Reasons for Failure of Mergers and Acquisitions

Mergers and acquisitions are not always successful and many factors are behind failure of mergers and acquisitions and here are some of them –

1. The key for any successful mergers and acquisitions is the price which is paid for acquiring the company for purchasing the other company. Hence if any company pays for acquisition more than which it is worth it will naturally result in failure of merger and acquisition.

2. When the company takes too much debt so as to acquire other company it will result in huge future interest payments and hence most of the earnings of the merged company goes towards the payment of such interest charges and hence it puts lots of pressure on the company resulting in company making loss or lower profit than before.

3. Another reason could be that employees of the company which is being taken over may not like to remain in the merged company because various reasons like the new management being not able to understand their needs and also lack of confidence in new management by the employees. This ultimately results in employees going out and creating a vacuum in the company because it is hard to replace experiences employees with others and hence a great operational difficulty arises for the merged company.

4. Sometimes regulatory authorities can delay the merger because various apprehensions like creation of monopoly, and other regulatory issues resulting in confusion all round whether merger will happen or not and which ultimately results in suppliers, employees as well as customers of the company going to other companies and hence again a big setback for the company which is taking over the another.

Hence from the above one can see that company should keep above points in mind before doing mergers and acquisitions in order to make it successful and not a failure.

1 comment… add one
  • rima

    you have made concepts very clear and simple…

Leave a Comment


Related pages


nasdaq full formagro based industry definitionwhat is an unearned revenueadvantages of venture capitalistadvantages and disadvantages of money market mutual fundsvertical mergeradvantages of process costingadvantages and disadvantages of future contractsjournal entry for unearned revenuebarter trade meaningdifference between shopping mall and department storecosting and pricing methodsdefine a mixed economyunearned revenue journal entry examplesexamples of inferior goods and normal goodshorizontal and vertical analysis of financial statementsmerits and demerits of globalisationmeaning of discounting of billsadvantages and disadvantages of electronic fund transferaccounting treatment of contingent liabilitieswhat is autocratic leadershipbenefits of swot analysisinfosys company websitecost oriented pricingformat of marginal costingconglomerate corporation definitionfeatures of capitalism socialism and mixed economydisadvantages of a mixed economic systemdividend defindirect quote currencyplanned economies exampleseffectiveness of autocratic leadershipglobalisation disadvantagessalaries payable journal entrywhere is unearned revenue recordedunclaimed dividendsoligopoly monopolydisadvantages of economic globalizationdifferentiate between assets and liabilitiesadvantages and disadvantages of capitalist economybrs rulesindustrialization disadvantagesduality accountingindirect quotation examplescost oriented pricing strategydistinguish between micro and macro economicsjournal entry for prepaid expenseadvantages and disadvantages of cost plus pricingmerger and acquisition advantages and disadvantagesdiminishing returns examplesfdi long formbenefits of convertible bondsstrengths of socialismfull form of fiiinternet merits and demeritsexamples of current liabilitiesmerits of capitalismdefinition of consigneeadvantages of socialismadvantages of specialization in economicsdefine floating exchange rateexample of unitary demandadvantages and disadvantages of b2bdifferentiate between direct and indirect taxesexamples of substitutes goodsadvantages of hire purchase and leasingwhat are manufacturing overheadswholesale loan operations meaningnasdaq full formthe materiality conceptcross exchange rate formulasubstitute goods and complementary goodsadvantages and disadvantages of a command economy