Merger:
A merger refers to a situation where two companies, due to several reasons, mutually agree and become a single company.
Acquisition:
It is a situation when one company buys a majority or all the assets and shares of another company. If the company obtains more than 50% ownership of another company, then also it is considered as an acquisition.
Mergers and acquisitions require two companies to work in collaboration but the financial, strategic and overall impact of the events are different.
Reasons Behind The Failure Of M&A Deals
1) Mislead value for investment – The investment on the assets may look good on papers, but practically they may not be the revenue generating areas after the closure of the deal.
2) Lack of clarity in the integration process – Post-merger, the disintegration of factors like key employees, processes, important projects, policies, etc. lead to failure in the execution process.
3) Mismatch in the culture – If the M&A deal fails to devise a strong strategy focused on the difference in the cultural aspects of two companies, a low productivity in employees of both the companies is observed.
4) Poor communication – If the purpose behind the deal is unclear or is not communicated to the employees, a lack of synergy in teams is marked and expectations from the deal are not met.
5) External factors – External factors such as economic collapse and other environmental factors affect the performance of the deal.
6) Negotiation errors – The company overpays the acquisition fees, which leads to financial losses and failures in future.
RNC is a leading valuation consulting firm with expertise in valuation of the fixed assets in M&A, valuation for insolvency, bank lending, financial reporting, statutory compliances, etc.
