Struggle to combine corporate structures limits benefit of most mergers, research shows

More than 90% of corporate mergers and acquisitions are falling short of their objectives, as companies struggle to combine corporate cultures and structures, a study has found.

The study of senior business leaders revealed that just 9% of mergers are considered “completely successful” in achieving their stated objectives.

This plummeted to an alarming 3% of mergers and acquisitions by UK companies.
The findings are contained in a report: Dangerous Liaisons: Mergers and Acquisitions – The Integration Game, published by management consultancy Hay Group, which studied more than 200 major European mergers and acquisitions taking place in the past three years.

The report identifies critical omissions in companies’ due diligence and post-merger integration strategies as the primary causes of failure.

Firms are prioritising financial and systems due diligence at the expense of vital, intangible assets critical to a merger process – such as business culture, human capital, company structure and corporate governance.

“Business leaders must recognise that the value of today’s companies is primarily in their intangible assets – the strategic, people and cultural factors that don’t show up on a balance sheet,” said David Derain, European merger and acquisitions director at Hay Group.
“A strategic focus on aligning the intangible as well as tangible assets of companies is critical to the success of any merger or acquisition.”

In addition, more than one-third of business leaders (38%) expressed dissatisfaction with the post-merger climate, with one-fifth (22%) describing the early months as ‘culture shock’ and a further 16% going so far as to label them ‘trench warfare’.

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