Experts have advocated the failure rate of M& A is #90%. They further suggested that when M&A as part of business strategy to grow need to address the following issues/challenges:
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PITFALLS/ISSUES/CHALLENGES OF PERFORMING AN M& A EXERCISE
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PRE-DEAL PLANNING STAGE
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Potential Pitfalls
· Incompatible marketing system
· Did not anticipate forseeable event
· Need to spin off or liquidate too much
· Incompatible culture
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Key Areas to focus on to Prevent failures
- Formulating strategy
- Developing the business case
- Reviewing alternative options
- Identifying targets
- Initial assessment
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DOING THE DEAL: EXECUTION STAGE
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Potential Pitfalls
· Acquirer paid too much
· Synergy non-existent or overestimated
· Acquired firm too unhealthy
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Key Areas to focus on to Prevent failures
· Evaluating the target
· Structuring the transaction
· Price assessment
· Supporting negotiations
· Due diligence
· Regulatory approvals
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POST-MERGER INTEGRATION
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Potential Pitfalls
· Inability to manage target
· Unable to implement change
· Clash of management styles/egos
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Key Areas to focus on to Prevent failures
· Establishing the strategic framework
· Developing integration plans
· Communications
· Implementing plans
· Establish key performance metric in the form of a balanced scorecard
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See other articles on: Justifications of Mergers & Acquisitions(M&A), Difference between a Merger & An Acquisition, Different types of M& A
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