Failure of Mergers Essay

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Failures of Merger

Failure of Mergers

The objective of this study is to examine why it is that most mergers fail and will provide real-life examples of the failure of mergers. Toward this end, this work will examine relevant literature in this area of study and specifically academic and professional literature and publications that are peer-reviewed in nature. The work of Weber and Camerer (2003 ) entitled "Cultural Conflict and Merger Failure: An Experimental Approach" reports that most mergers fail and that failure occur "on average in every sense: acquiring firm stock prices tend to slightly fail when mergers are announced; many acquired companies are later sold off; and profitability of the acquired firm is lower after the merger." (Weber and Camerer, 2003) There is a great deal of conflict reported during the process of a merger that results in a high rate of turnover." Disappointment was expressed by participants in the results of the merger. Widespread merger failure is reported to be "at odds with the public and media perceptions that mergers are grand things that are almost sure to create enormous business synergies that are good for employees, stockholders, and consumers." (Weber and Camerer, 2003) Participants are stated to express disappointment at the results and surprise at the outcome. (Weber and Camerer, 2003)

I. Mergers and Acquisition Failures are Project Management Failures

Elwin (2010) in the work entitled "Mergers and Acquisitions are Project Management Failures" states that projects "are how organizations realize their strategies.

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" (Elwin, 2010) The goal of a merger may be one or a combination of: (1) new technology; (2) new market; (3) increase in customers; (4) foreign direct investment; and (5) tax gains. (Elwin, 2010) The objective of a merger or acquisition is to: (1) increase shareholder value; (2) create firm value; (3) cost reduction; (4) increased productivity; (5) revenue growth; (6) strategic benefit; (7) market gain; (8) complementary resources; (9) vertical integration; and (10) reduce cost of capital. (Elwin, 2010) The rates for project failure stated by Elwin (2010) in mergers and acquisitions and stated for example is that in a survey of "more than 400 U.S. And European corporate executives published by Accenture, 55% of executives said that their most recent deals did not achieve expected cost-saving synergies." (Elwin, 2010) Elwin additionally reports that a McKinsey study states findings that in 70% of the deals studied "the buyer failed to achieve the expected levels of revenue synergies." (2010) Elwin reports that according to McKinsey study "61% of all acquisition programs were failures because the acquisition strategies did not earn a sufficient return on the funds invested. (Elwin, 2010) According to Carleton (1997) "between 55% to 70% of mergers and acquisitions fail to meet their anticipated purpose." (Elwin, 2010) In addition, a 2007 study reported by the Hay Group and the Sorbonne states.....

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