The Dreaded Business Mergers: Why Do They Fail So Often?

Only a small number of mergers succeed. Indeed, according to Harvard Business, up to 90% of mergers and acquisitions are doomed to fail for a variety of reasons. 

As a business owner, if you are considering acquiring a new business or merging with another brand, you will have to proceed to strategic planning, involving the assistance of an expert in business law to negotiate the whole process. Did you know that failure to negotiate and come to an agreement can be the number one reason for a merger collapse? 

What other issues can affect your M&A strategy? Below we review the top most frequent problems. 

The Dreaded Business Mergers: Why Do They Fail So Often?
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#1. Lack of transparency

Ultimately, a merger should never come as a complete surprise for the teams involved. Open and honest communication with your employees can help prepare them for the transformation. Not knowing how your employees are feeling about the new office, if they need to relocate, or about the new rules when they join an existing company can translate into a loss of motivation and a high turnover rate. 

Both companies must make a clear effort from the start to keep their respective teams in the loop and ensure that every worry and question can be addressed before the D day. 

#2. You didn’t do your research

Merging with an existing company means accessing a new audience group, discovering a new culture, and bringing your growth plan to the next level. A merger and acquisition process is designed for growth and survival. But to be successful, both companies must ensure:

  • They are familiar with each other’s culture
  • They understand each other’s financial situation (especially from the buyer’s perspective)
  • They appreciate how each other’s audience groups are complementary
  • They have a shared objective

More often than not, failure to ensure to research the other business thoroughly can lead to unpleasant surprises once the merger is processed. 

#3. The buyer’s identity is overwhelming

Merging with another company can be an enriching experience when both parties can learn from each other and build a stronger presence together. Typically, you can expect three types of brand behaviors after a merger:

  • Brand A and Brand B maintain their identities, but they share operations and strategies, hence saving costs without losing their unique audience groups
  • Brand A tries to swallow Brand B, leading to fear, confusion, and rebellion from the bought companies. Brand B’s employees are more likely to quit, taking their knowledge and audience with them. 
  • Brand B becomes Brand B-A, hence making the merger public without losing its market presence. Depending on how Brand A’s reputation affects B’s audience, it can backfire. 

When the merger focuses on making one brand disappear for the benefit of the other, it can have a negative impact on long-term success. 

#4. The cultural exchange is a failure

Which business culture should become the priority after a merger? Experts recommend the creation of a third culture that combines elements of both businesses to keep employees happy. Privileging one culture over the other is the quickest way to fail. 

Should businesses avoid mergers and acquisitions at all costs? Following the alarming results depicted by a recent Harvard study, everything would imply that mergers are a bad idea. However, understanding some of the most costly mistakes companies make can provide entrepreneurs with a safe plan of action.

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About Dequiana Jackson

Dequiana Jackson, Founder of Inspired Marketing, Inc., helps overachieving women entrepreneurs conquer limiting beliefs and create marketing plans that grow their businesses. This includes one-on-one marketing plan development, digital product creation, web design and content marketing. Dequiana is the author of Know Your Business: How to Attract Ideal Clients & Sell More and runs the award-winning blog, Entrepreneur-Resources.net.

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