Mergers and takeovers fail, statistically, 65% of the time. A reason behind this is that when companies go through an M&T it is often a unique uncommon experience that will only happen once, therefore this means that they unable to learn from past experiences and develop tried and tested methods to ensure the M&T happens smoothly. Another reason is that both management teams will come together to discuss certain methods and these may vary slightly between the different companies and this leaves things tense and causes friction between the two companies. The companies will liaise which each other to come out with the best conclusion. Often when this is done and agreed but both parties are never truly happy and can cause an unhappy workforce on both sides as most people do not enjoy change. A simple reason for a failure for a takeover is that a company can end up bidding way too much for a certain company to make sure they seal the deal instead of another competitor. In some mergers when a big company is merging with a smaller company there is a sense of ignorance from the bigger company and this can lead to not spending enough time and effort with the smaller company leaving unhappy people. When an M&T is occurring there needs to be good communication between employees as if there is no communication this will cause speculation between the employees and therefore loss of trust in management teams, also un-motivated staff thinking that they are going to lose their job, this can lead to a decrease in turnover. Overall when two companies come together there is a culture clash and different people and companies do things different ways and they cannot come to an agreement or when they do a grudge is still held. All of these reasons above will lead towards an unsuccessful merger or takeover and this can therefore affect the benefits to the shareholder. This is because all of those reasons above effect the value of the synergy the companies have together and they do not reach expectations therefore decreasing the values of the shares that shareholders have.
The other 35% of M&T are successful and there are certain reasons for this. A successful M&T has a new entity about the company. They take the best of both and put it together. This means that they create a new culture that is different from both companies that gives them the opportunity to move forward and create an effective company for long term success. Doing this will decrease the friction between both the companies. Another reason is communication. There cannot be enough communication in an M&T, this stems the flow of rumours between employees about layoffs or redundancies, and with stopping rumours it will keep motivation levels high between employees and they will keep working. There should be a goal which can be used as a motive for both companies and their employees. If there is a clear set out plan for the two companies they can then decide the best steps to take to achieve this goal and gives the shareholders confidence that the company is moving forward. These goals could include something like growth, extending to a different geographic area which you do not currently reach, increasing a customer base or acquiring key personnel that can aid your company greatly. As M&T’s are often rare, unique events the successful companies will learn as they go and make changes fast. As these things don’t happen often a company needs to keep track of everything that is happening and what is and is not working and if something is not working they need to change it fast to keep everything moving smoothly and both parties happy.
In conclusion only a few M&T’s are successful because they are so rare for some companies and they have no past experiences to work off. Those that are follow certain steps to an extent. They base the M&T on an increase on revenue, they resolve power and people issues quickly, start to integrate with the other company as soon as the deal is agreed, commit to a new different culture, over-communicate so that no one is in the dark to any situations and set out a plan for the synergy to achieve. Doing most of these steps will lead to a successful M&T, however there can be luck involved with these sort of deals along with missing out key steps this shows how complicated a successful M&T can be and how only 35% of them actually succeed.
