Mergers and Acquisitions Continue To Fail
I did the last eight hours of my continuing professional education requirements last week on M&A Activities. Given the amount of business failures and forced closures, there are a lot of businesses being sold or merged. One set of numbers stood out in the presentation.
Between 66% and 83% of Mergers and Acquisitions Fail
Those are staggering numbers. I’m not just talking about the smaller ones where a mom & pop grocery store buys the liquor store down the street for $50 and a carton of smokes. Included in these numbers are the mega billion dollar mergers that we read about in the financial newspapers.
Included in the 66 – 83% number are M&A’s that either fail or do not add additional dollars to the bottom line. Think about one of the larger deals. There are all sorts of specialists from investment bankers to consultants with more letters behind their names than are in them creating these failures. How is this even possible?
1 – Inadequate due diligence is common. People get excited about a deal, and don’t do their homework.
2 – Overestimation of synergies occurs as well. Just because you think a deal will create synergies and additional profits, does not mean that it will.
3 – Conflicting corporate cultures can stop profits cold. This also stops people from being able to work as a team.
4 – Slow post-merger integration causes substantial problems. Change can be impossible.
5 – Lack of a compelling strategy and bad planning are additional reasons. Just because something is for sale doesn’t mean you should buy it.
6 – Overpaying for a company is another. If you pay too much, how will you ever show a profit?
There’s a lot for sale out there and a lot of money flowing to make these sales a reality. If only between 17% and 33% of these sales are successful, maybe you should think twice before making a mistake that could bring down your entire organization.
Let me leave you with this.
I’m beginning to see the other side of the nightmare. Many of the financial statements we’re producing for our customers are impressive. Many of their competitors are out of business, and they are picking up those customers that need a home.
I keep telling all of you who are having problems to hang on.
Bad economies can be very good for business. The low hanging fruit is always going to come off the tree first. You’ll always have competitors that give up and go do something else, and that business will need to be served.
Hang in there. We’re going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. If there is anything you need, whether you are a current client or not, you have but to ask. I’m here and I remain,
Accounting Solutions Ltd.
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