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There is good news and bad news to be found in the recent worldwide M&A boom. On the bright side, it has helped many thousands of merging and acquiring companies to jumpstart increased growth, and this phenomenon has invariably benefited shareholders of the acquired firms. The bad news is that there is no evidence that the long-term success rate of these deals is likely to be any better than the dismal record of the past. The wreckage of failed mergers in the 1990s is to be found all over the business landscape. Among companies with M&A horror stories are to be found AT&T, Quaker Oats, Mattel, Disney, Sony, Compaq, Lockheed, Raytheon, Bank of America, General Electric (yes, GE) and BMW, to name but just a few. Several authoritative studies have found that a merger has no better than a 50-50 chance of creating value for the acquirer - some suggest less. If true, then in 1999, when the worldwide value of M&A deals was a staggering $2.3 trillion, there will be at least $1.15 trillion of value eventually destroyed.
There are of course many reasons why mergers go sour: poor strategic concepts, personality problems at the top, cultural differences, poor employee morale, incompatible information systems, etc. But probably the most ubiquitous cause of disaster is the failure, in one way or another, to integrate the two entities successfully. After the ink dries when the companies complete the deal, unity proves elusive, and instead of coming together things fly apart. "A whole consulting industry thrives by advising companies on post-merger integration, a salvage operation to recover something from the wreckage of impossible promises and ill-considered goals," said The Economist (1999), adding pres ...