Reasons for Frequent Failure in Mergers and Acquisitions

Despite the goal of performance improvement, results from mergers and acquisitions (M&A) are often disappointing. Numerous empirical studies show high failure rates of M&A deals. Studies are mostly focused on individual determinants. The literature therefore lacks a more comprehensive framework that includes different perspectives.Using four statistical methods, Thomas Straub shows that M&A performance is a multi-dimensional function. For a successful deal, the following key success factors should be taken into account:. Strategic logic which is reflected by six determinants: market similarities, market complementarities, operational similarities, operational complementarities, market power, and purchasing power.. Organizational integration which is reflected by three determinants: acquisition experience, relative size, cultural compatibility.. Financial / price perspective which is reflected by three determinants: acquisition premium, bidding process, and due diligence.All 12 variables are presumed to affect performance either positively or negatively. Post-M&A performance is measured by synergy realization, relative performance (compared to competition), and absolute performance.

":Despite the goal of performance improvement, results from mergers and acquisitions (M&A) are often disappointing. Numerous empirical studies show high failure rates of M&A deals. Studies are mostly focused on individual determinants. The literature therefore lacks a more comprehensive framework that includes different perspectives.

Reasons for M&A Failure - a Comprehensive ModelStrategic ManagementMarket similarities, Market Complementarities, Operational Similarities, Operational Complementarities, Market Power, and Purchasing PowerOrganizational BehaviorAcquisition Experience, Relative Size, Cultural CompatibilityFinancial / Price PerspectiveAcquisition Premium, Bidding Process, and Due DiligenceQuantitative ResearchPartial least squares (PLS)Comprehensive Model using Structural Equation ModellingComprehensive Performance Measure