Mergers and acquisitions are a fact of life in today’s highly competitive global business environment. As the jostle for market share continues to drive business into Merger and Acquisitions there has been many failures and successes of the same measure. Some mergers are so successful, that one cannot remember a time when the two companies were distinct. Where would Disney be without Pixar, or J.P. Morgan without Chase? Also acquisition of Jaguar Land rover by Tata group or the various acquisitions by Piramal Group are examples of successful M&A Deals. However, many mergers fall flat on their faces and fail. The newly created company goes bankrupt, executives are fired, and in some cases, the merged companies disband in a sort of corporate divorce. For whatever the reason, there doesn’t seem to be a magic wand to corporate mergers. Mergers are inherently risky, and without the proper strategy, intuition, and knowledge, mergers, can get, well, ugly. Though many factors contribute to the success or failure of a deal, listed below are three separate failed deals and the core reason that led to their downfall.
- Two Companies One Culture
While it is clear that successful mergers and acquisitions are based primarily on strategic, financial and other objective criteria, ignoring a potential clash of cultures can lead to financial failure. Far too often, cultural and leadership style differences are not considered seriously enough or systematically addressed. The word “Cultural Clash” has been coined to describe what happens when two companies’ philosophies, styles, values or habits are in conflict.