Mergers and Acquisitions 2

Factors Behind the Successes of Mergers and Acquisitions
This study has already found that factors attributing to merger and acquisition losses are not by chance or luck, but
rather by failing to allocate close attention to the many necessities needed within all aspects of combining and
integrating two business structures. It has also been interesting to note that little reference was given in any of the
previously sourced information laying blame on adverse external influences such as political and economic
uncertainty. Likewise, it is found that factors attributed to the success of mergers and acquisitions are enabled due
to sound business strategies; to which this report now turns.
A study conducted titled ‘Why Mergers Fail and How to Prevent It’, pointed out that mergers and acquisition
outcomes are “linked closely to the extent to which management is able to integrate members of organizations
and their cultures” (Cartwright 2012, p. 2). This observation is closely parallel to sourced information previously
discussed regarding the integration of personnel and cultures by different organizations. However, she also points
out the relevance of sensitively addressing ‘individual’ concerns, minimizing the impact on all employees when
integrating two different corporate entities into a single cohesive infrastructure. Logic suggests that the ‘human
factor’ plays a significant role in the enablement of a successful ‘marriage’ of two companies.
Regarding another factor that can contribute to the successful outcome of a merger or acquisition, a study titled
‘Why Do Mergers Fail? What Can Be Done to Improve their Chances of Success?’ suggest that “one way of ensuring
that post-merger integration will run smoothly is to set up a postmerger integration team in all the critical areas of
the organization” (Salame 2006, p. 18). Following this suggestion, it would be prudent to not only to enable pre-
merger investigation such as due diligence, but also by planning prior to the merger, a task force dedicated to
integrating all operational functions within both business entities; including administrative functions, marketing
systems and plans, financial systems and human resources.
Moreover, attention has been drawn above to the ‘human factor’, so when considering the employees, further
attention should be allocated by this postmerger integration team to look at cultural diversity and issues pertaining
to local communities. Such issues can include perceived inequalities of minority and disadvantaged population
groups. Acceptance of cultural diversity and minorities can enable a smoother integration of two companies. This is
especially applicable in the event that such integration takes place across international borders.
Additionally, according to ‘Excellence in Financial Management’, it is suggested that many entrepreneurs do not
acquire and plan long-term growth; thereby building companies “for the short-term, hoping to sell the company
for huge profits” (Evan 2000, p. 1). Perhaps this may be perceived by some to be ‘short-sighted’; however, the
result can often be the streamlining the companies into an efficient cohesive operation; thereby enabling
profitability and perhaps growth so as to add perceived value. A question is raised whether such a short term
viewpoint is arguably conducive to long term sustainability. However, by enabling quick solutions to integration
challenges, savings and financial viability may be found.
In a report published in 2008, ‘Mergers and acquisitions: opportunities for global growth’, it was noted that more
companies are now “recognizing the growing importance of emerging markets” (Grant Thornton 2008, p. 4). This
allows a company previously restricted by local or national competition, to combine resources with companies in
areas where the return on investment may be higher. Furthermore, growth in many emerging markets such China,
India and Brazil has been relatively strong when compared to the stagnant economies of more established major
powers.
Furthermore, Grant Thornton’s IBR survey has shown that shareholders and corporate decision-makers in the fast
growing BRIC economies are now enthusiastically embracing M&A” (p. 6). This paper suggests that perhaps
accessing emerging markets via mergers and acquisitions may be a key strategy for future sustainable growth.
Recognizing the energy and vitality of emerging markets can stimulate more established companies and
organizations based in ‘Western’ economies that have been subjected to defensive and perhaps negative outlook
based on poor economic outlook.
In considering all these factors inherent to the implementation of successful mergers and acquisitions, a report
‘Mergers & Acquisitions: A Global Research Report’ clearly stated that “As ever, it is the delicate balance between
financial drivers and people aspects which underpins success. Neither is sufficient in itself to deliver the benefits”
(Kelly, Cook & Spitzer 1999, p. 2). Underscoring the importance of both financial expertise and the ability to
recognize the validity of the ‘human factor, perhaps encapsulates what this investigation has sourced and
evaluated.
Conclusions and Recommendations
Perhaps the measure of why shareholders and directors of companies are still pursuing mergers and acquisitions
despite a global trend of a significant failure rate, can be attributed to the motivation for businesses to combine
forces and resources so as to ensure sustainability. Notwithstanding the many failures, the economic downturn has
perhaps highlighted the need to diversify resources into foreign and emerging markets; thereby potentially
enabling higher levels of growth. Henry reasoned that a measurement of successful mergers can be enacted by
evaluating stock market returns, one year after a merger (Henry 2002). Perhaps investors and shareholders should
be able to influence such future business transactions so that an investment viewpoint incorporating ‘return on
investment’ should be equally, or more weighted when evaluating such strategies.

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Factors Behind the Successes of Mergers and Acquisitions

Conclusions and Recommendations

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