I always enjoy giving talks and presentations to former Kellogg students and executive management teams on a wide range of topics including leadership, running a global company, mergers and acquisitions, and corporate governance.
In addition to having a lot of fun giving these talks, I am fortunate to raise a lot of donations for the One Acre Fund in Africa.
Last week I had the opportunity to give a talk for Strategex’s Peak Value Summit. Strategex is a Chicago-based market research and consulting firm that provides customized growth strategies for mid-to-large business-to-business organizations in both domestic and international markets. The firm provides services in areas such as mergers and acquisitions, due diligence, new product research, brand awareness and perception, competitor intelligence and benchmarking supplier relations, and employee surveys.
In my talk entitled “Lessons from the Battlefield: Why do the majority of acquisitions fail?” I shared what I believe are the seven major reasons for acquisition failure:
- Companies don’t take the time to figure out what they’re really really good at
- Companies don’t really understand the economics of what the target is worth
- Companies get emotional
- Companies become convinced that the acquisition is “very strategic” without understanding if the acquisition makes economic sense
- Companies allow bankers to decide what the acquisition target is worth rather than determining the value themselves
- Companies fail to take into account differences in culture and people dynamics
- Companies fail to quickly integrate the acquisition and leave too much uncertainty
Near the end of the talk I added an 8th reason: Companies rush into acquisitions, making rash decisions in the process.
My experience has taught me that taking the eight issues into account can significantly increase the probability of achieving a successful acquisition.
You can watch a clip from the session above or by clicking this link to hear the relevance of each of these.
Once again, Harry, you’ve said it all. For most companies, acquisitions, divestitures or sales are once in a lifetime events and unfortunately, the only way to be good at M&A is to do it all the time, every day. For lots of reasons, including that your outside advisors – lawyers and bankers – are not your friends. They are in it for the fees, whether or not the deal is good for you. You are on it on your own. I liked #3 – you’ve got to keep control of your emotions. Demonstrating your manliness by overpaying is just demonstrating stupidity.