Bigger is always better, right? That’s the prevalent idea in the corporate world. Companies strive to achieve more market share and get a loyal customer base to dominate the industry. They acquire businesses and use mergers with powerful corporations as a way to the top. The grander the union, the more fruitful are the results. We tend to think the same about mergers. Some mergers are successful and benefit the reputation of both the companies. But not all mergers achieve such high standards. Studies indicate that 83% of mergers fail – but does this signify that all mergers are doomed to fail?
Under expert guidance, you can avoid mistakes that result in merger failure and proceed with your plans. Advisory Consultants for Business Mergers & Acquisitions In Minnesota aim to provide you their services based on your specifications.
Why Mergers Fail?
Many mergers fail to live up to the expectations of stockholders. The newly created company goes bankrupt, employees are fired, and eventually, the companies end up getting a divorce. But why is that so? Well, there are many factors that prompted the failure of a seemingly profitable merger, for example;
* Poor strategic fit;
* Clash of organizational cultures;
* Sudden changes in market conditions;
* Payment of an overinflated price to acquire the company.
This article presents a few examples of deals gone bad (worse in some cases).
* America OnLine & Time Warner
Considered to be the most prominent merger failure of all time, Time Warner consolidated with American OnLine to capitalize on the convergence of mass media with the internet. AOL refused to give up dial-up access (which was declining rapidly) and so the technological advances proved more than these corporations could handle. Time Warner’s stock dropped 80%, and they suffered a whooping loss of $99 billion, the largest annual net loss ever reported by a company. The expected synergy of these two different companies never occurred and finally after eight years they split up.
* Quacker Oats & Snapple Beverage Company
Quaker Oats managed the widely popular Gatorade drink and thought they could do the same with Snapple and purchased it for $1.7 billion, in 1994. They dove headfirst into making a new marketing campaign and to get Snapple to every store and restaurant they could. However, they failed miserably. Not only did they pay above the market price for the acquisition, they also lacked the skill sets to run the operations. The retaliation from competitors like Pepsi and Coca-Cola forced them to sell Snapple after just 27 months.
While contemplating a merger, managers at both sides should aim to eliminate the barriers of enhanced shareholder value. When it comes to the smooth merger of a business, it’s better to get an expert opinion from advisory service providers for Business Mergers & Acquisitions in Minnesota. Sunbelt Business Advisors provide business intelligence to owners and buyers. Feel free to contact them and get the expert guidance and experience to make your company’s merger a success.
