Merger And Acquisition - Reasons for Failure and Counter Measures
Reasons for failures and Corrective measures
Aakash Kulkarni MGBSEP13IBWM001
Chetan Makharia MGBSEP13IBWM008
Frederick Fransjaya MGBSEP13IBWM011
Nitish Pyara Singh MGBSEP13IBWM018
Reason for choosing this topic
Objective of this research
Framework - Fishbone
Mergers and Acquisitions (M&A) is one of the
major aspects of a company which deals with
the Management, Corporate Strategy and
A Merger is when 2 companies which are of
similar size and revenue decide to join
An Acquisition is when one large company
acquires a small company for present or
REASON FOR CHOOSING THIS
FIGURE 1: QUARTERLY ANALYSIS M & A AS PERVALUE ANDTHE NUMBER OF DEALS
OBJECTIVES OF THIS RESEARCH
Find reasons for the rise in number of M
& A failures.
Identify the “INDEPENDENT” variables
and “INTER-DEPENDENT” variables
which are causing these failures.
Provide a concise report with
IMPLEMENTABLE solutions to help
reduce these failures.
WHY M&A ?
1. Operational benefits
Revenue Enhancement by gaining Pricing power
Cost saving in terms of Advertising, R&D
2. Financial benefits
Reduction in cost of Financing
Risk Reduction through Diversification
3. Strategic Motives
Example – Facebook acquiring Whatsapp
PARAMETERS OF SUCCESS
Ease of getting
• Google bid to acquire Whatsapp for US $10 Bn but
Whatsapp quoted US $19 Bn, thus leading to failure of
• TimeWarner and AOL merger during the dot com
bubble burst which led to US $99 Bn loss to AOL.
• EBay and Skype in 2005 (and overestimating possible synergy)
• Hewlett Packard and Compaq merger in 2001 that
resulted in US $13 billion loss in market value.
• Alcatel (United States) and Lucent (France) in 2006
• Sprint and Nextel, clash between the entrepreneurial
• Blackberry buyout by Fairfax in 2013
• Holcim and Lafarge merger is likely to be successful as
the size of both the companies is equal and the size of
the deal is larger
• VeramarkTerminates Merger Agreement withVarsity
Acquisition LLC,Agrees to be Acquired by Hubspoke
• Ebay and Skype in 2005 that predicted the wrong synergy
• Microsoft offered to buyYahoo for 40 billion, but since
the BOD ofYahoo were not able to effectively
communicate and deliver in the Pre-Merger meeting
this deal collapsed.
Culture and Core values play a vital role in
the Pre-Merger and Post-Merger situations.
Valuation of a company and the standards
followed play an important role.
Technology, Size and Other reasons can be
controlled through careful and preemptive
CONCLUSION - 1
◦ Investment Banks and Auditing Firms which assist
M & A must provideValuation on a common
ground.This also helps remove the
communication difference between the
◦ Cultural differences can be mitigated by improving
the understanding and purpose of the Merger and
Post-Merger, HR executives help integrate the 2
companies into one.
CONCLUSION - 2
◦ Valuation: Before a merger commences, a company
must ensure that the amount they are paying for the
M & A is not greater than the combined present value
of the future Cash flows of the company.
◦ Appointing or hiring experienced professionals who
help foresee problems which may cause the deal to
fail and also this helps the deal to be completed
earlier as it’s done in a structured process.
◦ “Jumping in earlier has always been higher risk
and with higher risk comes greater reward” -