Reasons why mergers and acquisitions might fail

On Behalf of Dunlap Fiore, LLC |

Businesses in Louisiana and elsewhere take on new business deal rather frequently. Whether it’s a new client or a customer being serviced, most business transactions are rather routine. On the other hand, more complex types of business transactions involve mergers and acquisitions (M&A.) This type of transaction is often a major one, greatly impacting a business on multiple levels.

Because it is considered a major business deal, an M&A has the possibility to fail. In fact, each year, many M&A’s fail. While these could be for very diverse and specific reasons, this post will focus on the most common reasons a merger or acquisition might fail.

While negotiating a deal, drafting the paperwork and signing the deal may have gone smoothly, some businesses fail to recognize what will occur after the ink dries. Specifically, some acquiring companies make the mistake of assuming that the employees of their acquisition will be on board simply because they have to be. Thus, it is important to help these employees find their place in the new business environment.

People often hear that opposites attract, but this is not always the case with M&A’s. Taking on a complimentary partner may not be the best step. This is especially certain if one party is strong and the other is weak. If the organization of these companies is vastly different, this is likely to result in disruptions and business disputes.

Communication is always key in any business deal, and it is paramount in a merger or acquisition. An M&A usually signifies a transformational shift; therefore, it is essential for this change to have framework and standing. If employees do not understand what is going on, it is difficult for them to be onboard.

Finally, M&A’s often fail because they fail to look at the end result as a unit or formed partnership. Even if both parties have succeeded individually, they joined together to succeed together. However, what they fail to do is so stop promising their individual successes while at the same time promising future successes as a unit. The merged unit must move forward as just that — a merged unit.

Because an M&A is a complex process, it is likely that the business deal will encounter various ups and downs along the way. Thus, it is important that parties to the deal understand their rights and options. An attorney experienced in business law could provide insight and guidance.

Source: Forbes, “Not As Simple As ‘Be Mine’: 4 Relationship Lessons For M&A,” Shaun Spearmon, Feb. 14, 2016