New Milner White Paper on 10 Steps to Success in Mergers and Acquisitions

The success rate of acquiring and merging companies is between 40% and 50% measured over a range of criteria (Kitching (1974), Egon Zehnder (1987), Norburn and Schoenberg (1987), Bishop and Kay (1993)). Although every merger is different, there are recurring factors that are common to success and recurring factors that are common to failure. By taking account of these factors a company can improve the likelihood of success in a merger. Milner Strategic Marketing Ltd’s new white paper, ’10 Steps to Success in Mergers and Acquisitions’, reviews the literature around mergers and acquisitions from 1967 to the present day to highlight these factors and assess their importance.

The factors that influence success or failure fall into three categories: People, Processes and Technology (Ernst & Young, 1994). A selection of the factors driving success and failure that are discussed in the white paper are summarised below:

Success

1. Ensure strategic consistency
Be explicit about how the merger fits into the corporate strategies of the two companies and make sure those criteria remain visible throughout.

2. Establish the new company identity
Do not try to merge the two companies but build a new company, with an identifiable brand, logo and name.

3. Eliminate the winners and losers polarisation
Build on the best practices and approaches of both companies to create the new company and position those as the New Company’s procedures. This will help to avoid the winners and losers syndrome.

4. Move quickly
Speed is one way of reducing resistance. Remember, most mergers take twice as long as expected. Therefore integrate selectively.

5. Remember the human factor
Above all, remember you are dealing with people. They are the resource which will make the merger work at every level and need to be treated with respect and sensitivity. Mergers across boundaries always create the potential for extra cultural clash. US & UK mergers often appear to be easier because of the language and business process. However there are still national differences.

 

Figure 1 Factors associated with success
Source: Coopers and Lybrand (1993)

 Failure

1. Don’t be insensitive towards people
Uncertainty and fear amongst staff will lead to loss of morale and commitment unless the acquirer handles the situation carefully. The acquiring company’s attitudes of superiority and inferiority are “one of the most important causes of merger or acquisition failures” (Benedichte Meyer and Altenborg (2008))

2. Poor implementation
Regardless of the potential of a merger or acquisition, it will not be realised unless the conflicting processes and strategies of the organisations are able to be resolved. Furthermore, having a sound strategy does not mean that it will be implemented effectively ‘on the ground’.

3. Don’t let long-term R&D slow down
Long-term R&D may not have an impact on the companies’ short-term profitability, but it will cause damage in the long run. It may mean a deterioration of skills and indicate to the rest of the industry that there is a loss of purpose and direction in the merged company.

 

Figure 2 Causes of failure
Source: Coopers and Lybrand (1993)

 

For the full list of factors that are important to consider in mergers and acquisitions and to read the discussion, case studies and conclusions, please click here to view the white paper.

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