The problem with mergers

The vast majority of corporate mergers don't deliver the expected benefits. So what chance has the coalition government?


The vast majority of corporate mergers don’t deliver the expected benefits. So what chance has the coalition government?

The vast majority of corporate mergers don’t deliver the expected benefits. So what chance has the coalition government?

One of the more staggering pieces of business research conducted in recent years came from consultancy Hay Group, which polled senior executives on the success of their M&A strategies. Some 91 per cent of those leaders felt that their own companies’ corporate deals had fallen short of their stated objectives.

While the reasons mergers deliver poor results are many and varied, one common theme identified by the research was a failure to reconcile cultural differences.

That may sound a bit woolly. It probably did to the people in charge of integrating those acquisitions, which is why they didn’t pay the issue any attention.

However, when you see MPs breaking ranks in the first few days of the new Con-Lib coalition government to publicly disagree with key Cabinet decisions, you start to understand how philosophical differences can cause problems that are not just academic.

Of course, these may not simply be matters of principle. David Davis has a well-deserved reputation as a champion of civil liberties, and his public criticism of the government’s plan to change the rules over no-confidence votes is in keeping with that agenda. But he is probably also a bit annoyed about going from bookies’ favourite for party leader in 2005 to backbencher in 2010.

In a successful corporate deal, the challenges of contrasting personalities and cultures are addressed alongside the nitty-gritty of integrating IT and finance. While I wish the coalition every success for the country’s sake, the lack of due diligence and the urgent need to patch up a deal may prove to be a shaky foundation for this merger.

Nick Britton

Lexus Ernser

Nick was the Managing Editor for growthbusiness.co.uk when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...

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