Failed mergers lead to "trench warfare"

NEARLY all UK mergers fail to fulfill their strategic
objectives, according to a report by the Hay Group.

And Britain's record for failure is among the worst in Europe.

Around 97% of mergers by UK firms fail, while 28% of business
leaders interviewed questioned by the management consultancy
admitted that the deal had failed to create “significant new
value”.

But the Hay Group cites culture shock as one of the biggest causes
of failure. It also blames poor due diligence and the prioritising
of finance and systems over business structures, staffing and
corporate governance as another cause.

More than half of the respondents questioned said that not properly
auditing non-financial assets had increased the risk of making a
wrong acquisition.

“Integrating intangible assets six months after a deal has
gone live is too late,” said David Derian, a director at the
Hay Group.

“Companies should be examining the compatibility and
differences between the two firms well before the deal is made
public in order to have a clear plan of action in place right from
the start.”

However, the study showed that 70% of senior management feel
that's too difficult to make such assessments before making a
bid.

Of more concern, only 13% of managers placed a high priority on
integrating executives and the workforce as a whole.

As a result, company culture had suffered with 22% of respondents
reporting culture shock. Around 16% went on to describe the
post-merger atmosphere as “trench warfare”.

More than 200 major European mergers and acquisitions were analysed
for the report.