M&A is not a step to be taken lightly. The nuances of a large deal can be mind-bogglingly complex, no matter how enticing the combination appears. Integrating two entities into a single coherent structure takes careful planning and the ability to
counter unforeseen problems. Cultural and language barriers can create confusion and mistrust, or even outright discord. Redundant systems and bureaus must be synthesized or streamlined, sometimes across different countries, all in parallel.
Toppan Vintage, a trusted financial printing and communications company, in partnership with Mergermarket, is pleased to present the newest edition of M&A Pulse newsletter. This newsletter features responses from US-based senior corporate executives who shared their insights on failed deals.
Lesson #3: Recognize the importance of management. Leading deal experts weigh in...
When asked to list all factors that had kept deals from being successful, the most commonly mentioned was a lack of compatibility between management teams. A full 70% of respondents said incompatibility played at least some role in causing deals to fail.
“Working with the right management is crucial for a successful deal,” said the director of strategy and investments at a Canadian insurance company. “The management should understand us and should be easy to work with. They also need to share our objectives.”
In some cases, the inability of management teams to cooperate can doom a deal before it even reaches the finish line. French advertising multinational Publicis and US advertiser Omnicom agreed on a US$35.1bn mega-merger in 2013 but canceled the tie-up less than a year later due to power struggles at the top. “Omnicom wanted their people to fill the CEO, CFO and general counsel jobs,” Publicis CEO Maurice Levy told Reuters after the two sides walked away. “I thought that went too far.”
To be sure, it can be challenging to properly evaluate management and culture fit during due diligence. Evidently, many companies would be served well by improving their abilities in this area.
One option to consider is hiring specialized management consultants to assess the compatibility of the two sides. Outside expertise may save precious time in the deal process and insert valuable competence into the situation.
The bottom line: A lack of fit between management teams is a highly common component of failed deals. Consider devoting extra resources to assess the fit thoroughly.
MASTERING M&A THE HARD WAY: LESSONS FROM FAILED DEALS
UNDERSTAND EXACTLY HOW AND WHY SOME M&A DEALS FAIL TO LIVE UP TO INITIAL EXPECTATIONS, AS WELL AS THE LESSONS THAT CAN BE LEARNED FROM THEM.