Q & A – What are the odds of a merger or acquisition being successful?

Q: What are the odds of a merger or acquisition being successful?

A: A number of studies have indicated that between 60 and 70% of M&A’s fail. These surveys reveal that companies do not pay enough attention to the people-related side of the deal and either ignore or underestimate the difficulties in merging the two cultures. This is a critical error since a) it is the people who bring much of the value to the deal and b) the non-integrated, incompatible cultures negatively affect the performance and value of the combined companies and prevent the realization of projected synergies.

Frequently cited contributors to the failures of M&As are incompatible corporate cultures, inability to manage change, unclear reporting structures, clashing egos or management styles, inadequate or untimely communications, poor benefits planning and follow through, unfocused team building, inadequate realignment efforts, the slow pace of integration and key talent retention.

Failing to handle the human resource issues effectively is costly. The impact can be seen in poor financial results, disrupted work processes, defection of customers, diminished investor confidence, and loss of key talent, poor morale, demotivation, and diminished performance of employees. Since companies may be paying a premium of up to 40% above the stock market value of the company for intangible assets (structural and human capital), maximizing those assets are critical to the return on investment.
For these reasons, it is critical that HR be included in the process as early as possible. A Bureau of Business Research study of 45 executives found a high correlation between the degree of reported effectiveness in handling workforce integration issues (HR’s role) and the achievement of business goals in six critical areas: financial goals, market position, strategic goals, overall financial position, productivity, and employee performance.