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Why Acquisitions Usually Fail Cheat Sheet by

Reasons Acquisitions Fail
corporate     reasons     fail     acquisitions

Introd­uction

Acquis­itions are one of the most powerful tools available to companies for achieving growth and building long-term value.
Unfort­una­tely, while lots of deals get done, few of them succeed. According to the Harvard Business Review, somewhere between 70-90% of all deals fail. Worse still, according to such firms as KPMG, The Boston Consulting Group, and L.E.K., 50-60% actually destroy shareh­older value.
One simple but effective way to ensure a successful acquis­ition is to study why others have failed and do something different.
Here are nine common root causes of failed acquis­itions. Every cause cited could have been avoided or mitigated with earlier or more concerted attention to the demands of integr­ation.

1. Strategy

Poor strategic logic or fit, strategy not used to determine goals of integr­ation
Examples: eBay / Skype, Arby’s / Wendy’s

2. Synergy

Overes­tim­ation of potential synergies, undere­sti­mation of synergy comple­xities or timetable to delivery
Examples: AOL/Time Warner, HP/Compaq

3. Culture

Fundam­ental incomp­ati­bil­ities (including buyer’s lack of self-a­war­eness), ineffe­ctive integr­ation, squelching positive attributes of target’s culture in name of uniformity
Examples: Daimler Benz/C­hry­sler, Alcate­l/L­ucent

4. Leadership

Weak leader­ship, delays in appointing new leadership team, loss of key talent, insuff­icient partic­ipation in the transa­ction and integr­ation processes, ego clashes, failure to deliver on pledges
Example: Sprint / Nextel

5. Transa­ction Parameters

Overpa­ying, inappr­opriate deal structure, endless negoti­ations bleeding both companies dry
Example: Quaker Oats / Snapple
 

75% M&A deals fail to create value

6. Due Diligence

Insuff­icient invest­igation (espec­ially little or no strategic and operat­ional due dilige­nce), failure to translate findings into actions.
Examples: Bank of America / Countr­ywide, HP / Autonomy

7. Commun­ica­tions

Failure to commun­icate with sufficient transp­arency, awareness, depth or frequency; failure to take key messages to approp­riate stakeh­olders, failure to address the concerns of each group with targeted yet strate­gically consistent messaging, making empty promises
failure to take key messages to approp­riate stakeh­olders, failure to address the concerns of each group with targeted yet strate­gically consistent messaging, making empty promises

Few deals have gone bad for sheer commun­ication failures. However, ineffe­ctive commun­ica­tions can lead to talent loss, customer loss and a host of other more direct forms of failure.

8. Key Talent

Failure to identify key personnel, failure to act swift enough to retain them
Examples: Bank of America / Merrill Lynch

9. Technology

Failure to identify fundam­ental incomp­ati­bil­ities (poor due dilige­nce), undere­sti­mating comple­xities or time required for system integr­ation
Examples: Sprint­/Ne­xtel, Facebo­ok/­Ins­tagram

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