How "Good" Deals Go Bad: The Most Common Causes of M&A Failures
Deals fail frequently. Here are the nine most common reasons why:
- Paying too much. Some companies feel they have to overpay to block a competitive bid or to protect their turf. But when too much is paid, it makes achieving a satisfactory return on investment awfully difficult.
- Lack of strategic clarity. Companies often acquire for the wrong or unclear reasons. Sometimes, a CEO simply wants to prove to the Board of Directors that he’s capable of doing a deal. Other times, acquirers catch deal fever and get caught up in a buying frenzy rather than analyzing realistically how the two organizations will complement each other.
- Slow decision making can derail a deal. If the two companies can’t decide who’s in charge, where they’re going, and how they’re going to create value together, both customers and employees can lose patience, grow anxious, and leave.
- Poor integration planning and execution. We’ve all seen situations where the best-laid plans have gone astray. Integration plans aren’t worth the paper they’re written on if the people who are responsible for executing those plans don’t understand them, agree with them, or want to make them work.
- Culture clash. Even companies in the same industry, serving the same customer segments, and holding the same values can suffer from culture clash. You may have heard about some of the problems between AOL and Time Warner as old and new media business ideas ran head-on into each other. Culture clash is real and common and it can cause a deal to fail just as surely as any other more seeming tangible reasons ...