Reasons Why Mergers Fail and How to Avoid Them

Now that many companies have eagerly decided to tie up with another establishment for both parties to reap the benefits out of it, there have been a lot of reports stating that a huge percentage of mergers fail – and for a lot of reasons.

Most of the reasons are pretty basic, but many companies have started to overlook on the problem, ending to a business / partner relationship that can completely ruin the merged reputation of these two companies.

There are hundreds or even thousands of companies who are now suffering from poor business relations because there are a lot of mistakes that have been happening right after the merger.

These simple reasons are about to be discussed below; these will help business individuals avoid merger failures and how they establish a business that focuses more on helping each other grow and work as one, instead of pulling one down and trying to gain more power over the other.

  • Culture Shock – two companies may have different ways of managing their establishment, and when mergers happen, these two establishments may experience culture shock. Come to think of it: if IBM and Google gets involved in a merger, these two huge companies may not click since they have their own way of managing a business. During the first few months of mergers, this is normal, but it is now up to the two or more companies involved on how they can adapt to each others’ managing styles.
  • Lack of planning – many people think that mergers may end up perfectly, since two companies will be taking over it – but this is where the problem comes in. majority of companies who merge may lack plan, or may even have different plans resulting for their merger contract completely fail. Communication is a very important aspect when it comes to mergers, and this is one thing that business owners have to bear in mind.
  • Lack of Enthusiasm – when it comes to mergers, many companies may hear proposals that sound like a great way to improve the company and to reap the benefits of the tie up. However, as soon as the merger starts, both companies end up lacking enthusiasm, which is one factor of mergers failing completely. Sometimes, one side of the company will show lack of interest in the proposal being made, while some others do not care about the managing system and even how the establishment will be handled. Remember, it is still your company – you own a part of it, and if you want to save your money, time exerted and even effort on this, start by showing enthusiasm. As soon as the other party has noticed your enthusiasm, he / she might just do the same thing, which starts a good business relationship.
  • Politics – everywhere we go, politics has always been a major issue, and giving power to people that you “know” causes mergers to fail. Play fair – do not just hire people and promote them simply because you are old friends or you think that he can do it. Establish a good business relationship, give positions to those who are deserving, even if it means giving it to someone from the other part.


13 June 2012