6 Signs That Your Merger & Acquisition May Fail
A strong merger and acquisition (M&A) can be an excellent move for your business, helping you obtain the resources and reach you need to grow and achieve your growth goals. It can give you access to new markets and give you the tools you need to be competitive or gain the edge against a growing competitor.
However, if the M&A is handled improperly or the deal doesn’t work out for one reason or another, it can be a ruinous mistake.
Some statistics show that half of all M&As will fail. Here are six signs that your merger or acquisition may not work out.
1) Cultural differences
Business owners usually put a great deal of thought into the compatibility of their products before entering into an M&A, but many neglect to really test and explore cultural compatibility. What are the values and environment that have been cultivated by each company? Will they clash or will they mesh? Incompatible workplace cultures can spell doom for any M&A.
2) Not enough resources to handle integration
The integration process of an M&A is difficult. It takes an incredible amount of time, money, man-hours, and other valuable resources. It is essential that you make sure you have the resources both to actually accomplish an effective integration of the two companies, but also that the return on the integration will be worth those costs.
3) Rushed due diligence
The importance of conducting thorough due diligence for your M&A cannot be overstated. This should be obvious to any business owner, but far too many rush forward in their eagerness to complete a deal and neglect important aspects of due diligence that will eventually come back to bite them. Make sure you know EXACTLY what you are getting out of your M&A.
4) Poor communication
Poor communication can ruin an M&A faster than nearly any other factor. Integration, developing a shared vision, figuring out how to split time between managing your business and handling the M&A, and numerous other aspects of any merger and acquisition all require very clear and detailed communication. If everyone is not on the same page, there is a very good chance the deal will not work out.
5) Wrong motivations
Ask yourself exactly why you are making this deal. Is it really going to help you achieve your goals, or are you conducting an M&A out of fear or because a competitor recently merged with another? If you have flawed motives from the start, you are not giving your M&A much hope to succeed.
6) Management focused only on the M&A
Yes, an M&A takes a great deal of time and effort. But it is vital that you not fall into the trap of devoting all your time to managing the transition and integration process to the detriment of your actual business. The M&A is important, but not more important than actually conducting business!
For more information or help with your company’s merger and acquisition, please contact the business and bankruptcy law firm of Maxwell Dunn today.