We should expect some mergers to fail

Why should mergers or carve-outs differ from other change programs?

Every report on the state of mergers and acquisitions points out that a proportion of mergers fail to deliver the intended benefits. Similarly, reports on the success of projects convey a similar message – some projects fail. Mergers are amongst the largest and most complex projects that companies must implement, and are not ‘run of the mill’ for most companies, so shouldn’t we expect mergers to fail – at least until we can implement projects successfully?

Disclaimer – I am a management consultant and spend a large proportion of my time advising clients on the strategic and operational aspects of mergers and carve-outs. I have written this post without intending to sell my capability and/or services (I haven’t disclosed the name of my employer, for a start) but readers might want to bear in mind my position.

So companies are not very successful at implementing projects. Over the years the reported success rate has improved, but the proportion of failures is still shameful.

What is a merger if it is not a project?

Mergers are just projects with tighter than average timescales, more politically-charged than average environments, broader than average scopes, more than average interdependencies, less well-defined than average requirements, and higher than average public scrutiny. In other words, they are more complex than average projects.

So we should expect mergers to fail at least as frequently as the overall rate for projects, and probably at a greater rate due to the high complexity. Although the share of executive attention means that maybe there is more ground-level motivation to make the merger a success that may work against this.

OK, so maybe we should expect some mergers to fail. So what? The point of this blog post is what exactly?

Well the simpler reason is just to point out that preventing the failure of mergers will not be a simple task – without solving the problem of why projects fail.

But the main (and hopefully more perspicacious) reason is to prompt the consideration of project failure in more detail within the context of mergers. Presumably if we know why projects fail, we should be able to introduce measures to avoid the failure. And we should be able to apply the same approach to that subset of projects called mergers, assuming the measures applied are applicable to all projects. I will return to this idea, and discuss possible responses, in subequent posts.

And carve-outs? Well they are probably even more difficult because the deadlines are legally driven.

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