There is always synergy value created by the joining or merger of two companies. The synergy value can be seen either through the Revenues (higher revenues), Expenses (lowering of expenses) or the cost of capital (lowering of overall cost of capital).
Mergers & Acquisitions can take place by:
There are many reasons for M&A. Among them are:
As encouraging and appetizing as the above reasons for M&A might sound, many M&A fail due to these reasons. • Poor or absence of strategic fit: Wide difference in objectives, core values and strategies of the organisations, • Poorly managed/processed Integration: There is an adage that says “when you fail to plan, you plan to fail”. Integration is often poorly managed without planning and design. It is like building a house without building plan. This leads to failure of implementation and execution. • Incomplete due diligence: In executing M&A, there is need to conceptualize the process from start to end. Inadequate due diligence can lead to failure of M&A as it is the crux of the entire strategy. • Being overly optimistic: It is sometimes better to see a bottle as half-empty than to see it as half-full. Too much optimistic projections about the target company could lead to bad decisions and failure of the M&A.