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Why Do Mergers Fail? What Can Be Done to Improve Their Chances of Success? (Report Date: January 2006, Full Report: 20 pages) Summary This report focuses on identifying the main human resources-related causes of merger failure, and also provides recommendations on how to achieve a successful merger. In recent years, the number of mergers and acquisitions that have taken place across the world has been staggering and has affected nearly all industries, as well as large and small companies alike. Increasing globalisation has also given rise to a higher number of cross-border mergers. However, although mergers and acquisitions are being aggressively pursued by companies, recent studies have indicated that 60-80% of all mergers are financial failures when measured by their ability to outperform the stock market or to deliver profit increases. While it is true that some of these failures can be largely attributed to financial and market factors, many studies are pointing to the neglect of human resources issues as the main reason for M&A failures. A 1997 PricewaterhouseCoopers global study concluded that lack of attention to people and related organisational aspects contribute significantly to disappointing post-merger results. While financial, legal and market factors must not be downplayed, it is how effectively the people from the two organisations are brought together that will ultimately determine whether the merger will be successful. This report discusses the main reasons for merger failure, and lists the key factors that are required to ensure a smooth and effective merger process.
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