There is a lot of literature on the failure of M&As to achieve value. I have assessed in other posts the reason for those poor results. In this post I prefer to discuss what a buyer has to focus on to identify the right target and maximise the chances the deal will achieve the desired results.
Most of the executives in organisations tend to have a financial background and be subject-matter experts with regards to their area of competence. This has led to a focus on the strategic fit when identifying a target for a merger or an acquisition, with little to no attention to the organisational fit.
It is now well researched that substantial differences in organisational cultures, managerial styles, reward practices, values and structures are amongst the number one reasons for deals’ failure.
It is key for a buyer to focus both on the strategic fit (whether the target being organisations that operate in the same market providing related products/services or targets with a buyer/seller relationship) and the organisational fit (culture, managerial styles, reward system, values and structures). The closer the organisational and strategic fit, the higher the chances the deal will be successful.
Of course there are lots of other elements that come into consideration, especially at integration stage. However, it is important to structure the deal in the right way from the very beginning in order to minimise problems at a later stage, when the deal has been sealed and may be too late to fix it.
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