The market is like a battlefield. Mergers and acquisitions are commonplace in the capital market. Some people rise up through this, while others fail. In the past few decades, countless companies have tried to expand their scale and upgrade their business through mergers and acquisitions. However, only a few can really succeed. Data shows that more than 50% of mergers and acquisitions transactions worldwide fail to achieve the expected results, and even cause companies to fall into greater difficulties.
So, what is the root cause of the failure of mergers and acquisitions? Is it a broken capital chain, or is the difficulty of management integration beyond expectations? Goheal's research found that although funds are a decisive factor, what really makes the transaction fail is often that the management underestimates the complexity of integration. Capital can quickly facilitate transactions, but whether the company's management culture, talent structure, and operating system can be effectively integrated is the key to success or failure.
Funding issues? Money is not omnipotent, but without money, it is absolutely impossible
The first threshold for mergers and acquisitions is the funding issue. Whether it is a cash merger, equity swap, or leveraged buyout, sufficient capital reserves are the prerequisite for success. However, many transactions have buried the seeds of failure on the funding side.
First, some companies blindly borrowed money for mergers and acquisitions, ignoring the sustainability of funds. For example, in order to expand overseas markets, a technology company completed a merger and acquisition through high leverage. Although it seemed prosperous in the short term, it actually carried heavy financial pressure and was eventually forced to divest assets due to cash flow interruption when the market was sluggish.
Second, valuation bubbles are also a common trap. In the M&A market, companies often acquire target companies at a high premium because of "strategic synergy" or "market potential", but if they fail to realize growth within the expected time, the capital market will quickly bite back. For example, a merger and acquisition case of an Internet company that once caused a sensation did not rise but fell after the transaction was completed. The reason was that the market found that the profitability of the target company was far lower than expected, which eventually led to the tight capital chain of the major shareholder and the failure of the restructuring.
Although funding issues are often the fuse for failed mergers and acquisitions, they are not the only factor. Goheal observed that even if the financial situation is stable, management imbalance can still make a seemingly perfect transaction a bubble.
Management imbalance? Integration failure is the biggest killer of mergers and acquisitions
If capital is the engine of mergers and acquisitions, then management integration is the steering wheel. Many companies pay too much attention to the transaction itself during mergers and acquisitions, but ignore the "integration" problem after the merger, which eventually leads to management chaos.
1. Cultural conflict: merger ≠ integration
Cultural differences between different companies are often the most difficult problem after mergers and acquisitions. Especially for cross-border mergers and acquisitions or mergers and acquisitions in different tracks, the management style, decision-making mechanism, and corporate culture of both parties may be very different. For example, a traditional manufacturing company acquired an Internet company, hoping to use digital transformation and upgrading, but because the management is accustomed to a rigorous hierarchical system, while Internet companies prefer flat management, it is difficult for employees to adapt, and eventually the contradictions between the two sides intensified and were forced to split.
2. Talent loss: talent defense war after mergers and acquisitions
M&A and restructuring are not only the merger of assets and businesses, but also the redistribution of talents. However, many companies have failed to formulate effective incentive mechanisms after mergers and acquisitions, resulting in the loss of core talents. For example, after a technology company acquired a startup, the founding team chose to leave because they were dissatisfied with the management model of the new owner. As a result, the new business stagnated within just one year, and its market share was quickly eroded by competitors.
3. Operational imbalance: short-term benefits vs. long-term value
After mergers and acquisitions, some companies will take radical financial optimization measures, such as layoffs, cost cuts, and changes in supply chain models, in order to quickly meet the expectations of the capital market. This may increase profits in the short term, but may cause the company to lose competitiveness in the long run. After acquiring a well-known brand, a retail giant over-cut operating costs, resulting in a decline in service quality and eventually losing its original customer base. The acquisition not only did not bring expected growth, but became a drag.
For this reason, Goheal particularly emphasizes the importance of management integration when conducting mergers and acquisitions, and recommends that companies formulate detailed integration plans before mergers and acquisitions, rather than starting to "put out fires" after the transaction is completed.
How to improve the success rate of mergers and acquisitions? The key lies in overall planning
Since both funds and management integration are decisive factors, how to improve the success rate of mergers and acquisitions?
First, refined financial planning
Before mergers and acquisitions, companies must conduct a comprehensive assessment of their financial situation, including fund raising, debt structure, cash flow planning, etc. Avoid over-reliance on leveraged financing to reduce financial risks. At the same time, reasonable valuation and investment return forecasts are also key to ensuring the feasibility of mergers and acquisitions.
Second, cultural integration and management team collaboration
Cultural integration is not just a one-time meeting or training, but a long-term running-in process. Management must find a balance between the cultures of both parties, neither completely overthrowing the original culture nor sticking to the old model. At the same time, ensuring the stability of key management personnel and technical teams is also the key to the smooth operation of the company after the merger and acquisition.
Third, a smooth transition of the market and customers
After the merger and acquisition, companies must ensure that customer experience is not affected. If there are major changes in the brand, service, and supply chain, it may lead to customer loss. Therefore, during the integration process, companies should maintain market confidence and ensure stable business operations.
Conclusion: Is success a minority in mergers and acquisitions?
Mergers and acquisitions are like a gamble, where winners can achieve leapfrog development, while losers may fall into the abyss. Whether it is funding issues or management imbalances, they are key factors affecting the success of mergers and acquisitions. In the future, with the continuous development of the capital market, the way of playing M&A will continue to upgrade. How can enterprises remain invincible in this capital game? Can the management integration after M&A become a new competitive advantage?
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[About Goheal] Goheal is a leading investment holding company focusing on global M&A holdings. It is deeply engaged in the three core business areas of acquisition of listed company control, M&A and restructuring of listed companies, and capital operation of listed companies. With its deep professional strength and rich experience, it provides enterprises with full life cycle services from M&A to restructuring to capital operation, aiming to maximize corporate value and achieve long-term benefit growth.
