PowerPoint Presentation

Why do MERGERS fail?

MERGERSA merger is a corporate strategy of combining different companies into a single company in order to enhance the financial and operational strengths of both organizations. A merger usually involves combining two companies into a single larger company. The combination of the two companies involves a transfer of ownership, either through a stock swap or a cash payment between the two companies. In practice, both companies surrender their stock and issue new stock as a new company.

Types Of MergersThere are five main types of company mergers:

Conglomerate: nothing in common for united companies.

Horizontal: both companies are in same industry, deal is part of consolidation.

Market Extension: companies sell same products but compete in different markets.

Product Extension: add together products that go well together.

Vertical Merger: two companies that make parts for a finished good combine.

Why do MERGERS fail? Few important factors and reasons why merger deals fail:-

Limited or no involvement from the owners: Appointing Merger advisors at high costs for various services is almost mandatory for any mid to large size deal. But leaving everything to them just is a clear sign leading to failure. Advisors usually have a limited role, till the deal is done. Owners should be involved right from the start and rather drive and structure the deal on their own, letting advisors take the assistance role.

Theoretical valuation v/s the practical proposition of future benefits: The numbers and assets that look good on paper may not be the real winning factors once the deal is done.External factors and changes to the business environment: External factors may not be fully controllable, and the best approach in such situations is to look forward and cut further losses, which may include completely shutting down the business or taking similar hard decisions.Poor governance: Lack of clarity as to who decides what, and no clear issue resolution process.Weak leadership:-Integrating two organizations is like sailing through a storm,you need a strong captain, someone whom everyone can trust to bring the ship to its destination.

No common vision:- In the absence of a clear statement of what the merged company will stand for, how the organisation will operate, what it will feel like, and what will be different compared to how things are today.Lack of communication:- Messages too frequently lack relevance to their audience and often hover at the strategic level when what employees want to know is why the organisation is merging.

Few Examples of Failed Mergers:-

Daimler Benz and Chrysler

Lack of Cultural Integration.

Bank of America and Merrill Lynch

Lack of Communication and Planning were done late.

Volvo and Renault

Implications of Ownership Structure.

Presented By:-Rishi Kumar Gupta.Shabnam Dogra.Debadrita Bose.