Reasons that Cause Failure of Mergers and Acquisitions скачать в хорошем качестве

Reasons that Cause Failure of Mergers and Acquisitions

What are the various possible reasons that cause failure of mergers and acquisitions? The following are the various possible reasons that cause failure of mergers and acquisitions. Unrealistic price paid for the target: Before the merger or acquisition take place, the target company is thoroughly valuated. When this valuation is over-estimated, it results in the company acquiring to bear the additional burden of the overpricing. This is not visible immediately. The losses surface up over the later years. Difficulties in cultural integration: There may be cultural differences in both the companies and these need to be dealt with in a very sensitive manner. If not done tactically, this might result in a disaster. This effect is more prevalent when both the companies are from different countries. The differences will become dominant over the years and can even result in the failure of the merger. Overstated synergies: The purpose of mergers and acquisitions is to create synergies through increased revenues reduced costs reduction in networking capital improvement in the investment intensity If these factors are overestimated, it leads to failure of the mergers. Integration difficulties: During integration, new challenges come up. To tackle these, the company prepares the plans. When the issues have inadequate or inaccurate information, the integration will be difficult. Poor business fit: When the products are services of the merging business do not fit into the acquiring business’s overall business plan, the effective and efficient integration is delayed and subsequently fails. Inadequate due diligence: Due diligence is very critical for the merger and acquisitions. When sufficient information is not available to detect financial and acquisitions it leads to failure. High leverage: When the finance for acquiring is borrowed from market, it creates high leveraged structure and increases the amount of interest to be born by the company. This increased interest might be so huge that it eats up the profits and defeats the intention of acquisition. Boardroom split: When there is re-alignment of power among the members of the board room, few members from both the business units might have differences of opinion. This leads to clashes and may delay or prevent the integration. Regulatory issues: When the merger is against the consent of any of the stakeholders, they might create legal obstacles that might result in regulatory delay and in such cases there is more risk of deterioration of the business. Human resources issues: The mergers might cause job losses, restructuring and implement a new corporate culture and identity. This might affect the employees psychologically in a negative manner. When the companies are more busy with the legal and financial considerations and neglect HR issues, it will impact the employees morale and productivity. Additional content on this topic can be found at http://www.eduxir.com/curriculum/cbse...