Having spent the first 17 years of his career reshaping companies acquired by an international group, and then focused on M&A consultancy across several industries, Paul J Siegenthaler has seen his fair share of M&A pitfalls. Here’s his take on the most common causes behind the fact that the majority of company integrations fail.
Ten reasons mergers and acquisitions fail
1. Ignorance While the parties to a merger or acquisition cannot exchange commercially sensitive information prior to being under common ownership, there is enough crucially important and legally permissible preparation work to keep an integration team busy for several months before day one. Most chief executives don’t know this and they waste the time that could be put to good use while they await clearance from the regulatory authorities. Good preparation means the integration can kick off on day one. Speed matters.
2. No common vision In the absence of a clear statement of what the merged company will stand for, how the organisation will operate, what it will feel like, and what will be different compared to how things are today, there is no point of the convergence on the horizon and the organisations will never blend.
3. Nasty surprises resulting from poor due diligence This sounds basic, but happens so often.
4. Team resourcing Resource requirements are very often underestimated. It can take two or three months to release the best players from daily business to join the integration team(s), find a backfill for them, sign up contractors to fill the gaps and set up the team’s infrastructure. Most companies start too late and are not ready on once the deal is completed.
5. Poor governance Lack of clarity as to who decides what, and no clear issue resolution process. Integrating organisations brings up a myriad of issues that need fast resolution or else the project comes to a stand-still. Again: speed matters, but with a sound decision-making process.
6. Poor communication Messages too frequently lack relevance to their audience and often hover at the strategic level when what employees want to know is why the organisation is merging, why a merger is the best course action it could take, in what way the company will be better after the merger, how it will “feel”, how the merger will affect their work and what support they will receive if they are adversely impacted.
7. Poor programme management Insufficiently detailed implementation plans and failure to identify key interdependencies between the many workstreams brings the project to a halt, or requires costly rework, extends the integration timeline and causes frustration.
8. Lack of courage Delaying some of the tough decisions that are required to integrate two organisations can only result in a disappointing outcome. Making those decisions will not please everyone, but it has the advantage of clarity and honesty, and allows those who do not find the journey and destination appealing to step off before the train gathers too much speed.
9. Weak leadership Integrating two organisations is like sailing through a storm: you need a strong captain, someone whom everyone can trust to bring the ship to its destination, someone who projects energy, enthusiasm, clarity, and who communicates that energy to everyone. If senior managers do not walk the talk, if their behaviours and ways of working do not match the vision and values the company aspires to, all credibility is lost and the merger’s mission is reduced to meaningless words.
10. Lost baby with bathwater Companies contemplating a merger or acquisition too often omit to pinpoint what particular attributes make the other party attractive, and to define how they will ensure those attributes will not get lost when the organisation and the culture have changed. Culture cannot be bought – it needs to be embraced.
Paul J Siegenthaler is the author of Perfect M&As, which is published by Ecademy Press