Although we had no data to back our claim, we suspected that the most important reasons for success would be quite different from those that led to failure. One basic question stimulated our research: “With so many sensible prescriptions available for making acquisitions work and managers who want to succeed, why do so many acquisitions seem to have disappointing results?” We were suspicious of advice that suggested that a would-be acquirer could succeed simply by avoiding the mistakes of acquisitions that had failed.
These factors may crop up in the planning for an acquisition, which may be over a protracted period, or during negotiations, which are likely to be rushed. Both buyer and seller are often unable to resolve important areas of ambiguity before they complete the agreement. Increasing momentum to close the deal can force premature closure and limit consideration of integration issues.ģ. General managers may find it difficult to integrate these perspectives.Ģ. The involvement of specialists and analysts with particular expertise and independent goals often results in multiple, fragmented views of the agreement. Indeed, our research identifies three factors inherent in the process that can affect the result.ġ. Why, then, have even friendly acquisitions that apparently satisfy this advice failed to work out so often? We believe that managers can gain insight into this question by looking beyond strategic or organizational fit to the acquisition process itself. Sufficient degrees of strategic and organizational fit ought to guarantee an acquisition’s success. The second approach stresses the need to achieve an organizational fit between the two companies by matching administrative systems, corporate cultures, or demographic characteristics. 2 The first emphasizes the strategic fit between the acquirer and its target and the importance of ensuring that the proposed subsidiary can contribute to the parent’s strategy. Most analysts stress one of two ways to make acquisitions work.
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And clearly, we must look beyond conventional advice on making acquisitions to understand how to manage them better.
1 Clearly, there is a difference between making acquisitions and making them work. Many managers today regard buying a company for access to markets, products, technology, resources, or management talent as less risky and speedier than gaining the same objectives through internal efforts.Īlthough we’re seeing more acquisitions on a larger scale more often than ever before, many studies show that these deals (especially those taking companies beyond their base businesses) do not live up to their advocates’ expectations. The use of acquisitions to redirect and reshape corporate strategy has never been greater.
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