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Mergers & Acquisitions (M&A) are an essential thrust for the growth strategies of many
companies. They are a core element of their efforts to improve their competitive positions
and added value. M&A are mega interventions in the scope of any company development, as
they – nearly always – represent far-reaching and radical changes in strategy, structures and
culture. The internal business function M&A thus has tremendous creative power. So it is all
the more surprising that this function has so far not received the attention it deserves in the
scope of company practices. Only in very few companies is M&A a properly differentiated,
independent function. Professional dealing with M&A usually only becomes part of the
company’s agenda when it becomes urgent: shortly before the deal – and sometimes even
later . Accordingly, the performance of M&A, i.e. the value added by M&A, is disgraceful. In
other words: There is hardly any other function with greater room for improvement. This also
calls for attention from other internal business functions such as HR, IT, controlling and
communication. They are of utmost importance as far as controlling and implementing
mergers are concerned. They usually bear the main burden of integration and are facing a
special challenge, as they often consider themselves threatened by mergers (e.g. two
divisions are merged into one) or by staff reductions.
Especially the second half of the 90s was characterised by an unparalleled wave of mergers.
In the year 2000, more mergers took place than ever before: more than 5000 in Europe
alone, with a transaction value exceeding 1600 billion euros. Two years later, there were only
little over 3000 mergers at a value of about 600 billion euros. Yet we are, time and again,
shocked by the fact that almost all surveys on the success of M&A reveal that most mergers
are failing. Selden and Colvin (2003) estimate that, between 1995 and 2000, more
shareholder value was destroyed by M&A than by the burst of the dot-com bubble: more than
$ 1,000,000,000,000.-- or in words: more than 1 trillion US dollars. Or, to put it another way:
These results show the business function M&A as one of the largest value-destroying factors
of the past few years.
There are now a large number of studies on post-merger performance of companies. What
these studies are revealing is a scene of horror. 61% of all mergers are annulled after a
period of 5 years (Porter 1987) and approximately 70% of mergers do not even lead to the
expected increase in market value (Jansen 1999). These are sobering facts. As we, as
consultants, are very often dealing with mergers and are striving for a sustainable, successful
development of our clients’ companies by giving positive impetus, this more than sobering
result of past M&A activity and the outlook on a new wave of such transactions inspired us
to take a close look at this subject from a systemic perspective – both conceptually as well
as practically oriented. Our central questions are as follows:
• What are the critical factors for success and the lessons learned we can extract from
experience and from analysing past mergers ?
• What needs to be done in order to make future mergers more successful?
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• How can the M&A function be organised in a sensible way.
To us, this seems to be of particular importance on account of the fact that the logic of laws,
business figures, business activities and tasks related to content have a greater impact on
mergers than on the scope of any other initiatives for change. At the same time, emotions
have to be taken into consideration. This creates contradictory requirements concerning
decisions and actions for all people involved.