In a broad sense, the purpose of M&A practices is two-fold—growth by acquiring new products, customers, and markets, and increasing profits based on the strategic potential of the deal.
However, losing focus of these desired objectives can result in a failure to develop a suitable plan that can establish the necessary integration processes needed for organizational success. Some glaring examples of deals that went wrong include the AOL-Time Warner merger, the HP-Autonomy deal, and the News Corp-MySpace acquisition.
From limited owner involvement, cultural integration issues, and misevaluation to the absence of a business sale specialist and business acquisition broker in your corner, poor M&A practices can derail a perfectly sound deal.
Let’s take a look at some of the most common reasons M&A deals fail and the implications for IT.
An Unclear Strategy
The absence of a clear and defined growth strategy can lead to ineffectual due diligence and poor deal negotiations. In the IT sector, a hazy approach to integration can lead to misaligned integration priorities.
Lack Of Customer Attrition
The chaos of an M&A transaction can spook customers or leave them feeling neglected, which could encourage them to flock to the competition. As a result, you lose market share, and the firm finds itself targeted by negative publicity. The acquiring company also fights to salvage a business that was thriving before the transaction. For IT, this could pose problems in identifying the potential integration-related issues that might adversely impact customers and a failure to develop risk mitigation plans to avert IT-related customer satisfaction issues.
Poor Post-Merger Planning And Implementation
Business managers put most of their energy in closing the deal during the acquisition and don’t focus on post-merger planning details. Leaving this to the junior managers of the acquiring firm puts enormous pressure on the acquiring firm’s IT staff since they’ll struggle to produce a smart post-transaction integration plan—possibly deviating from the business strategy.
Dissimilar corporate cultures can cause conflict and endanger the M&A transaction. It can also demotivate employees and expedite the departure of key executives. For IT, this could lead to the loss of key technical staff and subject matter experts before the integration is completed.
Subpar Due Diligence
Due diligence is often treated as an opportunity to validate what the acquiring firm’s senior management presumes about the target firm instead of addressing those challenges. Acquiring a company without a sound IT strategy that overcomes existing shortcomings poses several, often avoidable, integration risks.
If you’re thinking about selling your business or acquiring a business in South Carolina, New Jersey, Ohio, Pennsylvania, Georgia, Florida, Massachusetts, or other areas of the US, get in touch with Gulfstream Mergers & Acquisitions.
We’re a leading and reputable M&A advisory firm with decades of experience in successfully settling mergers and acquisitions. Contact us for more information or call at 1-704-892-5151 to find out more about our services.