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Thursday, November 22, 2007

Mergers and there success rate in Europe

Nine out of ten mergers fail
Only nine per cent of mergers and acquisitions (M&A) in Europe over the past three years have achieved their stated objectives, according to research from management consultancy Hay Group. The survey of 200 business leaders also finds that under a third (28 per cent) say their merger created significant new value.The figures for the UK are even more alarming, with only three per cent of mergers rated as successful.One key reason for failure is the over-prioritising of systems integration over intangible assets and cultural compatibility, with some 58 per cent of respondents admitting this had been a problem. David Derain, a director of Hay Group who leads its work on M&A, says: ‘Integrating intangible assets six months after a deal has gone live is too late. Companies should be examining the compatibility and differences between the two firms well before the deal is made public.’Little over a quarter (27 per cent) of companies surveyed analysed the cultural compatibility of the businesses to be merged before signing the deal, while 59 per cent failed to prioritise a review of leadership capability within the two organisations. The failures often led to an unfavourable post-merger climate, with 38 per cent of business leaders describing the early months as ‘culture shock’ and a further 16 per cent going so far as to label them ‘trench warfare’.



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