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In a world where the pace of changes is growing fast and technology is disrupting industries, many companies choose Mergers and Acquisitions as a growth strategy. Using this strategy, companies aim to strengthen strategic growth engines, get access to leading technology and talent, get access to products and markets, build strong new capabilities and more.
However, M&A presents the company with the highest challenge of all- taking 2 different entities with different strategies, operational and human systems and create a synergetic whole. The research in this field shows that there is a higher chance to fail than to succeed with failure rates at 50% to 80%.
The reasons for failures are different from one case to another. However, the reasons can be divided into 2 main categories: Failures associated with the decision-making process and failures in the integration process.
In the decision-making phase the reasons are
Acquiring a company that does not have a strategic fit with the acquiring company or a lack of strategic planning.
Overpayment to the acquired company.
Lack of assessment of the organizational culture and the human factor in the Due Diligence process.
Failures in the integration phase include:
Lack of operational integration planning , and selecting the right model.Neglecting the human factor in the integration process.
The integration phase is a critical phase that can determine the success of the deal. In most cases this phase lacks planning and is typically executed with the urgency to create certainty without adequate methodological analysis. The recommended process for this phase should include an analysis that addresses the right model of synergy, operational processes definitions as well as new organizational structure. For example, different models should be applied for vertical vs horizontal acquisitions, or for acquisitions of an entity from a different industry.
67% of the failures in the integration phase are associated with mismanagement of the human factor. The explanation to this lies in understanding the high level of uncertainty and instability that employees experience. The employees experience uncertainty with regards to the impact of the acquisition on their employment, position, roles and responsibilities and they are expected to adjust to new ways of thinking, operating, changing priorities and more. In the literature this high level of stress is called ” The merger syndrome”. This syndrome should be managed in order to avoid productivity reduction and turn-over of critical employees.
WeFund provides consultation that completes the existing M&A consultation & Due diligence services that are usually financial & legal based. Our services cover aspects of the strategic planning of the merged company, operational synergy planning & execution, as well as coping with the “merger syndrome” through advanced HR practices.
In a world where the pace of changes is growing fast many companies choose Mergers and Acquisitions as a growth strategy.
Using this strategy, companies aim to strengthen strategic growth engines, get access to leading technology and talent, get access to products and markets, build strong new capabilities and more.
However, The research in this field shows that there is a higher chance to fail than to succeed with failure rates at 50% to 80%.
The reasons for failure can be divided into 2 main categories: Failures associated with the decision-making process and failures in the integration process.
In the decision-making phase the reasons are acquiring a company that does not have a strategic fit with the acquiring company or a lack of strategic planning, overpayment to the acquired company and Lack of assessment of the organizational culture or the human factor in the Due Diligence process.
Failures in the integration phase include lack of operational integration planning and neglecting the human factor in the integration process.
The integration phase is a critical phase that can determine the success of the deal. In most cases this phase lacks planning and is typically executed with the urgency to create certainty without adequate methodological analysis.
67% of the failures in the integration phase are associated with mismanagement of the human factor. The employees experience high level of uncertainty with regards to the impact of the acquisition on their employment, position, roles and responsibilities and they are expected to adjust to new ways of thinking, operating, changing priorities and more. In the literature this high level of stress is called ” The merger syndrome”. This syndrome should be managed in order to avoid productivity reduction and turn-over of critical employees.
WeFund provides consultation that completes the existing M&A consultation & Due diligence services that are usually financial & legal based. Our services cover aspects of the strategic planning of the merged company, operational synergy planning & execution, as well as coping with the “merger syndrome” through advanced HR practices.
