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Why Corporate Acquisitions Fail

How to perform a corporate integration as smoothly as possible

13Jul

Mergers and Acquisition (M&A) deals should never be taken lightly. Such deals can mean a better financial future, but they also present a challenge for corporate cultures to adapt and work under one corporate mission. According to a Harvard Business Review report, more than 70% of corporate acquisitions fail. Gaps in the strategic planning often make it hard to get a corporate transformation right and to achieve desired results after the deal.

There are many reasons why M&A deals fail, including cross-border of IT infrastructure, financial regulations, cultural aspects, and many more. A company's set up may be entrepreneurial or conservative, relaxed or strict, but they are never identical. Instead of delivering better results, merging with/or acquiring a company can be exhausting, sucking financial and emotional resources. Thus, it is critical to provide a clear strategy, effective project management, open communication between stakeholder groups, and be as transparent as possible with employees, because it's the people who shape a culture.

Less successful deals are those that try pursuing international scale or filling portfolio gaps. In reality, such practices are vague and not effective enough to smoothly drive a change. Companies can get stuck discussing strategic benefits from acquisitions, when, in fact, such discussion is essentially about cost cutting rather than real strategic goals. Focussing on the core of the company, its people, will help to produce a valuable feedback and will help to reduce the number of questions and fears that may occur among employees. Timings are also important, as companies that wait too long to put new organizational and leadership structures in place risk losing people. If cultural matters are not addressed in time, employees may start seeking new job opportunities elsewhere, because employees have a greater loyalty to the culture than they have to a company's business strategy.

Large companies are not the only ones that get caught up in M&A challenges; startup integration can be as difficult. It's not only about capturing talent, but also about preservation of its identity and the way of delivering innovation. With startups, it's important to keep an eye on their cycle when securing a deal. The majority of large companies manage three types of innovation: process innovation, continuous innovation and disruptive innovation. An innovation portfolio is there to indicate whether companies want to build innovation internally, or they want to buy it, or partner with resources outside their company. Considering these makes it easier for companies to come up with a structured M&A strategy prior to the deal. When integration starts, smart companies don't disrupt a fast pace of innovation in a startup, instead, they support their growth, without overloading a startup team with corporate responsibilities. A founder is usually set as a CEO but works in partnership with a savvy 'corporate concierge' that analyzes company's resources and helps to accelerate growth.

Whether it's a deal between big players or integration with a small one, a successful acquisition or merging is only possible if leadership teams put up programs that target employee engagement, with a multi-layered strategy built around communication and transparency. 

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