An outstanding feature of the recent post-crisis global economy has been a sharp increase in mergers
and acquisitions. According to the Bloomberg 2011 M&A Outlook, in the year to November 2010
there were more than 21,000 such transactions globally, representing a 12% increase on the previous
year, with total value in excess of US$1.9 trillion. Over the last decade in particular, many larger
businesses have adopted acquisitions strategies as a core aspect of their business approach: back in
2004 it was reported that some companies were conducting 25 or more deals every year, or seeking
to achieve 50% or more of their business growth in this way (Chanmugam, Anslinger & Park, 2004)
The potential business benefits to a merger or acquisition include the expansion of product lines or
markets, a means of gaining a competitive edge in the market, or the ability to secure access to
scarce resources or expertise. However, this is also a high-risk business strategy, as evidenced by the
extremely merger and acquisition failure rate which is reportedly between 40% and 60% of all deals.
In the case of cross-border mergers, failure rates of up to 70% have been reported (Manas, 2011). In
some cases, the prospective partners fail to agree on terms and conditions for the merger, and
abandon the plans before too much effort is invested; too frequently though, the real problems only
arise after the formal merger takes place, and incompatibilities or conflicts between the two formerly
separate organizations come to the surface. These problems can often be avoidable, if more
attention is paid to the post-merger integration process.
Practically every transaction is accompanied by due diligence, with the increased involvement of
external specialists such as lawyers, auditors, tax consultants and investment bankers. Yet challenges
with post merger integration are consistently high and the resultant threat to a company’s
performance perhaps higher than it needs to be. There are no hard and fast rules to ensure that a
given merger will result in corporate wedded bliss.
This project discusses an art and science approach to merger management, which is recommended
for ensuring a smooth transition to a single organisation. The proposed strategy is grounded in a
growing body of research evidence that it is the people-related or cultural aspects of change that
most often lead to failed mergers. Addressing these factors along with the logistical aspects of the
merger can help to ensure that the business value and positive outcomes that were expected of the
merger are realised in practice.
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