Caution urged over M&A action in 2011

Merger & Acquisition boom predicted for 2011, but remember 80% of mergers end in failure.

After the best annual start in a decade, 2011 is being touted as the year of an M&A boom, as it begins to regain some of its pre recession momentum.

However, with an estimated 50 - 80 % of mergers failing in the past, M&A expert Paul J Siegenthaler is urging companies to err on the side of caution when approaching a deal, even when conditions begin to improve.

Although global M&A may not be up to pre recession levels, it is evident that the volume of deals began to pick up throughout last year.

There was a notable absence of so called “mega deals” due to a heightened perception of risk and the element of uncertainty, something which M&A expert Paul J. Siegenthaler predicts is likely to change this year.

“2011 is shaping up to be a stronger year in terms of M&A activity, as market uncertainty subsides and companies get a clearer and more stable picture of the business case underlying their merger or acquisition projects. There is likely to be a rise in ‘mega deals’ this year and with this comes a greater level of risk, if the M&A business integration process is not handled appropriately,” explains Siegenthaler, author of ‘Perfect M&As – The Art of Business Integration’ (Ecademy Press £23.99).

For well over a decade Siegenthaler has helped numerous acquired or merging companies to successfully integrate, and he’s seen time and time again that the most critical factors in the failure of a merger are a lack of a clearly communicated common vision, poor planning and unrealistic resourcing, poor programme management, inadequate stakeholder management, and poor governance.

He is concerned that many will embark on ambitious mergers or acquisitions during 2011 which seem too good to miss out on, but will fail to realise just how challenging and complex it can be to blend to businesses and cultures together until it’s too late.

Siegenthaler explains “Every company embarking on an acquisition or merger assumes it will succeed, when in fact it should assume it will fail unless it engages in a number of specific activities to avoid the many traps into which all the failed mergers have fallen, time and time again. It is fantastic to see the current surge of confidence, but it is imperative not to become overconfident at such a critical economic time.

Prior planning and preparation are key to ensuring any M&A has the best chance of success, but this doesn’t mean the process should be dragged out any longer than it needs to be. This is most certainly a time for less haste, more speed,” adds Siegenthaler.