As an essential part of your corporate armory, corporate mergers and acquisitions play a significant role in many companies' value and growth strategies. If designed and executed successfully, these strategies will help your company gain and sustain a competitive advantage.
But not all M&As succeed. The reasons for failure in M&A are many, but can be synthesised into two key factors. Firstly, over-optimism in valuing the target company, in particular being overly optimistic about the synergies to be achieved post-acquisition. The second reason relates to the human element. We like to think we are rational beings but we all tend to behave irrationally at times. We believe we can accurately predict the future and repeat previous success ad infinitum. As a result, we seek evidence to confirm our beliefs and views instead of searching for evidence to contradict ourselves, and we don't pay sufficient attention to people issues arising from the deal.
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