Question

From the non-financial accounting perspective, do you think mergers and acquisitions are a good thing it a bad thing and why?

Answer 1

Companies merge for a several reasons such as acquisition of new lines of distribution or technology, expansion of market share, or reduction of operating costs. However corporate mergers fail to produce anticipated result due to the clash of personalities and priorities. The reasons why M&As fails are:

--Strategy and growth models: M&As usually demand some alignment of strategies, however two businesses usually have very different strategies and growth models which leads to some level of failure.

--Customer focus: M&As occurs with the arrogance to ignore the customer which leads them to fail to produce anticipated results.

-- Cultural integration issues: Culture is a great enabler however can be the hidden destroyer. If proper culture adoption, harmonisation or change programme does not happens it may lead to damages, thus it is important to devise a proper strategy for hard-decision forceful integration setting aside cultural differences

-- Limited or no involvement from the owners: At high costs M&A advisors are appointed for various services for any mid to large size deal. However leaving everything to them just because they are charging high fee is a clear indicator to failure.

-- Theoretical valuation versus the practical proposition of future benefits: The assets and numbers that appear attractive on paper may not be the real winning causes once the deal is through