Rock Around the Block - The Blog of Rock LaManna

Six Ways Your M & A is Guaranteed to Lose

Posted by Rock LaManna on Mon, Aug 27, 2012 @ 09:08 AM

Six Ways Your M & A is Guaranteed to Lose resized 600

We read a lot about the latest and greatest M&A.  Then a year or two later, we read about how things went south.  It’s why only 15% of mergers and acquisitions succeed.  Instead of giving you the secret to success, it may be more helpful to point out the cause of failure.

Take one look at the recent M&A gone wrong between Spyker Cars NV and GM and you can see how easily a deal falls apart over the long run.  Here are six things to remember.

1. You can’t just be in it to win it for yourself. When both sides are only looking out for number one, a failure is predestined.  Remember, it’s win-win, not just win.

2. You must have a transition team in place.  I’ve been keeping an eye on a recent merger in the printing industry, and I can see it’s doomed to failure.  Neither side has a transition team in place, and its wreaking havoc on the current employees.

3. You’ve got to remember your current team is part of the deal.  How hard do you think your team is going to work if they don’t know what’s in store for them down the road?  Communicate, people, and show them the vision.

4. You have to establish the congruency upfront.  Do you truly have a strategic vision of how the two companies complement each other?  Or is it really just a comparison of the bottom line?

5. You need cultures that mesh, and that doesn’t include two negative ones.  I saw a recent M&A between two companies that were horrible to their employees.  Just like meshing two great companies will increase success exponentially, combining two bad ones works in opposite directions.

6. You have to trust each other to share financials.  I beat the drum about basing your long-term strategy on financials.  In the GM-Spyker Cars NV M&A, I wonder if financials were truly shared? It probably would have helped stave off the current problems.

The bottom line in any M&A?  Trust.  If you can’t connect trust with another company in these six areas, you can guarantee the deal won’t stand over time.  Just ask GM and Spyker.

(By the way, these two parties are headed to court, with a case that could potentially take years to resolve.  Ask yourself, would you rather be paying lawyer fees or making money?)

Photo by: Kheel Center, Cornell University

 

Topics: Mergers and Acquisitions, M & A

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