Why Do Some Mergers and Acquisitions Fail? - Essay Sample

Introduction

Mergers and acquisition should not be taken for granted. Instead, companies should recognize that, apart from integrating two companies under a common corporate mission, Mergers and Acquisitions also bring together the large groups people with various personalities, behavior traits, ambitions and system of working. In the contemporary world, various businesses have failed due to non-viable mergers and acquisitions strategies. A few companies that have failed include New York Central and Pennsylvania Railroad, Quaker Oats and Snapple, America Online and Time Warner and the like (Dumont, 2018). The following essay seeks to discuss five main causes that lead to the failure of some mergers and acquisitions.

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Poor governance and decision making among companies (Seth, 2018): There is a lack of clarity among people when it comes to making decisions, hence there are vague issue resolution processes. Combining firms attracts a myriad of issues that require swift resolution, and if not addressed on time, they threaten the progress of the project making it come to a stand-still.

Poor communication among the organization (Seth, 2018): Some of the mergers and acquisitions are characterized with ineffective project management, vague strategy, and lack of open communication between stakeholders, therefore making the merged companies struggle to fulfill their objectives.

Adverse external factors that change the business environment making it difficult for the business to operate: For example, The Bank of America failure was a result of the collapsing of the overall financial sector, whereby the mortgage companies were the highest affected (Price, 2012). External factors may not completely be regulated, and the appropriate strategy in such case is to seek measures on how to cut-off further losses that may threaten the progress of an organization.

Negative cultural integration issues (Dumont, 2018): As noted in the case of Daimler Chrysler, its merger was affected by integration issues. The issues are similar in the global merger and acquisition deals and a robust decision has to be made on either to go for the hard-decision forceful integration and putting aside the cultural differences or letting the local/regional businesses operate their respective unit, with a strong strategy and target on generating profit.

The contrary difference in the needed capacity against the current bandwidth (Dumont, 2018): this refers to the purpose of expansion needed in the evaluation of the current firm's capacity to combine and construct upon the larger business. The firms need to determine whether their resources are over-utilized, if not they will leave no future to make a successful deal.

Conclusion

To wind up, the factors identified for causing failed mergers and acquisitions are adverse to the business prosperity but at the same time, they can be avoided. Before merging and acquisitions, companies ought to seek common goals and operation strategy, while at the same time they need to decide on their back plan that will ensure continuity of business operation, and ensuring that business is not affected and there are no any financial losses.

References

Dumont, M. (2018). Biggest merger and acquisition of disasters. Retrieved from https://www.investopedia.com/articles/financial-theory/08/merger-acquisition-disasters.asp

Price, J. (2012). 6 Reasons Why So Many Acquisitions Fail. Retrieved from https://www.businessinsider.com/why-acquisitions-fail-2012-10?IR=T

Seth, S. (2018). Top Reasons Why M&A Deals Fail. Retrieved from https://www.investopedia.com/articles/investing/111014/top-reasons-why-ma-deals-fail.asp