Why do Companies Continue with Mergers and Acquisitions when so many Fail?

2666 Words 11 Pages
Why do Companies Continue with Mergers and Acquisitions when so many Fail?

The phenomenon of mergers and acquisitions (M&A’s) triggers an array of opinions and viewpoints. Often it is a strategy that is seen as a perfect way of achieving growth. It is by no means an organic or natural route to success, but has tended to be a quick and easy way of increasing an organisations size and power. However although there have been ‘waves’ of popularity and success since its introduction in the
1960’s it has also suffered criticism due to the number of failures it has accounted for. Despite the strong suggestion that this strategy has been the architect for many an organisation's downfall there still remains a propensity in the current
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Added to this he also highlighted that ‘only a paltry 25% of deals valued at 30% or more of the acquirer’s annual revenues could be counted as success’. These statistics represent the flaws that exist within the strategy of M&A’s and clash with the positive theory that ‘analysts and investors expect the merged enterprises to be greater than the sum of its parts’ (Doitte and Smith 1998). Coopers and Lybrand (1993) along with many other writers have studied and expanded on some of the key factors that limit that usefulness of
M&A’s.

Target management attitudes and cultural differences ‘heads the list of impediments to the successful melding of two organisations’
(Davenport 1998). This is appropriate not only in the case of cross-border mergers (Daimler Benz-Chrysler) where there many obvious points of concern such as language and communication, but also within the collaboration of firms based in the same country and even industry. Management often have their own ‘way of working’ that suits both themselves and their employees, which may be generated through national or corporate culture. This is generally characterised by unique and individual working practices amongst different firms nation and worldwide. Therefore when a
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