5 Reasons Why Company Mergers Fail

Mergers and acquisitions are an attractive proposition for instant growth of your business. However, research has shown that more than two third of the companies which went into a merger failed to reach their projected goals before the merger.

There are several reasons why mergers fail and oftentimes they reoccur with every new merger. Let’s look at the most common mistakes companies make.

5 Reasons Why Company Mergers Fail

1 -> Ignoring Potential Integration Problems

When companies enter into the process of a merger, they usually do it with the benefits of the potential symbiosis in mind. However, what they don’t do is create a detailed, step-by-step plan as to how each segment of each company will be merged.

A careful and detailed plan must be in place before the merger happens, but many companies still fail to do this and their mergers never reach the goals that were projected. Business continues as usual and managers remain preoccupied with day-to-day errands and increasing profits that they fail to see that the merger could be much more successful if it was approached with a detailed plan in place.

2 ->  Not Enough Communication

Communication is vital in a merger and when the managers and employees of the companies involved don’t communicate enough, problems start to pile up. An even bigger problem occurs when managers don’t inform or even misinform their employees of the restructuring process, which then results in unexpected layoffs and reduction in salaries.

3 -> Loss of Key Managers

According to many business experts, the biggest problem with mergers is the loss of talented managers and employees. This happens in spite of the fact that companies usually declare that one of the reasons for the merger is to keep existing talented employees and attract new ones.

This is especially true in acquisitions in which the dominant company provides the managers for the key positions while the other company’s managers and employees are either given lower job positions or are given a choice to either stay and work under their new bosses or leave the company.

4 -> Loss of Customers

This is yet another key factor that companies involved in mergers fail to address properly. However, unlike the other reasons for failure listed here, this one can actually ruin a business completely.

5 -> Power Struggles

Internal power struggles and the fight for supremacy in the merger can be a serious drawback for its success. These power struggles often take away the focus from important issues and in that way have a negative effect on the business.

Furthermore, power struggles are often the result of the managers’ desire to satisfy their own needs and not the needs of the company and make decisions that damage the merger’s chances of success.

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