According to leading M&A research, most mergers and acquisitions fail to meet their original goals.
What are the most commonly cited reasons for failure? (hint: they are rarely about the integration of balance sheets, physical locations or IT systems.)
- A study conducted by Coopers & Lybrand in 1992 analyzed one hundred failed or troubled mergers. 85% of the executives surveyed reported that the major obstacle was "differences in management style and practices."
- A.T. Kearney's investigation into 155 M&A deals across numerous industries found that most failures were "people related."
- Watson Wyatt Worldwide surveyed 190 top executives, including CEOs and CFOs, and found that "cultural incompatibility" is consistently blamed as the most significant threat to successful integration. However, it was also found that research on cultural factors is the least likely to be conducted during due diligence.
- Research by the British Institute of Management also found that a major reason for merger failures was that companies underestimated the problems inherent in merging two cultures.
The financial, strategic and human costs of delays and mistakes in a post-merger integration are usually enormous. Outright failure can be profoundly devastating. Thus, the need for a detailed understanding of the companies' hidden human networks becomes all the more critical. This has long been understood by many management executives and thought leaders, but few had the proper tools to address these types of issues. That situation has vastly changed with the fairly recent introduction of social network analysis to the business world.
Here's how Constellation SAS can make a vital difference in your organization's M&A intiatives: