A Look into the Case Studies of Failed M&As

When most people hear of mergers and acquisitions (M&As), they hear of the successful billion-dollar deals. However, hundreds of billions of dollars have been wasted on failed acquisitions. There are a number of factors that lead to the failures of M&As in all types of industry.

Cultural clashes

Cultural clashes occur when two or more countries are involved in a deal. A U.S. auction company can merge with a foreign-based auction company and sell the same products and services. However, one company may fail to realize that American consumers have different preferences in products than Asian buyers.

Prior successes

An extremely wealthy, successful business owner often overestimates the company’s full range of potential. A company with a long history of success may convince the owners and partners that any business deal they enter into will succeed. However, a M&A transaction is a matter that is separate from the company and is not guaranteed to work.

Jumping on the bandwagon

Another mistake is to pursue a business idea because everyone else is doing it. An example is for a company to acquire a company that specializes in technology because it has worked well for other companies. Investing in technology may fail if the company fails to keep up with industry updates and developments.

Double failures

Two failing companies are often combined with the assumption that they’ll succeed. In reality, this merger is likely to fail and lose more profits than it did before. The merger between Sears and Kmart, both retailers with declining popularity, resulted in major multibillion-dollar losses that were never recovered.

The challenges of technology

The dynamics of technology are often difficult to understand by all types of entrepreneurs. Some of the worst merger failures have occurred when companies have tried to implement digital technology into their systems.

Mergers and acquisitions are made by major companies to increase their revenue and expand their success. An online company may acquire a telecommunication company to improve transactions between buyers and sellers. However, an inaccurate M&A plan could bring opposite results that threaten to ruin the company. The solution to preventing disaster is to review the causes and effects of common M&A disasters.