Some thoughts on how broken M&A is, and how to fix it

M&A is Growing in all Industries… (Graph source: MergerMarket)

M&A incompetency may be decreasing modestly…

Yet top acquirers still regularly make $1B mistakes… (some recent examples)

($700,000,000)($8,000,000,000) ($700,000,000)

($100,000,000) ($6,200,000,000)

“…beliefs in one’s superiority have significant consequences… misguided acquisitions have been explained by a “hubris hypothesis”: the executives of the acquiring firm are simply less competent than they think they are.” Nobel laureate Professor Daniel Kahneman: Thinking, Fast and Slow, 2011 (p.258)

M&A failure is rooted in misaligned interest and hubris…

Correlation between company size and executive pay incentivizes CEOs to expand their companies regardless of financial consequences.Stanford GSB professor Jeffrey Pfeffer: Power, 2010 (pp.93-4)

The solution is in turning CEOs from ‘all knowing’ to Social Architects…

McKinsey Quarterly 2012:“Senior executives who launch [social strategy] initiatives are essentially… embracing the underlying principles—transparency, radical inclusion, egalitarianism, and peer review—of the Web-based social technologies that make it possible to open up direction setting.Taking these principles to their logical conclusion suggests a shift in the strategic-leadership role of the CEO and other members of the C-suite: from “all-knowing decision makers,” who are expected to know everything and tell others what to do, to “social architects,” who spend a lot of time thinking about how to create the processes and incentives that unearth the best thinking and unleash the full potential of all who work at a company.”

Summary

• M&A is complex, many parties involved• Parties’ interests aren’t aligned• Most M&A fails• Failure built on behavioral issues• The way to fix M&A is also behavioral• Social M&A is going from strategy and

deal flow to implementation • We at Merjerz are leading the way,

join us at www.merjerz.com