Most mergers fail to create value, says new study

Consultants KPMG have studied a series of mergers and acquisitions and come to the conclusion that most fail to deliver the benefits originally foreseen.

Using shareholder value as the benchmark, KPMG says that over 80% of deals failed to achieve an increase - and over half actually destroyed value.

"To extract the full value from the deal," notes head of M&A integration John Kelly, "acquirers must find the right balance between activities focused on financial performance and those related to people and cultural aspects."

Kelly points to six factors critical in determining success:

• synergy
• integration planning, and
• due diligence, plus
• selection of the management team
• resolution of cultural issues, and
• communication, especially internal.

Too often, says Kelly, the focus is on the first three 'hard' issues at the expense of the equally crucial 'soft' issues. And, he adds, due diligence should no longer be confined to looking at corporate assets. It needs to extend to an evaluation of the benefits that will follow from bringing two companies together.

Elliott Chase