A so-called White Paper by Stuart Ferguson (downloadable at http://www.cultureclout.com/whitepapers.htm) addresses the reality of M&A failures and the impact of corporate culture. (I say “so-called” because this is really a promo for a book Ferguson has published, entitled “Culture Clout.”)
The most common reasons cited for engaging in M&A are, in order, acquire products, enter new markets, and consolidation. Acquisition of skills and talent comes in 9th of 11 reasons cited.
Yet, a TowersPerrin survey cited in Ferguson’s white paper found that only 17% of deals analyzed resulted in an increase in shareholder value, while 30% had no discernible change and 53% actually destroyed shareholder value. It should be noted that this was a survey of 700 large, cross-border deals between 1996 and 1998, and not very clear if he is recycling old news, or the study followed the companies for 10 years and only now can reach a meaningful conclusion about the impact on shareholder value. Maybe we have to buy the book to find out. Or look for a white paper on TowersPerrin’s website.
Ferguson goes on to state what by now should be obvious, that organizational and cultural problems are more likely to derail a merger than are financial factors, and that “soft” business issues such as synergy, picking the right people, resolving culture issues and integrating the organizations’ communications and these areas need the most pre-deal attention for acquirors to increase the likelihood of success.
Then on to the sales pitch, an Organizational Culture Survey tool and scoring system, purported to be useful in assessing the attractiveness of a deal.
— David Bass
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