"A thousand-mile dam collapses because of an ant hole."-Mergers and acquisitions in the capital market, from handshakes at the negotiation table to the final signing and delivery, seem to be just the implementation of a business decision. But the real battlefield is often not on the stage, but hidden in invisible details.
Mergers and acquisitions are a high-level game in the capital market and a key way for companies to grow and develop. However, every year, a large number of mergers and acquisitions of listed companies around the world eventually fail. Is it the ruthlessness of the market environment or the company's own decision-making mistakes? Goheal has been tracking global mergers and acquisitions trends for a long time. Today, I will take you to deeply analyze the real driving force behind this silent competition.
Behind the capital feast: Who is directing the merger and acquisition script?
Mergers and acquisitions, at first glance, are the addition and subtraction of financial figures, but in fact they are the result of the struggle between the market, supervision, shareholders, and management.
Common factors for merger and acquisition failure:
1. Pricing errors-buyers acquire at a high premium, resulting in the inability to realize the return on investment.
2. Strategic mismatch - the acquisition target does not match the core business of the enterprise, and the integration is not suitable.
3. Regulatory barriers - policy review fails, resulting in the abortion of the transaction.
4. Shareholder game - major shareholders disagree, small shareholders make trouble, resulting in the abortion of the transaction.
Case: Pfizer's acquisition of AstraZeneca failed
In 2014, pharmaceutical giant Pfizer attempted to acquire AstraZeneca for US$117 billion to US$120 billion, but due to price disputes, the US government's crackdown on "tax inversion" transaction policies, and AstraZeneca management's opposition to the undervaluation of the offer, the transaction was ultimately not reached. This incident once again proves that mergers and acquisitions are not just financial calculations, but also involve complex factors such as corporate culture, management willingness and national policies.
Psychological warfare on the negotiation table: the triple challenge of price, shareholders and public opinion
In M&A transactions, negotiations are often more important than contracts. The biggest fuse for failed negotiations is often price disputes.
The core difficulties of M&A negotiations:
1. Valuation bias - the buyer wants to acquire at a low price, the seller wants to sell at a premium, who will decide the fair price?
2. Shareholder opposition - small shareholders believe that the acquisition plan harms their interests, or large shareholders are dissatisfied with the transaction. Will it trigger confrontation in the capital market?
3. Market opinion - will negative news affect the stock price? Will regulators intervene in the transaction due to public opinion?
Case: Ant Group's acquisition of MoneyGram failed
In 2017, Ant Group planned to acquire the US cross-border payment company MoneyGram for US$1.2 billion, but the transaction was ultimately rejected because the US Foreign Investment Committee (CFIUS) was concerned about data security risks. Behind this failed merger and acquisition is actually the multiple influences of national policies, shareholder interests and market opinion.
Goheal believes that before an M&A transaction, companies must conduct a comprehensive assessment of prices, regulations, shareholder intentions and market opinion to avoid temporary variables at the negotiation table that may lead to aborted transactions.
Regulatory red line: the "invisible hand" of the capital market
M&A of listed companies is not a completely free capital game. Regulatory agencies in various countries play the role of "invisible hand" to determine whether the transaction can proceed smoothly.
Core challenges of regulatory approval:
1. Antitrust investigation-will the merger and acquisition cause market monopoly?
2. National security review-does data security and industry sensitivity affect national interests?
3. Industry specificity-are certain industries (such as finance, energy, and communications) subject to additional policy restrictions?
Case: Nvidia's acquisition of Arm failed
In 2020, Nvidia planned to acquire chip design company Arm for approximately US$40 billion to US$80 billion, but the transaction was eventually terminated in 2022 due to concerns about market monopoly by the British government and US regulators. This case shows that even if the capital is strong, if regulatory risks are ignored, it may fall short.
Goheal reminded that before the merger and acquisition, full communication should be conducted with the regulator, policy risks should be assessed, and regulatory resistance should be reduced by adjusting the transaction structure.
Invisible bomb after M&A: Integration failure is more terrible than transaction failure
Even if the transaction is successful, the company still needs to face a more difficult problem-how to integrate?
The main difficulties of post-merger integration:
1. Cultural conflict-the management style and corporate culture of the employees of the two companies are incompatible, affecting team collaboration.
2. Difficulty in business collaboration-can different technical systems and market strategies be truly integrated?
3. Management changes-the original management team left, and the new team found it difficult to take over, causing the company to fall into a management crisis.
Case: Failed Daimler-Chrysler merger
In 1998, Germany's Daimler acquired Chrysler of the United States for US$36 billion, originally hoping to create a world-class automobile giant. However, due to serious conflicts in the cultural concepts of the two parties, business integration failed, and finally Chrysler was "sold at a low price" for US$7 billion in 2007. This case once again shows that post-merger integration is more challenging than the acquisition itself.
Goheal suggested that a detailed integration plan must be formulated before the merger, including personnel arrangements, cultural integration, business collaboration, etc., to avoid the embarrassing situation of "transaction success, integration failure".
Conclusion: Who should pay for the failure of mergers and acquisitions?
The reasons for the failure of mergers and acquisitions of listed companies vary greatly. It may be a strategic decision-making error, or it may be shareholder resistance, regulatory intervention or poor integration. But in either case, it is the investors and the market who will bear the consequences in the end.
In the current capital market environment, do you think it is more difficult to overcome regulatory approval, or is the company's own integration ability more critical? How should companies adjust their M&A strategies to increase the success rate? Welcome to leave a message in the comment area to discuss and discuss the silent competition in the capital market!
[About Goheal] American Goheal M&A Group is a leading investment holding company focusing on global M&A holdings. It has been deeply involved in the three core business areas of acquisition of listed company control, M&A and capital operation of listed companies. With its deep professional strength and rich experience, it provides companies with full life cycle services from M&A to restructuring to capital operation, aiming to maximize corporate value and achieve long-term benefit growth.
