MERGERS AND ACQUISITIONS FAILURE RATES AND PERSPECTIVES ON WHY THEY FAIL

Abstract

Mergers and acquisitions represent the ultimate in change for a business. Despite this, it is common knowledge that mergers and acquisitions do fail and they do not necessarily create shareholder value. The main aim of this piece of research work was to contribute to the general body of knowledge in the area of failure rates, and the perspectives on why mergers and acquisitions fail. The objective was to investigate from literature on the failure rates and perspectives on why M and As fail, present the various discussions and arguments on the subject matter, and then catalog them for researchers and students in this particular field. It was found that the integration stage of the whole merger and acquisition process was the most problematic area which contributes to merger and acquisition failure, and that the problem in the integration stage has to do with the human factor (the employees-coping with cultural differences, politics, lack of effective communication, etc). Another factor that occurred most after the human factor is poor strategies that are rolled out after the deal is sealed. Again, M and A failure rate is very high; averaging about 50%, regardless of the initial high hopes.

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