income for the brand.

      Even when payment for such is justified in the books, the acquiring company must decide if such process is compatible with its own values.