Question

Investigate the factors for failure of M&As using case examples around the world.

It's a 1000 words essays
Write as much as you can. State the reason for failures then add an example to it

Answer 1

Merger and acquisition is basically consolidation of two or more firm with each other.

Merger is basically combination of two companies and they form a new company while aquisition is the case in which one company acquired another company and take over it . Main objectives behind merger and acquisition are wealth maximization increase the reach to the customer ,create competitiveness in Market for competitor firms . Merger and acquisition are very important aspects in corporate finance and lots of merger and acquisition deals take place in financial markets. Some merger are successful and some are failed for some reasons . Here we will discuss about various factors for failure of merger and acquisition.

Misvaluation- At the time of valuation of the firm in at the time of merger and acquisition firms takes wrong decision for valuation or they are not able to identify the real value which creates problems after M&A deals so misvaluation-of assets is a important factor for failure.

Cultural conflict and issues - when two companies from different culture merge with each other or acguire by each other it craets conflicts between two cultures and can cause the reason for failure of M&A deals . Ex. L&T and Mind tree deal.

Negotiation Problem- sometimes firms are not able to negotiate with other firms which also affect the success of the M&A deal.

High Cost of Recovery- in some cases after M&A deals has done the cost of recovery is too high that the acquirer firm is not able to bear the cost and causes failure .

Lack of Backup plan - experts suggest that backup plan is very much essential for the merger and acquisition deals because in many cases mereger and acquisition deals has failed due to proper backup plan .

Lack of clear bottom line - some time firms didn't get the desired potential benifits from mereger and acquisition deals and due to this the deal fails .

Lack of clarity in the integration process- if firms are not clear about the integration phase it can be a major factor for the failure