Big fish eating fishMergers and acquisitions are back on the agenda for many Boards of  Directors and Executive Management teams.  But why bother?  Surely the evidence suggests that the great majority of mergers or acquisitions fail on a number of counts.  Integration is difficult and leveraging the synergies is a complex task. However, M & As can be worthwhile if you are clear about why you are merging or acquiring another company. Here are some sound reasons why you might consider a merger or acquisition to gain some competitive advantage:

Sound reasons to consider a merger or acquisition:

  1. Increase the size of your business as a defensive strategy to ward off acquisitive suitors
  2. To gain more market or customer influence
  3. Grow revenues by gaining entry to new markets
  4. Acquiring established brands to add to your current portfolio of products or services
  5. Innovation; new products, processes, technology and technical expertise
  6. Leverage cost savings and efficiencies from distribution channels and networks
  7. To change or transform your company (i.e., moving from building military vehicles to become an off-road vehicle specialist).

And some reasons why they fail!

Significant numbers of mergers and acquisitions fail to realize full cost savings or efficiency benefits or fully materialize any sustainable competitive advantage because the reason for doing the M or A is unclear at the outset. They also fail because senior leaders underestimate the difficulty of integrating different cultures and working practices or eradicate the essential entrepreneurial and creative spirit of the acquired or merged company even though that is what attracted them in the first place!  If you are considering a merger or acquisition to boost your ego or if doing so will distract you from your core business, then think again!

If you would like to discuss this article then please contact Philip Perry:

M: 07597 674328   E: philip@philipperry.com   W: www.philipperry.com

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